Doc. No. 1.01
Aircraft N777UA
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PARTICIPATION AGREEMENT
(1995 777 A)
Dated as of May 1, 1995
Among
UNITED AIR LINES, INC.,
Lessee,
_________________,
Owner Participant,
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
in its capacity as
Pass Through Trustee under each of the
Pass Through Trust Agreements,
STATE STREET BANK AND TRUST COMPANY,
Not in its Individual Capacity,
except as expressly provided herein,
but solely as Owner Trustee,
and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
In its Individual Capacity and as Indenture Trustee
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United Air Lines, Inc.
1995 777 A Equipment Trust
One Boeing 777-222 Aircraft
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TABLE OF CONTENTS
Page
SECTION 1. Certain Definitions; Participations in
Lessor's Cost of the Aircraft.......... 3
SECTION 2. Lessee's Notice of Delivery Date........ 4
SECTION 3. Instructions to the Owner Trustee and
Indenture Trustee...................... 5
SECTION 4. Conditions.............................. 6
(a) Conditions Precedent to the
Participations in the Aircraft.... 6
(b) Conditions Precedent to the
Obligations of Lessee............. 15
SECTION 5. Confidentiality of Purchase Agreement... 16
SECTION 6. Extent of Interest of Certificate
Holders................................ 17
SECTION 7. Lessee's Representations, Warranties
and Indemnities
(a) In General........................ 17
(b) General Tax Indemnity............. 22
(c) General Indemnity................. 34
(d) Withholding....................... 40
SECTION 8. Representations, Warranties and
Covenants.............................. 40
SECTION 9. [Intentionally Omitted]................. 63
SECTION 10. Other Documents; Amendment.............. 63
SECTION 11. Certain Covenants of Lessee............. 64
SECTION 12. Owner for Income Tax Purposes........... 65
SECTION 13. Notices; Consent to Jurisdiction........ 65
SECTION 14. Change of Situs of Owner Trust.......... 66
SECTION 15. Miscellaneous........................... 67
SECTION 16. Invoices and Payment of Expenses........ 69
SECTION 17. Optional Redemption of Certificates..... 70
ii
Page
SECTION 18. Optimization............................ 74
SECTION 19. Nondisclosure.......................... 75
SCHEDULES
SCHEDULE I -- Names and Addresses
SCHEDULE II -- Commitments
SCHEDULE III -- Legal Opinions
EXHIBIT A-1 -- Form of Transferor Opinion Re: Transfer of
Owner Participant's Interest
EXHIBIT A-2 -- Form of Transferee Opinion Re: Transfer of
Owner Participant's Interest
EXHIBIT B -- Form of Assignment and Assumption Agreement
EXHIBIT C -- Form of Guaranty Agreement
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PARTICIPATION AGREEMENT
(1995 777 A)
THIS PARTICIPATION AGREEMENT (1995 777 A) dated as of May 1, 1995
among (i) United Air Lines, Inc., a Delaware corporation (the "Lessee"), (ii)
[____________], a corporation organized under the laws of Delaware (the "Owner
Participant"), (iii) STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company, not in its individual capacity, except as expressly provided herein,
but solely as Owner Trustee under the Trust Agreement (the "Owner Trustee"),
(iv) FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity, except as otherwise provided
herein, but solely as trustee under the Pass Through Trust Agreement (the "Pass
Through Trustee"), dated as of February 1, 1992, as amended and restated as of
May 1, 1995 (the "Basic Agreement"), in each case between the Lessee and STATE
STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, as
supplemented by Trust Supplements Nos. 1995-A1 and 1995-A2, each dated as of May
__, 1995 between the Lessee and the Pass Through Trustee creating the 1995-A1
Pass Through Trust and the 1995-A2 Pass Through Trust, respectively (the Basic
Agreement as so supplemented being the "1995-A1 Pass Through Trust Agreement"
and the "1995-A2 Pass Through Trust Agreement", respectively, each of the 1995-
A1 Pass Through Trust Agreement and the 1995-A2 Pass Through Trust Agreement
being a "Pass Through Trust Agreement") and (v) FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, a national banking association, in its individual capacity
and as Indenture Trustee under the Trust Indenture (the "Indenture Trustee").
WITNESSETH:
WHEREAS, pursuant to the Purchase Agreement between Lessee and the
Manufacturer, the Manufacturer has agreed to sell to Lessee, among other things,
certain Boeing Model 777-222 aircraft, one of which has been recently purchased
from the Manufacturer by Lessee and is the subject of this Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant is entering into the Trust Agreement pursuant
to which Trust Agreement the Owner Trustee agrees, among other things, to hold
the Trust Estate defined in Section 1.01 thereof (the "Trust Estate") for the
use and benefit of the Owner Participant; and
WHEREAS, concurrently with the execution and delivery of this
Agreement,
(i) Lessee and the Owner Trustee are entering into the Owner Trustee's
Purchase Agreement and Assignment (1995 777 A) dated as of May 1, 1995 (the
"Owner Trustee's Purchase Agreement"), whereby Lessee agrees to sell the
Aircraft to the Owner Trustee and assigns to the Owner Trustee certain
rights and interests of Lessee under the Purchase Agreement with respect to
the Aircraft; and
(ii) the Manufacturer has executed the Consent and Agreement (1995
777 A) dated as of May 1, 1995 substantially in the form attached to the
Owner Trustee's Purchase Agreement, with respect to the Owner Trustee's
Purchase Agreement; and
WHEREAS, the Indenture Trustee and the Owner Trustee concurrently with
the execution and delivery of this Agreement are entering into the Trust
Indenture and Mortgage (1995 777 A) dated as of May 1, 1995 pursuant to which
the Owner Trustee agrees, among other things, to issue one or more Loan
Certificates in the form set forth in Exhibit A-1 or Exhibit A-2 to the Trust
Indenture to each Pass Through Trustee on behalf of the related grantor trusts
created by the applicable Pass Through Trust Agreement as evidence of the Owner
Trustee's indebtedness to each Pass Through Trustee, which Loan Certificates are
to be secured by the mortgage and security interest in the Aircraft created
pursuant to the Trust Indenture by the Owner Trustee in favor of the Indenture
Trustee, and the Owner Trustee shall execute and deliver the Trust Supplement
covering the Aircraft, supplementing the Trust Agreement and the Trust
Indenture; and
WHEREAS, as described in Section 2 hereof, the Owner Trustee and
Lessee are entering into a Lease Agreement (1995 777 A) dated as of May 1, 1995
whereby, subject to the terms and conditions set forth therein, the Owner
Trustee agrees to lease to Lessee, and Lessee agrees to lease from the Owner
Trustee, the Aircraft on the Delivery Date; and
WHEREAS, in connection with the foregoing, each Pass Through Trustee
will issue the Pass Through Certificates substantially in the form of Exhibit A
to each Pass Through Trust Agreement; and
WHEREAS, to facilitate the Owner Trustee's issuance of the Loan
Certificates to the applicable Pass Through Trustee and the purchase of the Loan
Certificates by each such Pass Through Trustee, the Lessee has duly authorized
the execution and delivery of each of the two Pass Through Trust Agreements as
the "issuer" thereunder, as such term is defined in and solely for purposes of
the Securities Act of 1933, as amended, and of the Pass Through Certificates
being issued thereunder as the
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"obligor" thereunder, as such term is defined in and solely for purposes of the
Trust Indenture Act of 1939, as amended, with respect to the Pass Through
Certificates and is undertaking to perform certain administrative and
ministerial duties thereunder and is also undertaking to pay the fees and
expenses of the Pass Through Trustees; and
WHEREAS, certain terms are used herein as defined in Section 1(a)
hereof.
NOW THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
SECTION 1. Certain Definitions; Participations in Lessor's Cost of
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the Aircraft. (a) The terms "Lessee," "Owner Participant," "Pass Through
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Trustee," "Owner Trustee" and "Indenture Trustee" shall have the further
meanings attributed thereto in the Lease Agreement referred to above and, except
as otherwise defined in this Agreement, terms used herein in capitalized form
shall have the meanings attributed thereto in the Lease Agreement referred to
above. Unless the context otherwise requires, any reference herein to any of
the Operative Documents refers to such document as it may be amended from time
to time in accordance with its terms and the terms of each other agreement
restricting the amendment thereof.
(b) Subject to the terms and conditions of this Agreement, (i) each of
the Pass Through Trustees agrees to finance in part, the Owner Trustee's payment
of Lessor's Cost for the Aircraft by making a secured loan to the Owner Trustee
(herein called a "Loan" and collectively, the "Loans") on a date to be
designated pursuant to Section 2 hereof, but in no event later than May 31,
1995, in the amount in Dollars equal to the amount set forth opposite its name
on Schedule II hereto and (ii) the Owner Participant hereby agrees, in
connection with its equity investment in the beneficial ownership of the
Aircraft and the sale of the Aircraft by the Lessee to the Owner Trustee
pursuant to the Owner Trustee's Bill of Sale, as contemplated hereby and by the
Owner Trustee's Purchase Agreement, to make its equity investment in the
beneficial ownership of the Aircraft on a date to be designated as set forth
above, but in no event later than May 31, 1995, in an amount in Dollars equal to
the amount set forth opposite its name on Schedule II hereto. To fund its
obligations set out in (i) above, each Pass Through Trustee shall, in accordance
with Section 2.01 of the applicable Pass Through Trust Agreement, execute,
authenticate and deliver Pass Through Certificates, dated a date not later than
the Delivery Date and of the maturities, in the principal amounts, bearing the
interest rates and of the other economic terms specified in the request of the
Company (as defined in the Basic Agreement)
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delivered pursuant to such Section 2.01, and deliver such Pass Through
Certificates to the Underwriters (as defined in Section 4(a)(xvii) as specified
in such request against payment by the Underwriters of an amount equal to the
aggregate principal amount of its Loan. In the case of the Owner Participant,
the amount of its participation to be made as provided above in the payment of
Lessor's Cost and, in the case of each Pass Through Trustee, the amount of its
Loan, is hereinafter called such Participant's "Commitment" for the Aircraft.
In case any Participant shall default in its obligation to make the amount of
its Commitment available pursuant to Section 2 hereof in respect of the
Aircraft, the other Participants shall have no obligation to make any portion of
such amount available or to increase the amount of its Commitment and the
obligation of the nondefaulting Participants shall remain subject to the terms
and conditions set forth in this Agreement.
SECTION 2. Lessee's Notice of Delivery Date. Lessee agrees to give
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the Owner Participant, the Owner Trustee, the Pass Through Trustees and the
Indenture Trustee at least two Business Days' prior written notice of the
Delivery Date for the Aircraft, which Delivery Date shall be a Business Day not
later than May 31, 1995, which notice shall specify the amount of Lessor's Cost
and the amount of each Participant's Commitment for the Aircraft. As to each
Participant, the making of its Commitment for such Aircraft available in the
manner required by this Section 2 shall constitute a waiver of such notice. The
Owner Trustee and the Indenture Trustee shall be deemed to have waived such
notice if the Indenture Trustee shall have received from the Owner Participant
funds in the full amount of the Owner Participant's Commitment and the proceeds
of the sale of the Loan Certificates in the full amount of the Pass Through
Trustees' Commitments.
Subject to the terms and conditions of this Agreement, and
simultaneously with receipt by the parties hereto of all amounts to be paid to
them on the Delivery Date pursuant to this Section 2, the Lessee shall transfer
title to and deliver the Aircraft to the Owner Trustee, the Owner Trustee shall
purchase and take title to, and accept delivery of, the Aircraft, and the Owner
Trustee shall lease the Aircraft to Lessee, it being understood that the
transactions described in this Section 2 are simultaneous and mutually
dependent. On the Delivery Date, subject to the terms and conditions of this
Agreement, and in consideration for the transfer of title to the Aircraft to the
Owner Trustee, the Owner Trustee and the Indenture Trustee (on behalf of the
Owner Trustee) shall pay over the funds made available to it equal to Lessor's
Cost to Lessee's account no. ____________ at First Security Bank of Utah,
National Association. In addition, subject to the terms and conditions of this
Agreement, the Owner Trustee shall, on the Delivery Date,
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issue to the Pass Through Trustees the Loan Certificates to evidence the Loans
The Owner Participant agrees, subject to the terms and conditions of
this Agreement, to make its Commitment available to the Owner Trustee at the
Owner Trustee's account no. ________ at First Security Bank of Utah, National
Association, and the Pass Through Trustees agree to make their Commitment
available to the Indenture Trustee at the Indenture Trustee's account no.
_________ at First Security Bank of Utah, National Association, at or before
10:00 a.m., New York City time, on the Delivery Date specified in Lessee's
notice referred to in the first paragraph of this Section 2 (such specified
Delivery Date being herein called the "Scheduled Delivery Date").
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee.
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Subject to the terms and conditions of this Agreement, the Owner Trustee and the
Indenture Trustee, upon their respective receipts in full of the Owner
Participant's and the Pass Through Trustees' Commitments for the Aircraft, as
provided in Section 2 hereof, together with instructions from such Participant
or its special counsel to release such funds to Lessee, shall transfer such
funds to the Lessee and the Owner Trustee shall purchase the Aircraft from the
Lessee and lease the Aircraft to Lessee and such action shall constitute,
without further act, authorization and direction by the Owner Participant to the
Owner Trustee and the Indenture Trustee acting on behalf of the Owner
Participant (in regard to item (a) below) and to the Owner Trustee (in regard to
items (b) - (f) below):
(a) to pay to Lessee the Lessor's Cost in the manner set forth in
Section 2;
(b) to the extent not previously accomplished by a prior
authorization, to authorize a representative or representatives of the Owner
Trustee (who shall be an employee or employees, or an agent or agents, of Lessee
designated by Lessee) to accept delivery of the Aircraft on the Delivery Date
pursuant to the Owner Trustee's Bill of Sale;
(c) to accept from the Lessee the Owner Trustee's Bill of Sale and the
Owner Trustee's FAA Bill of Sale;
(d) to execute an Aircraft Registration Application, a Lease
Supplement and a Trust Supplement, in each case covering the Aircraft;
(e) to borrow from the Pass Through Trustees amounts equal to their
respective Loans to finance a portion of Lessor's
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Cost and to issue to the Pass Through Trustees Loan Certificates in the amounts
specified herein; and
(f) to take such other action as may be required to be taken by the
Owner Trustee on the Delivery Date by the terms of any Operative Document.
SECTION 4. Conditions. (a) Conditions Precedent to the
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Participations in the Aircraft. It is agreed that the respective obligations of
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the Participants to participate in the payments of Lessor's Cost are subject to
the satisfaction prior to or on the Delivery Date of the following conditions
precedent, except that paragraphs (iii), (xx), (xxiv) (insofar as it relates to
the Pass Through Trustees), (xxv), (xxvi) and (xxviii) shall not be a condition
precedent to the obligation of the Pass Through Trustees, and paragraphs (iv),
(x) (insofar as it relates to the Owner Participant), (xiv), (xix) and (xxvii)
shall not be a condition precedent to the obligation of the Owner Participant:
(i) The Participants shall have received due notice with respect
to such participation pursuant to Section 2 hereof (or shall have waived
such notice either in writing or as provided in Section 2).
(ii) No change shall have occurred after the date of the execution
and delivery of this Agreement in applicable law or regulations thereunder
or interpretations thereof by appropriate regulatory or judicial
authorities which, in the opinion of the Owner Participant or the Pass
Through Trustees, as the case may be, would make it a violation of law or
regulations for (x) the Lessee, the Indenture Trustee, any Participant or
the Owner Trustee to execute, deliver and perform the Operative Documents
to which any of them is a party or (y) the Pass Through Trustees or the
Owner Participant to make their respective Commitments available or, in the
case of any Pass Through Trustee, to acquire a Loan Certificate or to
realize the benefits of the security afforded by the Trust Indenture.
(iii) In the case of the Owner Participant, the Pass Through
Trustees shall have made available the amount of their respective
Commitments for the Aircraft in accordance with Section 1 hereof.
(iv) In the case of the Pass Through Trustees, the Owner
Participant shall have made available the amount of its Commitment for the
Aircraft in accordance with Section 1 hereof.
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(v) The following documents shall have been duly authorized,
executed and delivered by the respective party or parties thereto, shall
each be satisfactory in form and substance to the Participants and shall be
in full force and effect and executed counterparts shall have been
delivered to the Participants, and their respective counsel, provided that
only the applicable Pass Through Trustee shall receive an executed original
of its Loan Certificate, only the Indenture Trustee, acting on behalf of
the Certificate Holders, shall receive the original counterparts of the
Lease and the Lease Supplement, only the Owner Participant shall receive a
copy of the Purchase Agreement which shall be delivered to and retained by
the Owner Trustee (the Owner Trustee and the Owner Participant and their
respective counsel may inspect the Purchase Agreement prior to the Delivery
Date but thereafter shall not have access to the same until the return of
the Aircraft to Lessor (but only to the extent the Purchase Agreement has
any continued effectiveness on such return date) or unless a Lease Default
or Event of Default shall have occurred and be continuing) and provided
further that only the Lessee and the Owner Participant shall receive copies
of the Tax Indemnity Agreement:
(1) the Lease;
(2) a Lease Supplement covering the Aircraft and dated the
Delivery Date;
(3) the Tax Indemnity Agreement;
(4) the Trust Agreement;
(5) a Trust Supplement covering the Aircraft and dated the
Delivery Date;
(6) the Owner Trustee's Bill of Sale and the Owner Trustee's
FAA Bill of Sale;
(7) the Owner Trustee's Purchase Agreement;
(8) an acceptance certificate covering the Aircraft in the
form agreed to by the Participants and Lessee (the "Acceptance
Certificate") duly completed and executed by the Owner Trustee or its
agent, which shall be a representative of Lessee, and by such
representative on behalf of Lessee;
(9) the Trust Indenture;
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(10) the Loan Certificates;
(11) the Consent and Agreement;
(12) the Purchase Agreement;
(13) the Owner Participant Parent Guaranty; and
(14) the Pass Through Trust Agreements.
(vi) A Uniform Commercial Code financing statement or statements
covering all the security interests created by or pursuant to the Granting
Clause of the Trust Indenture shall have been executed and delivered by the
Owner Trustee and the Indenture Trustee, and such financing statement or
statements shall have been duly filed in all places necessary or advisable,
and any additional Uniform Commercial Code financing statements deemed
advisable by the Owner Participant or the Pass Through Trustees shall have
been executed and delivered by Lessee, the Indenture Trustee or the Owner
Trustee and duly filed.
(vii) Each Participant and the Indenture Trustee shall have
received the following, in each case in form and substance satisfactory to
it, provided that only the Owner Participant shall receive a copy of the
Purchase Agreement which shall be delivered to and retained by the Owner
Trustee (the Owner Trustee and the Owner Participant and their respective
counsel may inspect the Purchase Agreement prior to the Delivery Date but
thereafter shall not have access to the same until the return of the
Aircraft to Lessor (but only to the extent the Purchase Agreement has any
continued effectiveness on such return date) or unless a Lease Default or
Event of Default shall have occurred and be continuing):
(1) a certified copy of the Certificate of Incorporation and
By-Laws of Lessee and a copy of resolutions of the board of directors
of Lessee or the executive committee thereof, certified by the
Secretary or an Assistant Secretary of Lessee, duly authorizing the
execution, delivery and performance by Lessee of this Agreement, the
Lease, the Owner Trustee's Purchase Agreement, the Owner Trustee's
Bill of Sale, the Owner Trustee's FAA Bill of Sale, the Tax Indemnity
Agreement and each other document required to be executed and
delivered by Lessee on the Delivery Date in accordance with the
provisions hereof and thereof;
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(2) such other documents and evidence with respect to
Lessee, the Manufacturer, the Owner Trustee, the Indenture Trustee and
the Participants, as the Pass Through Trustees or the Owner
Participant, or their respective counsel, may reasonably request in
order to establish the authority of such parties to consummate the
transactions contemplated by this Agreement, the taking of all
corporate proceedings in connection therewith and the compliance with
the conditions herein set forth;
(3) a certificate of Lessee (i) as to the Person or Persons
authorized to execute and deliver this Agreement, the other Lessee
Documents, and any other documents to be executed on behalf of Lessee
in connection with the transactions contemplated hereby and as to the
signature of such person or persons, and (ii) to the effect that the
application of the proceeds from the Pass Through Certificates as
provided for herein will not be inconsistent with any of the
provisions of the Pass Through Trust Agreements;
(4) a copy of the Purchase Agreement certified by the
Secretary or an Assistant Secretary of Lessee as being a true and
accurate copy of the same with all amendments attached thereto that
relate to the Manufacturer's warranties or related obligations or any
right in such Agreement assigned by the Lessee to the Owner Trustee
pursuant to the Owner Trustee's Purchase Agreement;
(5) a copy of the general authorizing resolutions of the
boards of directors (or executive committees) or other satisfactory
evidence of authorization of the Indenture Trustee, the Owner Trustee,
the Pass Through Trustees, the Owner Participant and the Owner
Participant Parent, certified as of the Delivery Date by the Secretary
or an Assistant Secretary of the Indenture Trustee, the Owner Trustee,
the Pass Through Trustees, the Owner Participant and the Owner
Participant Parent, respectively, which authorize the execution,
delivery and performance by the Indenture Trustee, the Owner Trustee,
the Pass Through Trustees, the Owner Participant and the Owner
Participant Parent of all of the Operative Documents to which it is a
party, together with such other documents and evidence with respect to
the Indenture Trustee, the Owner Trustee, the Pass Through Trustees,
the Owner Participant and the Owner Participant Parent as either the
Pass Through
9
Trustees (or their counsel) or the Owner Participant (or its counsel)
may reasonably request in order to establish the consummation of the
transactions contemplated by this Agreement, the taking of all
corporate proceedings in connection therewith and compliance with the
conditions herein set forth; provided, this clause shall not be a
condition precedent as to any Participant as to documents to be
provided by that Participant; and
(6) a copy of the excerpts the "United Air Lines 777
Maintenance Program" referred to in Section 5 of the Lease.
(viii) All appropriate action required to have been taken by the
Federal Aviation Administration, or any governmental or political agency,
subdivision or instrumentality of the United States, on or prior to the
Delivery Date in connection with the transactions contemplated by this
Agreement shall have been taken, and all orders, permits, waivers,
authorizations, exemptions and approvals of such entities required to be in
effect on the Delivery Date in connection with the transactions
contemplated by this Agreement shall have been issued, and all such orders,
permits, waivers, authorizations, exemptions and approvals shall be in full
force and effect on the Delivery Date.
(ix) On the Delivery Date, the following statements shall be true,
and the Participants and the Indenture Trustee shall have received evidence
satisfactory to each of them to the effect that:
(1) the Owner Trustee has good and marketable title (subject
to filing and recording of the Owner Trustee's FAA Bill of Sale with
the Federal Aviation Administration) to the Aircraft, free and clear
of Liens other than the rights of Lessee under the Lease and Lease
Supplement covering the Aircraft, the mortgage and security interest
created by the Trust Indenture, the rights of the Owner Participant
under the Trust Agreement and the Trust Supplement and Liens permitted
by clause (iii) (solely for Taxes not yet due) of Section 6 of the
Lease;
(2) application for registration of the Aircraft in the name
of the Owner Trustee (together with any required affidavits) and the
Owner Trustee's FAA Bill of Sale have been duly filed with the FAA;
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(3) the Trust Agreement, the Trust Indenture and the Trust
Supplement and the Lease and the Lease Supplement have been duly filed
with the FAA for recordation;
(4) the Owner Trustee, as lessor under the Lease, and the
Indenture Trustee, as assignee of the Owner Trustee's rights under the
Lease Agreement pursuant to the Trust Indenture, are entitled to the
protection of Section 1110 of the Bankruptcy Code in connection with
the Owner Trustee's and the Indenture Trustee's right to take
possession of the Airframe and Engines in the event of a case under
Chapter 11 of the Bankruptcy Code in which the Lessee is a debtor; and
(5) the Aircraft has been duly certified by the FAA as to
type and airworthiness in accordance with the terms of the Lease and
has a current, valid U.S. standard certificate of airworthiness issued
by the FAA.
(x) On the Delivery Date, (A) the representations and warranties
of Lessee, the Owner Participant and the Owner Trustee contained in
Sections 7 and 8 of this Agreement and in the Tax Indemnity Agreement and
the Owner Participant Parent contained in the Owner Participant Parent
Guaranty shall be true and accurate as though made on and as of such date
except to the extent that such representations and warranties relate solely
to an earlier date (in which case such representations and warranties shall
have been true and accurate on and as of such earlier date), (B) no event
shall have occurred and be continuing, or would result from the purchase,
sale, lease or mortgage of the Aircraft, which constitutes (or would, with
the passage of time or the giving of notice or both, constitute) an Event
of Default as defined in the Lease or the Trust Indenture, and (C) no event
shall have occurred that might have the effect of materially and adversely
affecting the ability of Lessee to carry on its business as conducted on
December 31, 1994 or to perform its obligations under the Operative
Documents.
(xi) The Participants shall have received an opinion addressed to
the Participants, the Indenture Trustee, and the Owner Trustee from (a)
Francesca M. Maher, Vice President-Law, Deputy General Counsel and
Corporate Secretary for Lessee, in substantially the form of Schedule III-
1(a) hereto and (b) Vedder, Price, Kaufman & Kammholz, special counsel to
the Lessee, in substantially the form of Schedule III-1(b) hereto.
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(xii) The Participants shall have received an opinion addressed to
the Participants, the Owner Trustee, the Indenture Trustee and Lessee from
counsel to the Manufacturer, in substantially the form of Schedule III-2
hereto.
(xiii) The Participants shall have received an opinion addressed to
the Participants, the Indenture Trustee, the Owner Trustee and Lessee, from
Bingham, Dana & Gould, special counsel for the Owner Trustee, in
substantially the form of Schedule III-3 hereto.
(xiv) The Pass Through Trustees shall have received an opinion
addressed to the Indenture Trustee, the Pass Through Trustees, the Owner
Trustee and Lessee from (a) Dewey Ballantine, special counsel to the Owner
Participant and the Owner Participant Parent, in substantially the form of
Schedule III-4(a) hereto and (b) Michael Flynn, Vice President-General
Counsel and Secretary to the Owner Participant and the Owner Participant
Parent in substantially the form of Schedule III-4(b) hereto.
(xv) The Participants shall have received an opinion addressed to
the Participants, the Indenture Trustee, the Owner Trustee and Lessee, from
Crowe & Dunlevy, P.C., special counsel in Oklahoma City, Oklahoma, in
substantially the form of Schedule III-5 hereto.
(xvi) The Participants shall have received an opinion addressed to
the Participants, the Owner Trustee and Lessee from Ray, Quinney & Nebeker,
special counsel for the Indenture Trustee and the Pass Through Trustees, in
substantially the form of Schedule III-6 hereto.
(xvii) The Owner Participant shall have received an opinion
addressed to it from Vedder, Price, Kaufman & Kammholz, special counsel to
the Lessee, substantially to the same effect as the opinion delivered
pursuant to Section 5(b)(1) of the Purchase Agreement dated ____________
(the "Underwriting Agreement") among Lessee, Merrill Lynch & Co. and Lehman
Brothers (the "Underwriter").
(xviii) The Participants and the Indenture Trustee shall have
received a certificate signed by the President or any Vice President of
Lessee, dated the Delivery Date, addressed to the Participants and the
Indenture Trustee and certifying as to the fulfillment of all conditions in
this Section 4(a) insofar as they relate to Lessee and as to the matters
stated in paragraphs (viii), (x) (insofar as it relates to Lessee), (xxii)
and (xxiii) (to the knowledge of
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Lessee, except in regard to matters relating to the Participants, Indenture
Trustee or the Owner Trustee, in which event such representation shall be
to the knowledge of Lessee without any investigation whatsoever) of this
Section 4(a).
(xix) (a) The Owner Participant shall, by making its Commitment
available as provided in Section 1(b)(ii) of this Agreement, (b) the
Indenture Trustee shall by authenticating the Loan Certificates issued on
the Delivery Date, (c) the Owner Trustee shall, by accepting the Owner
Trustee's Bill of Sale and the Owner Trustee's FAA Bill of Sale and (d) the
Pass Through Trustees shall, by making their respective Commitments
available as provided in Section 1(b)(i) of this Agreement, be respectively
deemed to have reaffirmed as of the Delivery Date the representations and
warranties made by it in Section 8 of this Agreement.
(xx) The Owner Participant shall have received an opinion, in form
and substance reasonably satisfactory to the Owner Participant, from BK
Associates, independent aircraft appraisers, or such other recognized
aircraft appraiser selected by the Owner Participant, to the effect that
(A) on the Delivery Date, the fair market value of the Aircraft is equal to
Lessor's Cost; (B) on the Delivery Date, the Aircraft is expected to have
an economic useful life of at least 125% of the aggregate of the Interim
Term and the Basic Term; (C) on the Delivery Date, the Aircraft is expected
to have a residual value at the end of the Basic Term of at least 20% of
Lessor's Cost (without considering the effects of inflation or deflation
and assuming the Aircraft is in compliance with Section 5 of the Lease);
(D) on the Delivery Date, the Aircraft is expected to have a fair market
value on the EBO Date that does not exceed an amount equal to the EBO
Price; (E) the fair market value of each Engine is at least equal to Engine
Cost; and (F) the Aircraft is not limited use property.
(xxi) The Participants and the Indenture Trustee shall have
received an independent insurance broker's report, and certificates of
insurance, in form and substance reasonably satisfactory to the
Participants, as to the due compliance with the terms of Section 11 of the
Lease relating to insurance with respect to the Aircraft.
(xxii) On the Delivery Date it shall be true that no Event of Loss
(or event which with the passage of time would become an Event of Loss)
with respect to the Airframe or any Engine has occurred.
13
(xxiii) No action or proceeding shall have been instituted nor shall
governmental action be threatened before any court or governmental agency,
nor shall any order, judgment or decree have been issued or proposed to be
issued by any court or governmental agency at the time of the Delivery Date
to set aside, restrain, enjoin or prevent the completion and consummation
of this Agreement or the transactions contemplated hereby.
(xxiv) The respective representations and warranties of the
Indenture Trustee and the Pass Through Trustees contained in Section 8
hereof shall be true and accurate as of the Delivery Date as though made on
and as of such date except to the extent that such representations and
warranties relate solely to an earlier date (in which event such
representations and warranties shall have been true and accurate on and as
of such earlier date) and the Lessee and each Participant shall have
received a certificate signed by the Chairman of the Board, the President,
any Vice President or any Assistant Vice President of the Indenture Trustee
and the Pass Through Trustees certifying as to the foregoing matters with
respect to the Indenture Trustee and the Pass Through Trustees, as
applicable.
(xxv) The Owner Participant shall have received from Dewey
Ballantine, special counsel to the Owner Participant, a favorable opinion,
in form and substance satisfactory to the Owner Participant, with respect
to certain income tax aspects of the transactions contemplated by the
Operative Documents.
(xxvi) In the opinion of the Owner Participant and its special
counsel, no law (including tax laws), regulation or regulatory order or
holding applicable to the Owner Participant or the Owner Participant's
participation in the transactions contemplated hereby, shall have been
enacted, issued or proposed prior to the Delivery Date that would have a
material adverse impact on the Owner Participant.
(xxvii) The Pass Through Trustees shall have received a letter from
BK Associates to the effect that the fair market value of the Aircraft on
the Delivery Date is not less than 125% of the aggregate amount of the
Loans.
(xxviii) The Lessee shall have executed and delivered to Owner
Participant a letter relating to Lessee's average cost of capital together
with appropriate supporting documentation.
14
Promptly upon the registration of the Aircraft and the recording of
the Lease, the Trust Indenture, the Trust Agreement, the Lease Supplement and
the Trust Supplement covering the Aircraft pursuant to the Federal Aviation Act,
Lessee will cause Crowe & Dunlevy, P.C., special counsel in Oklahoma City,
Oklahoma, to deliver to the Owner Participant, the Indenture Trustee, the Pass
Through Trustees, the Owner Trustee and Lessee an opinion as to the due and
valid registration of the Aircraft in the name of the Owner Trustee, the due
recording of the Owner Trustee's FAA Bill of Sale, the Trust Indenture, the
Lease Supplement, the Trust Supplement, the Lease and the Trust Agreement and
the lack of filing of any intervening documents with respect to the Aircraft.
(b) Conditions Precedent to the Obligations of Lessee. It is agreed
-------------------------------------------------
that the obligations of Lessee (A) to sell the Aircraft to the Owner Trustee,
(B) to accept delivery of the Aircraft under the Lease and (C) to enter into its
other Operative Documents, are all subject to the fulfillment to the
satisfaction of Lessee prior to or on the Delivery Date of the following
conditions precedent:
(i) The conditions specified in Section 4(a)(iii), 4(a)(iv),
4(a)(viii), 4(a)(xxii) and 4(a)(xxiii) hereof shall have been satisfied,
unless such nonsatisfaction is the result of the actions of Lessee.
(ii) Those documents described in Section 4(a)(v) shall have been
duly authorized, executed and delivered by the respective party or parties
thereto (other than Lessee) in the manner specified in Section 4(a)(v),
shall each be satisfactory in form and substance to Lessee, shall be in
full force and effect on the Delivery Date, and an executed counterpart of
each thereof (other than the Loan Certificates) shall have been delivered
to Lessee or its counsel.
(iii) Lessee shall have received a copy of the general authorizing
resolutions of the boards of directors (or executive committees) or other
satisfactory evidence of authorization of the Indenture Trustee, the Owner
Trustee, the Pass Through Trustees, the Owner Participant and the Owner
Participant Parent, certified as of the Delivery Date by the Secretary or
an Assistant Secretary of the Indenture Trustee, the Owner Trustee, the
Pass Through Trustees, the Owner Participant and the Owner Participant
Parent, respectively, which authorize the execution, delivery and
performance by the Indenture Trustee, the Owner Trustee, the Pass Through
Trustees, the Owner Participant and the Owner Participant Parent of all the
Operative Documents to which
15
it is a party, together with such other documents and evidence with respect
to the Indenture Trustee, the Owner Trustee, the Pass Through Trustees, the
Owner Participant and the Owner Participant Parent as Lessee or its counsel
may reasonably request in order to establish the consummation of the
transactions contemplated by this Agreement, the taking of all corporate
proceedings in connection therewith and compliance with the conditions
herein set forth.
(iv) The representations and warranties of the Participants, the
Indenture Trustee and the Owner Trustee contained in Section 8 hereof and
the Owner Participant Parent in the Owner Participant Parent Guaranty shall
be true and accurate as of the Delivery Date as though made on and as of
such date except to the extent that such representations and warranties
relate solely to an earlier date (in which event such representations and
warranties shall have been true and accurate on and as of such earlier
date) and Lessee shall have received a certificate signed by the Chairman
of the Board, the President, any Vice President or any Assistant Vice
President or other authorized representative of the Indenture Trustee, the
Owner Participant, the Pass Through Trustees and the Owner Trustee,
respectively, certifying as to the foregoing matters with respect to the
Indenture Trustee, the Owner Participant and the Owner Trustee,
respectively.
(v) Lessee shall have received the opinions set forth in Sections
4(a)(xii), 4(a)(xiii), 4(a)(xiv), 4(a)(xv), and 4(a)(xvi), in each case
addressed to Lessee and dated the Delivery Date.
(vi) No change shall have occurred after the date of the execution
and delivery of this Agreement in applicable law or regulations thereunder
or interpretations thereof by appropriate regulatory authorities which, in
the opinion of Lessee, would make it a violation of law or regulations for
Lessee to enter into any transaction contemplated by the Operative
Documents.
(vii) No law (including tax laws), regulation or regulatory order
or holding applicable to the Lessee or Lessee's participation in the
transactions contemplated hereby, shall have been enacted, issued, or
proposed prior to the Delivery Date that would have a material adverse
impact on Lessee.
SECTION 5. Confidentiality of Purchase Agreement. Lessor, the
-------------------------------------
Participants, and the Indenture Trustee shall keep
16
the Purchase Agreement confidential and shall not disclose the same to any
Person, except (A) to prospective and permitted transferees of Lessor's, a Pass
Through Trustee's, the Owner Participant's or the Indenture Trustee's interest
who agree to hold such information confidential, (B) to the aforementioned
prospective and permitted transferees', Lessor's, Pass Through Trustees', the
Owner Participant's or the Indenture Trustee's counsel or special counsel,
independent insurance brokers or other agents who agree to hold such information
confidential, (C) as may be required by any statute, court or administrative
order or decree or governmental ruling or regulation, including Federal or state
banking examiners or tax auditors or (D) as may be necessary or desirable for
purposes of protecting the interest of any such Person or for enforcement of the
Lease by Owner Trustee, the Participants or the Indenture Trustee; provided,
however, that any and all disclosures of all or any part of the Purchase
Agreement which are permitted by (C) or (D) above shall be made only to the
extent necessary to meet the specific requirements or needs of the Persons to
whom such disclosures are hereby permitted.
SECTION 6. Extent of Interest of Certificate Holders. No Certificate
-----------------------------------------
Holder shall have any further interest in, or other right with respect to, the
mortgage and security interests created by the Trust Indenture when and if the
Original Amount of, Premium, if any, and interest on all Loan Certificates held
by such Certificate Holder and all other sums payable to such Certificate Holder
hereunder, under the Trust Indenture and under such Loan Certificates shall have
been paid in full. Each Certificate Holder by its acceptance of a Loan
Certificate, agrees that it will look solely to the income and proceeds from the
Trust Indenture Estate to the extent available for distribution to such
Certificate Holder as provided in Section 2.09 of the Trust Indenture and that
neither the Owner Participant nor the Owner Trustee shall be personally liable
to any Certificate Holder for any amounts payable under the Loan Certificates,
the Trust Indenture, hereunder, or under any other Operative Documents
(including, without limitation, amounts payable as Premium), except as expressly
provided in this Agreement or (in the case of the Owner Trustee) in the Trust
Indenture.
SECTION 7. Lessee's Representations, Warranties and Indemnities. (a) In
---------------------------------------------------- --
General. Lessee represents and warrants that as of the Delivery Date:
- -------
(i) Lessee is a corporation duly organized and validly existing
in good standing pursuant to the laws of the State of Delaware; is duly
qualified to do business as a foreign corporation in each jurisdiction in
which its
17
operations or the nature of its business requires, except where the failure
to be so qualified would not have a material adverse effect on Lessee or
its business; is a Citizen of the United States and a Certificated Air
Carrier; holds all material licenses, certificates, permits and franchises
from the appropriate agencies of the United States of America and/or all
other governmental authorities having jurisdiction, necessary to authorize
Lessee to engage in air transport and to carry on scheduled passenger
service, in each case as presently conducted; has its chief executive
office (as such term is defined in Article 9 of the Uniform Commercial
Code) in Elk Grove Township, Illinois; and has the corporate power and
authority to conduct its business as it is presently being conducted, to
hold under lease the Aircraft and to enter into and perform its obligations
under the Lessee Documents;
(ii) the execution, delivery and performance by Lessee of the
Lessee Documents have been duly authorized by all necessary corporate
action on the part of Lessee, do not require any stockholder approval, or
approval or consent of any trustee or holders of any indebtedness or
obligations of Lessee except such as have been duly obtained, and none of
such Lessee Documents contravenes any law, judgment, governmental rule,
regulation or order binding on Lessee or the certificate of incorporation
or by-laws of Lessee or contravenes the provisions of, or constitutes a
default under, or results in the creation of any Lien (other than Permitted
Liens) upon the property of Lessee under, its certificate of incorporation
or bylaws, or any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement or other
agreement or instrument to which Lessee is a party or by which it or its
properties may be bound or affected;
(iii) neither the execution and delivery by Lessee of the Lessee
Documents nor the performance by Lessee of its obligations thereunder
require the consent or approval of, the giving of notice to, or the
registration with, or the taking of any other action in respect of any
federal, state or foreign government authority or agency, except for (A)
the orders, permits, waivers, exemptions, authorizations and approvals of
the regulatory authorities having jurisdiction over the operation of the
Aircraft by Lessee, which orders, permits, waivers, exemptions,
authorizations and approvals have been duly obtained, and are in full force
and effect, (B) the registration of the Aircraft referred to in Section
4(a)(ix)(2), (C) any normal periodic and other reporting requirements under
the applicable rules and regulations of the FAA to the extent required to
be given or obtained only
18
after the Delivery Date, (D) the recordings with the FAA described in the
opinion referred to in Section 4(a)(xv) and (E) any normal periodic and
other reporting requirements under the applicable rules and regulations of
the FAA to the extent required to be given or obtained only after the
Delivery Date, it being understood that the registration of the issuance
and sale of the Pass Through Certificates to be issued pursuant to the
provisions of the Pass Through Trust Agreements under the Securities Act of
1933, as amended, and under the securities laws of any state in which the
Pass Through Certificates may be offered for sale if the laws of such state
require such action has been duly accomplished and the qualification of
each Pass Through Trust Agreement under the Trust Indenture Act of 1939, as
amended, has been duly obtained;
(iv) each of the Lessee Documents has been duly executed and
delivered by Lessee and constitutes legal, valid and binding obligations of
Lessee enforceable against Lessee in accordance with the terms thereof;
(v) there are no pending or threatened actions or proceedings
before any court or administrative agency involving any Lessee Document or
the transactions contemplated hereby or which individually (or in the
aggregate in the case of any group of related lawsuits) is expected to have
a material adverse effect on the financial condition of Lessee or the
ability of Lessee to perform its obligations under the Lessee Documents;
(vi) except for (A) the registration of the Aircraft pursuant to
the Federal Aviation Act, (B) the filing for recording pursuant to said Act
of the Trust Agreement, the Lease with the Lease Supplement covering the
Aircraft, the Trust Indenture and the Trust Supplement attached thereto and
made a part thereof, and the Owner Trustee's FAA Bill of Sale, (C) the
filing of financing statements (and continuation statements at periodic
intervals) with respect to the security and other interests created by such
documents under the Uniform Commercial Code of Illinois (which financing
statement Lessee has caused to be presented in due form for filing with the
appropriate filing office in the State of Illinois) and such other states
as may be specified in the opinions furnished pursuant to Section 4(a)(xi)
hereof and (D) the taking of possession by the Indenture Trustee of the
original counterparts of the Lease and the Lease Supplement covering the
Aircraft, no further action, including any filing or recording of any
document (including any financing statement in respect thereof under
Article 9 of the Uniform Commercial
19
Code of any applicable jurisdiction), is necessary or advisable in order to
establish and perfect the Owner Trustee's title to and interest in the
Aircraft as against the Lessee and the Indenture Trustee's security
interest in the Aircraft as against the Owner Trustee, and in each case as
against any third parties in any applicable jurisdictions in the United
States;
(vii) there has not occurred any event which constitutes a Default
or an Event of Default under the Lease which is presently continuing and
there has not occurred any event which constitutes or would, with the
passage of time or the giving of notice, or both, constitute an Event of
Loss;
(viii) the statements of financial position of Lessee as of
December 31, 1994 and the related statements of earnings and cash flow of
Lessee for the year then ended, copies of which have been furnished to the
Participants, fairly present the financial condition of Lessee as at such
date and the results of operations and cash flow of Lessee for the period
ended on such date, in accordance with generally accepted accounting
principles consistently applied (except as may be stated in the notes
thereto), and since December 31, 1994, there has been no material adverse
change in such condition or operations, except for such matters timely
disclosed in press releases issued by UAL Corporation or Lessee or in
public filings, effective as of the date hereof, with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended,
by UAL Corporation or Lessee;
(ix) the Owner Trustee will have received good and marketable
title to the Aircraft free and clear of all Liens, except the rights of
Lessee under the Lease and the Lease Supplement covering the Aircraft, the
Lien of the Trust Indenture, the beneficial interest of the Owner
Participant in the Aircraft, and the Liens permitted by clause (iii)
(solely for Taxes not yet due) of Section 6 of the Lease;
(x) none of the proceeds from the issuance of the Loan
Certificates or from the acquisition by the Owner Participant of its
beneficial interest in the Trust Estate will be used directly or indirectly
by Lessee to purchase or carry any "margin stock" as such term is defined
in Regulation G or U of the Board of Governors of the Federal Reserve
System;
20
(xi) neither Lessee nor anyone acting on behalf of Lessee has (A)
directly or indirectly offered any interest in the Trust Estate for sale
to, or solicited any offer to acquire any of the same from, anyone other
than the Owner Participant, and not more than ____________ (__) other
institutions believed capable of evaluating and bearing the risks of
investment in the transactions contemplated hereby, or (B) offered any
interest in the Trust Estate or any Pass Through Certificate or any Loan
Certificate in a manner which would violate the Securities Act of 1933, as
amended, the regulations thereunder, administrative and judicial
interpretation thereof or the securities laws, rules or regulations of any
state;
(xii) Lessee is not in default in the performance of any term or
condition of the Owner Trustee's Purchase Agreement, and is not in default
in the performance of any term or condition of the Purchase Agreement which
materially adversely impairs the transactions contemplated hereby;
(xiii) no governmental approval of any kind is required of the
Owner Participant, any Pass Through Trustee, the Owner Trustee or the
Indenture Trustee for their respective execution of or performance under
this Agreement, the Pass Through Trust Agreements or any agreement
contemplated hereby solely by reason of any fact or circumstance peculiar
to: (a) Lessee, (b) the nature of the Aircraft, or (c) Lessee's proposed
operations or use of the Aircraft;
(xiv) all sales or use tax then due and for which Lessee is
responsible pursuant to Section 7(b)(i) hereof shall have been paid, other
than such taxes which are being contested by Lessee in good faith and by
appropriate proceedings so long as such proceedings do not involve any
material risk of the sale, forfeiture or loss of the Aircraft or any
interest therein;
(xv) The Aircraft has been duly certified by the FAA as to type
and airworthiness and such certification remains in full force and effect;
(xvi) Owner Trustee, as lessor under the Lease, and the Indenture
Trustee, as assignee of the Owner Trustee's rights under the Lease pursuant
to the Trust Indenture, are entitled to the protection of Section 1110 of
the Bankruptcy Code in connection with the Owner Trustee's and the
Indenture Trustee's right to take possession of the Airframe and Engines in
the event of a case under Chapter 11 of the Bankruptcy Code in which Lessee
is a debtor; and
21
(xvii) neither Lessee nor any subsidiary of Lessee is an "investment
company" or a company "controlled by an investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(b) General Tax Indemnity. (i) Indemnity. Except as provided in
--------------------- ---------
Section 7(b)(ii) hereof, whether or not any of the transactions contemplated
herein are consummated, Lessee shall pay when due and assume liability for, and
protect, save and shall indemnify and hold harmless each Indemnitee (except
that, for purposes of this Section 7(b)(i), an Indemnitee shall not include any
Certificate Holder) from and against (x) any and all Taxes howsoever imposed
against any Indemnitee, Lessee or all or any part of the Aircraft, the Airframe,
the Engines, the Parts or any part thereof or otherwise by any federal, state or
local government or other taxing authority in the United States or by any
foreign government or any political subdivision or taxing authority thereof or
by any territory or possession of the United States or by any international
authority upon or in connection with, relating to, or measured by (A) the
assembly, manufacture, construction, substitution, improvement, location,
conditioning, installation, financing, refinancing, purchase, acquisition,
acceptance, delivery, nondelivery, transport, ownership, registration,
reregistration, possession, repossession, control, operation, use, maintenance,
repair, replacement, insuring, sale, return, abandonment, storage, redelivery,
leasing, subleasing, modification, rebuilding of, transfer of title to, transfer
of registration of, rejection, importation, mortgaging, exportation or
disposition of, or the imposition of any Lien (or the incurrence of any
liability to refund or pay over any amount as the result of any Lien) on, the
Aircraft, the Airframe, the Engines, the Parts or any part thereof, (B) the
rentals, receipts or earnings from the Aircraft, the Airframe, the Engines, the
Parts or any part thereof, (C) any amount paid or payable pursuant to any
Operative Documents or any Pass Through Trust Agreement or any document related
thereto or the property or the income or other proceeds with respect to any of
the property held in the Trust Estate or the Trust Indenture Estate or the
property held by each Pass Through Trustee under the respective Pass Through
Trust Agreement, (D) the Aircraft, the Airframe, the Engines, the Parts or any
part thereof or any contract relating to the manufacture, construction,
acquisition or delivery thereof, (E) any or all of the Operative Documents, the
Pass Through Trust Agreements, or the issuance of the Loan Certificates or the
Pass Through Certificates (or the refinancing thereof) and any other documents
contemplated hereby or thereby and amendments and supplements hereto and thereto
which have been approved by Lessee or the execution, delivery, recording or
performance of any thereof or the issuance, acquisition, holding or subsequent
transfer thereof, (F) the payment of the Original
22
Amount of, or interest or Premium on, or other amounts payable with respect to,
the Loan Certificates or the payment of principal of, interest on or any other
amounts payable with respect to the Pass Through Certificates, (G) otherwise
with respect to or in connection with the transactions contemplated by the
Operative Documents, or (H) any change in the Owner Trustee or the situs of the
Trust Estate made pursuant to Sections 8(c) or 14 hereof; and (y) any reasonable
out-of-pocket costs and expenses fairly attributed to any of the foregoing
incurred by any Indemnitee.
(ii) Exclusions from General Tax Indemnity. The provisions of
-------------------------------------
Section 7(b)(i) shall not apply:
(1) in the case of an Indemnitee which is the Owner
Participant, the Owner Trustee, the Trust Estate, or a successor,
assign, or Affiliate of any thereof, to any Income Tax (as defined in
Section 7(b)(xii) hereof) imposed by (A) the United States Federal
government, (B) any state or local taxing jurisdiction or authority in
the United States to the extent such Income Taxes would not have been
imposed if (I) the use, location or operation of the Aircraft, or (II)
the activities of the Lessee, to or in such state or local
jurisdiction, had been the only connection between the Indemnitee and
such jurisdiction, or (C) any foreign government or any political
subdivision or taxing authority thereof or by any territory or
possession of the United States or by any international authority,
except to the extent such Income Taxes are attributable to (I) the
use, location or operation of the Aircraft, or (II) the activities of
the Lessee, to or in such jurisdiction;
(2) to any Tax imposed on an Indemnitee which is the Owner
Participant, the Owner Trustee, or the Trust Estate, or any successor,
assign or Affiliate of any thereof, as a result of a voluntary
transfer or disposition by such Indemnitee including, without
limitation, the revocation of the trust created by the Trust Agreement
or an involuntary transfer or disposition relating to bankruptcy or
similar proceedings of all or any portion of its respective equitable
or legal ownership interest in the Aircraft, the Airframe, the
Engines, the Parts or any part thereof, the Trust Estate or the
Operative Documents and each Pass Through Trust Agreement, unless such
transfer or disposition, whether or not voluntary or involuntary,
shall occur, (A) during a period when an Event of Default has occurred
and is continuing under
23
the Lease at the time of transfer or disposition and such transfer is
as a result of such Event of Default, or (B) in connection with the
termination of the Lease or action or direction of the Lessee pursuant
to Sections 7, 8, 9, 10 or 19 thereof;
(3) to any Tax imposed on any Indemnitee which is the
Indenture Trustee, the Trust Indenture Estate or a Pass Through
Trustee or any successor, assign or Affiliate of any thereof, as a
result of a voluntary or involuntary transfer or other disposition of
all or any portion of its respective equitable or legal interests in
the Trust Estate or the Trust Indenture Estate or the Operative
Documents and each Pass Through Trust Agreement unless, in each case,
such transfer or disposition shall occur (A) during a period when an
Event of Default has occurred and is continuing under the Lease at the
time of transfer or disposition and such transfer or disposition is a
result of such Event of Default, or (B) in connection with the
termination of the Lease or action or direction of the Lessee pursuant
to Sections 9, 10 or 19 thereof;
(4) to any Tax imposed on the Owner Participant, Trust
Estate or Owner Trustee which results from the willful misconduct or
gross negligence of (i) the Owner Participant, to the extent imposed
on the Owner Participant, Trust Estate or Owner Trustee, or (ii) to
the extent imposed on the Owner Trustee, the Owner Trustee;
(5) to any Tax imposed on an Indemnitee which is the
Indenture Trustee, the Trust Indenture Estate or a Pass Through
Trustee which results from the willful misconduct or gross negligence
of such Indemnitee;
(6) to any Tax based on or measured by any fees received by
the Owner Trustee, the Indenture Trustee or a Pass Through Trustee in
connection with any transaction contemplated by the Operative
Documents;
(7) so long as no Event of Default or event which, with the
passage of time or the giving of notice or both, would become an Event
of Default, shall be continuing, to any Tax imposed with respect to
(A) any period after the expiration of the Term and, unless purchased
by the Lessee, return of the Aircraft, (B) the earlier discharge in
full of Lessee's obligation to
24
pay the Stipulated Loss Value or the Termination Value and all other
amounts due under the Lease or (C) placement in storage or parking of
the Aircraft pursuant to Section 5(d) of the Lease; provided, however,
that this Section 7(b)(ii)(8) shall not apply to any Tax (x) relating
to events or conditions occurring or matters arising upon or prior to
such expiration, discharge, storage or parking, or (y) imposed on or
with respect to any payments of Tax indemnified hereunder which are
due after such expiration, discharge, storage or parking until after
such payments have been made;
(8) in the case of an Indemnitee which is the Trust
Indenture Estate or any successor, assign or Affiliate thereof, to any
Tax in the nature of an intangible or similar tax upon or with respect
to the value of the interest of the Trust Indenture Estate or the Pass
Through Certificates, as the case may be, in any of the Loan
Certificates imposed by any government or taxing authority;
(9) to any Tax which Lessee or an Indemnitee is contesting
in good faith under the provisions of Section 7(b)(iv) hereof until
the conclusion of such contest;
(10) to any Tax imposed on the Owner Trustee or an Owner
Participant resulting from, or which would not have occurred but for,
a Lessor Lien (including for this purpose Liens that would be Lessor
Liens but for the proviso to the definition of Lessor Liens);
(11) in the case of an Indemnitee which is the Owner
Participant or the Owner Trustee, to any Taxes to the extent of the
amount of such Taxes that are imposed by any jurisdiction on and with
respect to any activities of such Indemnitee in such jurisdiction
which activities are unrelated to the transactions contemplated by the
Operative Documents and each Pass Through Trust Agreement; and
(12) to any Tax which has been properly included in the
Lessor's Cost.
The provisions of this Section 7(b)(ii) shall not apply to any
Tax imposed in respect of the receipt or accrual of any indemnity payment
made by Lessee pursuant to this Section 7(b) or Section 7(c) hereof or
pursuant to the Tax Indemnity Agreement; provided, however, that this
clause
25
shall not result in any duplication of any amounts of any gross-up payable
under Section 7(b)(iii) or Section 7(c) hereof or the Tax Indemnity
Agreement.
Notwithstanding the exclusions set forth in this Section 7(b) or
any other provision of the Operative Documents or the Pass Through Trust
Agreements, the Lessee hereby agrees to indemnify and hold harmless on a
net after-tax basis the Trust Estate, the Owner Trustee and the Owner
Participant for any failure to withhold U.S. Federal Income Taxes upon
payments of principal, interest, Premium or discount on the Loan
Certificates or the Pass Through Certificates, including interest and
penalties, unless the Owner Participant has been timely advised by the
Lessee in writing that such withholding is required.
(iii) Calculation of General Tax Indemnity Payments. Any payment
---------------------------------------------
which Lessee shall be required to make to or for the account of any
Indemnitee in connection with any Tax which is subject to indemnification
under this Section 7(b) shall be in an amount which, after reduction by the
amount of all Taxes required to be paid by such Indemnitee in respect of
the receipt or accrual of such amount and after consideration of any
current savings of such Indemnitee resulting by way of any deduction,
credit or other tax benefit attributable to such indemnified Tax that
actually reduces any taxes for which Lessee is not actually required to
indemnify such Indemnitee pursuant to Section 7(b) hereof or the Tax
Indemnity Agreement shall be equal to the payment otherwise required
hereunder.
If, by reason of any Tax payment made to or for the account of an
Indemnitee by Lessee pursuant to this Section 7(b), such Indemnitee
subsequently realizes a tax deduction, savings or credit (including any
foreign tax credit and any reduction in Taxes) not previously taken into
account in computing such payment, such Indemnitee shall promptly pay to
Lessee an amount equal to the sum of (I) the actual reduction in Taxes, if
any, realized by such Indemnitee which is attributable to such deduction,
savings or credit and (II) the actual reduction in Taxes realized by such
Indemnitee as a result of any payment made by such Indemnitee pursuant to
this sentence; provided, however, that in the case of an Indemnitee which
is the Owner Participant or the Owner Trustee, such Indemnitee shall not be
obligated to make any payment pursuant to this Section 7(b)(iii) to the
extent that the amount calculated pursuant to (I) above would exceed (x)
the amount of all prior payments (determined without regard to any amount
paid in respect of Taxes required to be paid by such Indemnitee in
26
respect of the receipt or accrual of such amounts received by such
Indemnitee) from Lessee pursuant to this Section 7(b), less (y) the portion
of all prior payments computed pursuant to (I) above by such Indemnitee to
Lessee hereunder.
For purposes of this Section 7(b)(iii), items of foreign Tax of
any Indemnitee shall be deemed to be utilized by such Indemnitee as credits
or deductions for any taxable year in accordance with the following
priorities:
First, all available foreign Taxes other than those
described below in Second; and
Second, all available foreign Taxes arising out of any
equipment leasing transaction to the extent that such Indemnitee was
indemnified or held harmless for such Taxes by a lessee on a pari
passu basis.
Any Taxes that are imposed on any Indemnitee as a result of the
disallowance or reduction of any tax benefit referred to in this subsection
as to which such Indemnitee has made in full the payment to Lessee required
hereby (or as to which such Indemnitee would have made its payment but for
Section 7(b)(vii) hereof) or which is otherwise taken into account in
calculating Lessee's indemnity obligation, in a taxable year subsequent to
the utilization by such Indemnitee (including the expiration of any tax
credit carryovers or carrybacks of such Indemnitee that would not otherwise
have expired) shall be treated as a Tax for which Lessee is obligated to
indemnify such Indemnitee pursuant to the provisions of this Section 7(b)
without regard to the provisions of Section 7(b)(ii), 7(b)(iv) or the third
paragraph of this Section 7(b)(iii).
(iv) General Tax Indemnity -- Contests. If a written claim shall
---------------------------------
be made against any Indemnitee for any Tax for which Lessee is obligated
pursuant to this Section 7(b), such Indemnitee shall notify Lessee in
writing promptly after receipt thereof (as well as the name of independent
tax counsel for purposes of this Section 7(b)(iv)) and, in any event,
within 30 days of receipt of such notice and shall provide Lessee such
information regarding such claim as Lessee may reasonably request, but the
failure to give such notice or to provide such information when required
shall not diminish Lessee's obligation hereunder unless such failure
effectively precludes Lessee's ability to (A) require such Indemnitee to
contest the Tax or (B) contest the Tax itself (in a case
27
where Lessee cannot require the Indemnitee to contest such Tax).
If a written claim shall be made for any Tax, other than an
Income Tax, for which Lessee is obligated pursuant to this Section 7(b),
and under applicable law of the taxing jurisdiction Lessee is allowed to
directly contest such Tax and the Tax to be contested is not reflected in a
report or return with other Taxes of any Indemnitee and if the Indemnitee
determines in good faith that it will not suffer any adverse consequences
as a result, then the Lessee shall be permitted, at its expense and in its
own name, or, if consented to by the Indemnitee, in the name of such
Indemnitee, to contest the imposition of such Tax; provided, however, that
Lessee shall not be permitted or entitled to contest any Tax (A) if such
contest will result in the risk of an imposition of criminal penalties or a
material risk of a sale, forfeiture or loss of the Aircraft, the Airframe,
the Engines, the Parts or any part thereof or the creation of any Lien
other than Liens for Taxes of Lessee (x) either not yet due or being
contested in good faith by appropriate proceedings so long as such
proceedings do not involve the risk of an imposition of criminal penalties
or the material risk of any sale, forfeiture or loss of the Aircraft, and
(y) for the payment of which such reserves, if any, as required to be
provided under generally accepted accounting principles have been provided
and, to the extent permitted by law, Lessee shall be entitled to withhold
payment during pendency of such contest, (B) if an Event of Default shall
have occurred and be continuing, unless the Lessee shall have, at the
option of the Owner Participant, either (i) provided security for its
obligations hereunder reasonably satisfactory to the Owner Participant by
placing in escrow sufficient funds to cover any such contested Tax or (ii)
paid such Tax, (C) unless in Lessee's request to the Indemnitee to contest
such Tax, Lessee shall have agreed to pay such Indemnitee on demand all
costs and expenses that such Indemnitee actually incurs in connection with
contesting such claim (including, without limitation, all costs, expenses,
losses, reasonable legal and accounting fees, disbursements, penalties,
interest and additions to tax) or (D) unless in the case of an Indemnitee
which is the Owner Participant or the Owner Trustee, or a successor, assign
or Affiliate of the Owner Participant or the Owner Trustee, prior to the
commencement of a contest Lessee shall have delivered to such Indemnitee a
written acknowledgement of Lessee's obligation to indemnify fully such
Indemnitee to the extent that the contest is not successful; provided,
however, that Lessee will not be bound by its acknowledgement of liability
if and
28
to the extent that the contest results in a determination which clearly and
unambiguously demonstrates that Lessee is not otherwise liable under this
Section 7(b) with respect to such Tax.
If requested by Lessee in writing (A) within 30 days of Lessee's
receipt of notice from an Indemnitee under the first paragraph of this
Section 7(b)(iv) and (B) with respect to a Tax for which Lessee is
obligated to indemnify pursuant to this Section 7(b) which is not described
in the previous paragraph exclusive of the proviso thereto, such Indemnitee
shall in good faith at Lessee's expense contest the imposition of any such
Tax. After consulting with Lessee and Lessee's counsel concerning the
forum in which the adjustment is most likely to be favorably resolved, such
Indemnitee shall, in its sole discretion, select the forum for such contest
and determine whether any such contest shall be by (A) resisting payment of
such Tax, (B) paying such Tax under protest or (C) paying such Tax and
seeking a refund or other repayment thereof. In no event shall such
Indemnitee be requested or required to contest the imposition of any Tax
for which Lessee is liable under this Section 7(b) unless (I) in Lessee's
request to the Indemnitee to contest such Tax, Lessee shall have agreed to
pay such Indemnitee on demand all reasonable costs and expenses that such
Indemnitee actually incurs in connection with contesting such claim
(including, without limitation, all costs, expenses, losses, reasonable
legal and accounting fees, disbursements, penalties, interest and additions
to tax), (II) such action to be taken will not result in the risk of an
imposition of criminal penalties or the material risk of any sale,
forfeiture or loss of the Aircraft, or the creation of any Lien other than
Liens for Taxes of Lessee (x) either not yet due or being contested in good
faith by appropriate proceedings so long as such proceedings do not involve
the risk of an imposition of criminal penalties or the material risk of any
sale, forfeiture or loss of the Aircraft and (y) for the payment of which
such reserves, if any, as are required to be provided under generally
accepted accounting principles have been provided by Lessee, (III) if such
contest shall be conducted in a manner requiring the payment of the claim,
Lessee shall have paid the amount required directly to the appropriate
authority or made an advance of the amount thereof to such Indemnitee on an
interest-free basis and agreed to indemnify the Indemnitee against any
additional net after-tax cost to such Indemnitee with respect to such
advance or payment, (IV) with regard to an Income Tax on an Indemnitee
which is the Owner Participant or the Owner Trustee, or a successor, assign
or Affiliate of the Owner Participant or the Owner Trustee,
29
independent tax counsel selected by such Indemnitee and reasonably
satisfactory to the Lessee shall furnish an opinion, prepared at the
Lessee's expense, to the effect that there is a reasonable basis to contest
such claim and with respect to appeal, to the effect that it is more likely
than not such appeal will be successful, (V) in the case of an Indemnitee
which is the Owner Participant or the Owner Trustee, or a successor, assign
or Affiliate of the Owner Participant or the Owner Trustee, prior to the
commencement of a contest Lessee shall have delivered to such Indemnitee a
written acknowledgment of Lessee's obligation to indemnify fully such
Indemnitee to the extent that the contest is not successful; provided,
however, that Lessee will not be bound by its acknowledgment of liability
if and to the extent that the contest results in a determination which
clearly and unambiguously demonstrates that Lessee is not otherwise liable
under this Section 7(b) with respect to such Tax, (VI) if an Event of
Default shall have occurred and be continuing, the Lessee shall have, at
the option of the Owner Participant, either (i) provided security for its
obligations hereunder reasonably satisfactory to the Owner Participant by
placing in escrow sufficient funds to cover any such contested Tax or (ii)
paid such Tax, and (VII) the amount of the indemnity computed under Section
7(b) arising from a claim for Tax exceeds $10,000. In no event shall an
Indemnitee be required to appeal or to seek leave to appeal an adverse
determination with respect to Taxes contested by, or in the name of, the
Indemnitee to the United States Supreme Court.
If any Indemnitee shall obtain a refund of all or any part of any
Tax paid by Lessee such Indemnitee shall pay Lessee an amount equal to the
sum of (I) the amount of such refund, including interest received
attributable thereto, net of taxes required to be paid by such Indemnitee
as a result of any refund and/or interest received and (II) any tax benefit
realized by such Indemnitee as a result of any payment by such Indemnitee
made pursuant to this sentence; provided, however, that in the case of any
Indemnitee which is the Owner Participant or any successor, assign or
Affiliate of the Owner Participant such amount attributable to (I) above
shall not be in excess of the amount of such Tax payment (determined
without regard to any amount paid in respect of Taxes required to be paid
by such Indemnitee in respect of the receipt or accrual of such payment or
advance made by Lessee to such Indemnitee) plus interest received, if any,
from the relevant taxing authority with respect to such Tax payment (net of
Taxes required to be paid by such Indemnitee in connection with the receipt
of such interest), it being intended that such Indemnitee shall realize a
net
30
benefit pursuant to this Section 7(b) only if Lessee shall first have been
reimbursed for any payments by it to such Indemnitee pursuant to this
Section 7(b) arising from the same Loss. If any Indemnitee shall have paid
Lessee any refund of all or part of any Tax paid by Lessee and it is
subsequently determined that such Indemnitee was not entitled to the
refund, such determination shall be treated as the imposition of a Tax for
which Lessee is obligated to indemnify such Indemnitee pursuant to the
provisions of this Section 7(b) without regard to Section 7(b)(ii) or
Section 7(b)(iv).
Nothing contained in this Section 7(b)(iv) shall require any
Indemnitee to contest, or permit Lessee to contest, a claim with respect to
the imposition of any Tax if such Indemnitee shall waive its right to
indemnification under this Section 7 with respect to such claim or a claim
with respect to which a previous contest pursuant to the provision of this
Section 7(b)(iv) shall have been determined adversely to the taxpayer.
(v) General Tax Indemnity -- Reports. Lessee will provide such
--------------------------------
information (including information on the routes and operations of the
Aircraft) as may be reasonably requested by an Indemnitee or required to
enable an Indemnitee to fulfill its tax filing or audit requirements with
respect to the transactions contemplated by the Operative Documents. In
the event any return, statement or report is required to be made or filed
with respect to any Tax imposed on or indemnified against by Lessee under
this Section 7(b) (other than with respect to Income Taxes), Lessee shall
notify the Indemnitee of such requirement and (i) to the extent permitted
by law, and not otherwise requested by the Indemnitee, or required by law,
Lessee shall make and file in its own name (and pay the tax shown due on)
such return, statement or report in such manner as will show the ownership
of the Aircraft in the Owner Trustee and furnish the Indemnitee with a copy
of such return, statement or report; provided, however, that Lessee shall
have no obligation under this clause (i) to the extent such Indemnitee
after receipt of Lessee's written request shall have failed to furnish
Lessee with such information as is peculiarly within such Indemnitee's
control and is necessary to file such returns, statements or reports, and
(ii) in the case of a return, statement or report required (or requested by
the Indemnitee) to be in the name of or filed by such Indemnitee, Lessee
shall prepare and furnish such return, statement or report for filing by
such Indemnitee in such manner as shall be reasonably satisfactory to such
Indemnitee and send the same to such Indemnitee for filing
31
no later than 10 Business Days prior to the due date; provided, however,
that Lessee shall have no obligation under this clause (ii) to the extent
such Indemnitee after receipt of Lessee's written request shall have failed
to furnish Lessee with such information as is peculiarly within such
Indemnitee's control and is necessary to prepare such return, statement or
report. Lessee shall hold each Indemnitee harmless from and against any
liabilities, including, but not limited to penalties, additions to tax,
fines and interest, arising out of any insufficiency or inaccuracy in any
such return, statement, report or information if such insufficiency or
inaccuracy is attributable to Lessee.
(vi) General Tax Indemnity -- Payment. Except as provided in
--------------------------------
Section 7(b)(iv) or (v) hereof, Lessee shall pay any Tax directly to the
appropriate taxing authority if legally permissible and upon demand of an
Indemnitee shall pay such Tax and any other amounts due hereunder to such
Indemnitee within 20 Business Days of such demand, but in no event shall
any such payments be made more than 10 Business Days prior to the date the
Tax to which any such payment hereunder relates is due (unless Lessee has
not received such demand at least 15 Business Days prior to such date in
which case within five Business Days after receipt of such demand), in
immediately available funds. Any such demand for payment from an
Indemnitee shall specify in reasonable detail, the payment and the facts
upon which the right to payment is based. Each Indemnitee shall promptly
forward to Lessee any notice, bill or advice received by it concerning any
Tax indemnified against hereunder. As soon as practicable after each
payment by Lessee of any Tax indemnified against hereunder, Lessee shall
furnish the appropriate Indemnitee the original or a certified copy of a
receipt for Lessee's payment of such Tax or such other evidence of payment
of such Tax as is acceptable to such Indemnitee. Lessee shall also furnish
promptly upon request such data as any Indemnitee may reasonably require to
enable such Indemnitee to comply with the requirements of any taxing
jurisdiction.
(vii) Application of Payments During Existence of Default or Event
------------------------------------------------------------
of Default. Any amount payable to Lessee pursuant to the terms of this
----------
Section 7(b) shall not be paid to or retained by Lessee if at the time of
such payment or retention a Default or an Event of Default shall have
occurred and be continuing under the Lease. At such time as there shall
not be continuing any Default or Event of Default, such amount shall be
paid to the Lessee to the extent not previously applied against Lessee's
obligations
32
hereunder as and when due after the Owner Trustee shall have declared the
Lease in default pursuant to Section 15 thereof.
(viii) Reimbursements by Indemnitees Generally. If, for any
---------------------------------------
reason, Lessee is required to make any payment with respect to any Taxes
imposed on any Indemnitee in respect of the transactions contemplated by
the Operative Documents or on the Aircraft, the Airframe, the Engines, the
Parts or any part thereof, which Taxes are not the responsibility of Lessee
under this Section 7(b), then such Indemnitee shall pay to Lessee an amount
which equals the amount paid by Lessee with respect to such Taxes plus
interest thereon, computed from the date of payment by Lessee, at the Base
Rate.
(ix) Forms, etc. Each Indemnitee agrees to furnish to Lessee from
-----------
time to time, at the Lessee's request and expense, such duly executed and
properly completed forms as may be necessary or appropriate in order to
claim any reduction of or exemption from any withholding tax imposed by any
taxing authority in respect of any payments otherwise required to be made
by Lessee pursuant to the Operative Documents and each Pass Through Trust
Agreement, which reduction or exemption may be available to such
Indemnitee. In addition, any Indemnitee shall, at Lessee's expense,
execute and deliver any forms or documents which Lessee reasonably requests
and which are reasonably related to any indemnified Taxes. Notwithstanding
the foregoing, an Indemnitee shall not be required to (A) make available
any Income Tax returns; or to (B) execute and deliver any forms or
documents which would in the good faith determination of such Indemnitee
disadvantage such Indemnitee in the context of its overall filing position
or with regard to other Taxes not indemnified under this Agreement or the
Tax Indemnity Agreement.
(x) Non-Parties. If an Indemnitee is not a party to this
-----------
Agreement, Lessee may require the Indemnitee to agree to the terms of this
Section 7(b) prior to making any payment to such Indemnitee under this
Section 7(b).
(xi) Owner Participant. For the purposes of this Section 7(b),
-----------------
the term "Owner Participant" shall mean and include [__________________]
(and its permitted successors and assigns) and where appropriate the
affiliated group of corporations (and each member thereof) making a
consolidated or combined return of which [_____________] (and its permitted
successors and assigns) is a member.
33
(xii) Income Tax. For purposes of this Section 7, the term Income
----------
Tax means any Tax based on or measured by or with respect to net income
(including, without limitation, capital gains taxes, minimum taxes, income
taxes collected by withholding, and taxes on tax preference items) or net
receipts and taxes imposed on gross income or gross receipts which are
expressly in lieu of a net income tax (provided, however, that sales, use,
value added, rental, license, ad valorem or property Taxes shall not
constitute an Income Tax) and Taxes which are capital, doing business,
franchise, excess profits, net worth taxes and interest, additions to tax,
penalties, or other charges in respect thereof.
(c) General Indemnity. Lessee hereby agrees to indemnify, on an
-----------------
after-tax basis, each Indemnitee against, and agrees to protect, save and keep
harmless each of them from (whether or not the transactions contemplated herein
or in any of the other Operative Documents or the Pass Through Trust Agreements
are consummated), any and all Expenses imposed on, incurred by or asserted
against any Indemnitee, in any way relating to or arising out of (A) the
Operative Documents and each Pass Through Trust Agreement (and any amendments
thereto), the negotiation and the consummation of the transactions contemplated
thereby or any sublease under the Lease Agreement or the enforcement of any of
the terms of any thereof; or (B) the manufacture, design, purchase, resale,
acceptance or rejection of the Airframe or any Engine or Parts; or (C) the
Aircraft (or any portion thereof) or any Engine whether or not installed on the
Airframe or any airframe on which an Engine is installed whether or not arising
out of the finance, refinance, ownership, delivery, nondelivery, storage, lease,
sublease, possession, use, non-use, operation, maintenance, modification,
alteration, condition, sale, replacement, substitution, return or other
disposition, registration, reregistration or airworthiness of the Aircraft (or
any portion thereof) including, without limitation, latent or other defects,
whether or not discoverable, strict tort liability and any damage to property or
the environment, death or injury to any person and any claim for patent,
trademark or copyright infringement; or (D) the offer, sale, holding, transfer
or delivery of the Loan Certificates or the Pass Through Certificates, whether
before, on or after the Delivery Date (the indemnity in this clause (D) to
extend also to any person who controls an Indemnitee, its successors, assigns,
employees, directors, officers, servants and agents within the meaning of
Section 15 of the Securities Act of 1933, as amended); or (E) the offer,
holding, transfer or sale of any interest in the Trust Estate or the Trust
Agreement or any similar interest (a) on or prior to the Delivery Date, or (b)
subsequent to the Delivery Date during the continuation of an Event of Default
under the Lease or in connection with the exercise by the Lessee of its
34
purchase options under the Lease or in connection with a refinancing pursuant to
Section 17 hereof or in connection with the termination of the Lease or action
or direction of Lessee pursuant to Sections 7, 8, 9, 10, or 19 thereof;
provided, that the foregoing indemnity shall not extend to any Expense to the
extent resulting from or arising out of one or more of the following: (1) any
representation or warranty by such Indemnitee in the Operative Documents or in
any Pass Through Trust Agreement being incorrect, or (2) the failure by such
Indemnitee to perform or observe any agreement, covenant or condition in any of
the Operative Documents or in any Pass Through Trust Agreement including,
without limitation, the creation or existence of a Lessor Lien (including for
this purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens), or (3) the willful misconduct or the gross
negligence of such Indemnitee (other than gross negligence imputed to such
Indemnitee solely by reason of its interest in the Aircraft), or (4) (A) in the
case of such Indemnitee a disposition (voluntary or involuntary) of all or any
part of its interest in the Airframe or any Engine, (B) in the case of a
Certificate Holder a disposition (voluntary or involuntary) by such Certificate
Holder of all or any part of its interest in any Loan Certificate or (C) in the
case of any Indemnitee a disposition by such Indemnitee of all or any part of
such Indemnitee's interest in the Operative Documents or the Pass Through Trust
Agreements other than in each of (A), (B) and (C) during the continuance of an
Event of Default under the Lease or pursuant to the exercise by the Lessee of
its purchase options under the Lease or in connection with a refinancing
pursuant to Section 17 hereof or in connection with the termination of the Lease
or action or direction of Lessee pursuant to Sections 7, 8, 9, 10 or 19 thereof,
or (5) other than to the extent provided in the succeeding paragraph, any Tax
(as defined in Section 7(b) hereof) whether or not Lessee is required to
indemnify for such Tax pursuant to Section 7(b) hereof (it being understood that
Section 7(b) hereof and the Tax Indemnity Agreement and provisions requiring
payments to be made on an after-tax basis or expressly providing for additional
indemnification by Lessee exclusively provide for Lessee's liability with
respect to Taxes), or (6) the offer or sale by the Owner Participant after the
Delivery Date of any interest in the Trust Estate or the Trust Agreement or any
similar interest, unless such offer or sale shall occur (A) during a period when
an Event of Default has occurred and is continuing under the Lease at the time
of such offer or sale or (B) in connection with the exercise by Lessee of its
purchase options under the Lease or, (7) in the case of the Owner Participant, a
failure on the part of the Owner Trustee to distribute in accordance with the
Trust Agreement any amounts received and distributable by it thereunder or, in
the case of a Certificate Holder, a failure on the part of the Indenture Trustee
to distribute in accordance with the Trust
35
Indenture any amounts received and distributable by it thereunder to such
Certificate Holder or a failure on the part of any Pass Through Trustee to
distribute in accordance with the applicable Pass Through Trust Agreement any
amounts received and distributable by such Pass Through Trustee under such Pass
Through Trust Agreement, or (8) other than during the continuation of a Default
or an Event of Default under the Lease the authorization or giving or
withholding of any future amendments, supplements, waivers or consents with
respect to any of the Operative Documents or any Pass Through Trust Agreement
unless such amendments, supplements, waivers or consents (a) are requested by
Lessee or (b) are required or permitted pursuant to the terms of the Operative
Documents (unless the same results from the actions of an Indemnitee) (provided
if Lessee is not responsible for the Expense associated with such amendment,
supplement, waiver or consent, the party requesting the execution of the same
shall be responsible for such expense), or (9) other than to the extent provided
in the succeeding paragraph any loss of tax benefits or increase in tax
liability under any tax law whether or not Lessee is required to indemnify
therefor pursuant to this Agreement or the Tax Indemnity Agreement (it being
understood that Section 7(b) hereof and the Tax Indemnity Agreement and
provisions requiring payments to be made on an after-tax basis or expressly
providing for additional indemnification by Lessee exclusively provide for
Lessee's liability with respect to Taxes), or (10) except to the extent fairly
attributable to acts or events occurring on or prior thereto, acts or events
which occur after the earlier of: (I) the return of possession of the Airframe
or any Engine or any Part to the Owner Trustee or its designee pursuant to the
terms of the Lease (other than pursuant to Section 15 thereof, in which case
Lessee's liability under this Section 7(c) shall survive for so long as Owner
Trustee shall be entitled to exercise remedies under such Section 15), (II) the
termination of the Term in accordance with Sections 5, 9 or 19 of the Lease,
(III) the last day of the Term if Owner Trustee shall have furnished the notice
referred to in Section 10(d) of the Lease and Lessee shall have failed to return
possession to Owner Trustee on such day or (IV) the payment by Lessee of all
amounts required to be paid under the Lease following an Event of Loss (but
excluding from the terms of this subsection (IV) an Event of Loss followed by
the replacement of the Aircraft).
Notwithstanding clause 7(c)(5) or (9) above, Lessee further agrees
that any payment or indemnity pursuant to this Section 7(c) in respect of any
"Expenses" shall be in an amount which, after deduction of all Taxes required to
be paid by such recipient with respect to such payment or indemnity under the
laws of any federal, state or local government or taxing authority in the United
States, or under the laws of any taxing
36
authority or governmental subdivision of a foreign country, or any territory or
possession of the United States or any international authority, shall be equal
to the excess, if any, of (A) the amount of such Expense over (B) the current
net reduction in Taxes actually required to be paid by such recipient resulting
from the accrual or payment of such Expense.
Nothing in this Section 7(c) shall be construed as a guaranty by
Lessee of payments due pursuant to the Loan Certificates or the Pass Through
Certificates or of the residual value of the Aircraft.
If a claim is made against an Indemnitee involving one or more
Expenses and such Indemnitee has notice thereof, such Indemnitee shall promptly
after receiving such notice give notice of such claim to Lessee; provided that
the failure to provide such notice shall not release Lessee from any of its
obligations to indemnify hereunder or from any other obligation that the Lessee
may have to such Indemnitee at law or in equity, and no payment by Lessee to an
Indemnitee pursuant to this Section 7(c) shall be deemed to constitute a waiver
or release of any right or remedy which the Lessee may have against such
Indemnitee for any actual damages as a result of the failure by such Indemnitee
to give Lessee such notice. So long as Lessee has acknowledged its obligation
to indemnify pursuant to this Section 7(c), Lessee shall be entitled, at its
sole cost and expense, acting through counsel reasonably acceptable to the
respective Indemnitee, (A) in any judicial or administrative proceeding that
involves solely a claim for one or more Expenses, to assume responsibility for
and control thereof, (B) in any judicial or administrative proceeding involving
a claim for one or more Expenses and other claims related or unrelated to the
transactions contemplated by the Operative Documents, to assume responsibility
for and control of such claim for Expenses to the extent that the same may be
and is severed from such other claims (and such Indemnitee shall use reasonable
efforts to obtain such severance), and (C) in any other case, to be consulted by
such Indemnitee with respect to judicial proceedings subject to the control of
such Indemnitee and to be allowed, at Lessee's sole expense, to participate
therein. Notwithstanding any of the foregoing to the contrary, Lessee shall not
be entitled to assume responsibility for and control of any such judicial or
administrative proceedings if (i) any Default under Section 14(a), (b), (f) or
(g) of the Lease or an Event of Default under the Lease shall have occurred and
be continuing, (ii) if such proceedings will involve a material risk of the
sale, forfeiture or loss of, or the creation of any Lien (other than a Permitted
Lien) on, the Aircraft, the Trust Indenture Estate or the Trust Estate or any
part thereof unless Lessee shall have posted a bond or other security reasonably
satisfactory to the relevant Indemnitees in respect to such risk
37
or (iii) if such proceedings could, in the good faith opinion of the Indemnitee
entail any risk of criminal liability or any material risk of civil liability
(unless, in the case of such civil liability, Lessee has agreed to indemnify
against such civil liability in a manner reasonably acceptable to such
Indemnitee). The Indemnitee may participate at its own expense and with its own
counsel in any judicial proceeding controlled by Lessee pursuant to the
preceding provisions; provided, however, that if in the written opinion of
-------- -------
counsel to such Indemnitee (which opinion and counsel shall be reasonably
acceptable to Lessee) an actual or potential material conflict of interest
exists where it is advisable for such Indemnitee to be represented by separate
counsel, the reasonable fees and expenses of such separate counsel shall be
borne by Lessee.
The Indemnitee shall supply Lessee, at Lessee's expense, with such
information reasonably requested by Lessee as is necessary or advisable for
Lessee to control or participate in any proceeding to the extent permitted by
this Section 7(c). Such Indemnitee shall not enter into a settlement or other
compromise with respect to any Expense as to which Lessee has acknowledged its
obligation to indemnify (and if Lessee has not so acknowledged only upon 5
Business Days' prior written notice to Lessee) without the prior written consent
of Lessee (except during the continuance of any Default under Section 14(a),
(b), (f) or (g) of the Lease or an Event of Default under the Lease when such
consent shall not be required if such Indemnitee gives 30 days' prior written
notice to Lessee describing the proposed settlement or compromise), which
consent shall not be unreasonably withheld or delayed, unless such Indemnitee
waives its right to be indemnified with respect to such Expense under this
Section 7(c).
The Lessee shall supply the Indemnitee with such information
reasonably requested by the Indemnitee as is necessary or advisable for the
Indemnitee to control or participate in any proceeding to the extent permitted
by this Section 7(c).
Upon payment of any Expense pursuant to this Section 7(c), Lessee,
without any further action, shall be subrogated to any claims the Indemnitee may
have relating thereto other than claims under Section 9.06 of the Trust
Indenture or Section 5.03 or 7.01 of the Trust Agreement. The Indemnitee agrees
to give such further assurances or agreements and to cooperate with Lessee to
permit Lessee to pursue such claims, if any, to the extent reasonably requested
by Lessee.
In the event that Lessee shall have paid an amount to an Indemnitee
pursuant to this Section 7(c), and such Indemnitee
38
subsequently shall be reimbursed in respect of such indemnified amount from any
other person, such Indemnitee shall, unless a Default under Section 14(a), (b),
(d) (solely with respect to Lessee's obligations under Section 7(a) or (b)(viii)
of the Lease or Section 8 of the Lease), (f) or (g) of the Lease or an Event of
Default under the Lease shall have occurred and be continuing, promptly pay
Lessee but not before Lessee shall have made all payments then due to such
Indemnitee pursuant to this Section 7(c) and any other payments then due under
any of the Operative Documents, an amount equal to the sum of (I) the amount of
such reimbursement, including interest received attributable thereto, net of
taxes required to be paid by such Indemnitee as a result of any reimbursement
including interest received attributable thereto and (II) any tax benefit
actually realized by such Indemnitee as a result of any payment by such
Indemnitee made pursuant to this sentence; provided, however, that in the case
of any Indemnitee which is the Owner Participant or any successor, assign or
Affiliate of the Owner Participant such amount attributable to (I) above shall
not be in excess of the amount of such Expense payment net of any amount paid in
respect of Taxes required to be paid by such Indemnitee in respect of the
receipt or accrual of such payment or advance made by Lessee to such Indemnitee
plus interest received, if any, from the relevant taxing authority with respect
to any such Expense payment, it being intended that such Indemnitee shall
realize a net benefit pursuant to this Section 7(c) only if Lessee shall first
have been reimbursed for any payments by it to such Indemnitee pursuant to this
Section 7(c).
Lessee agrees to pay the reasonable and continuing fees and expenses
of the Indenture Trustee (including, but not limited to, the reasonable fees and
expenses of its counsel and any agent appointed in accordance with Section
9.02(c) of the Trust Indenture) and each Pass Through Trustee (including, but
not limited to, the reasonable fees and expenses of its counsel) and, as
provided in Section 6.07 of the Trust Agreement, the Owner Trustee (including,
but not limited to, the reasonable fees and expenses of its counsel), in each
case without cost, on a net after-tax basis, to the Owner Participant, for
acting as such, other than such fees and expenses which constitute Transaction
Expenses.
Lessee's obligations under the indemnities provided for in this
Agreement shall be those of a primary obligor, whether or not the Person
indemnified shall also be indemnified with respect to the same matter under the
terms of any other document or instrument, and the Person seeking
indemnification from Lessee pursuant to any provision of this Agreement may
proceed directly against Lessee without first seeking to enforce any other right
of indemnification.
39
To the extent permitted by applicable law, interest at the Past Due
Rate shall be paid, on demand, on any amount or indemnity not paid when due
pursuant to this Section 7 until the same shall be paid. Such interest shall be
paid in the same manner as the unpaid amount in respect of which such interest
is due.
Any amount which is payable to Lessee by any Person pursuant to this
Section 7 shall not be paid to Lessee if a Default under Section 14(a), (b), (d)
(solely with respect to Lessee's obligations under Section 7(a) or (b)(viii) of
the Lease or Section 8 of the Lease), (f) or (g) of the Lease or an Event of
Default under the Lease shall have occurred and be continuing or if any payment
is due and owing by Lessee under the Lease or to such Person under any other
Operative Document. Any such amount shall be held by such Person and, if such
Default or an Event of Default under the Lease shall have occurred and be
continuing, shall be applied against Lessee's obligations hereunder to such
Person as and when due (and, to the extent that Lessee has no obligations
hereunder to such Person, such amount shall be paid to Lessee). At such time as
there shall not be continuing any such Default or an Event of Default or there
shall not be due and owing any such payment, such amount shall be paid to Lessee
to the extent not previously applied in accordance with the immediately
preceding sentence.
(d) Withholding. If Lessee advises the Owner Trustee, the Indenture
-----------
Trustee and the relevant Certificate Holder in writing that interest on its Loan
Certificates is subject to United States withholding tax, then the Owner Trustee
shall instruct the Indenture Trustee to, and Indenture Trustee shall, withhold
as provided in Section 9.11 of the Trust Indenture.
SECTION 8. Representations, Warranties and Covenants. (a) The Owner
-----------------------------------------
Participant represents that it is acquiring its interest in the Trust Estate for
investment purposes only and not with a present intent as to any resale or
distribution thereof (subject nonetheless to any requirement of law that the
disposition of its properties shall at all times be and remain within its
control) and that neither it nor anyone acting on its behalf (other than for
purposes of this paragraph, Lessee and the Underwriter) has directly or
indirectly offered any interest in the Trust Estate or any Loan Certificates or
Pass Through Certificates or any similar securities for sale to, or solicited
any offer to acquire any of the same from, anyone in a manner which would result
in a violation of the Securities Act of 1933, as amended or the securities laws,
rules and regulations of any state.
40
(b) Each of the Owner Participant and State Street Bank and Trust
Company, in its individual capacity, represents and warrants to the other
parties to this Agreement that it is, and on the Delivery Date will be, a
Citizen of the United States. The Owner Participant agrees, solely for the
benefit of Lessee and the Certificate Holders, that if during such time as the
Aircraft is registered in the United States (or if Lessee desires to register
the Aircraft in the United States) (i) it shall not be a Citizen of the United
States and (ii) the Aircraft shall be, or would therefore become, ineligible for
registration in the name of the Owner Trustee under the Federal Aviation Act and
regulations then applicable thereunder, then the Owner Participant shall (at its
own expense and without any reimbursement or indemnification from Lessee) as
soon as is reasonably practicable but in any event within 30 days after
obtaining Actual Knowledge of such ineligibility and of such loss of citizenship
(A) effect voting trust or other similar arrangements or take any other action
as may be necessary to prevent any deregistration or to maintain the United
States registration of the Aircraft, or (B) transfer its beneficial interest in
the Trust Estate in accordance with Section 8(l) hereof. It is understood that:
(1) the Owner Participant shall be liable to any of the other parties hereto for
any damages suffered by any such other party as the result of the representation
and warranty of the Owner Participant in the first sentence of this Section 8(b)
proving to be untrue as of the Delivery Date; and (2) the Owner Participant
shall be liable to Lessee, any Sublessee and any Certificate Holder for any
damages which may be incurred by Lessee, any Sublessee or such Certificate
Holder as a result of the Owner Participant's failure to immediately comply with
its obligations pursuant to the second sentence of this Section 8(b) unless such
failure is a result of such party's breach of its obligations to cooperate set
forth in the following sentence (including any damages suffered by any such
party (other than damages suffered by Lessee which Lessee could have mitigated
by taking reasonable steps (Lessee having no obligation to restrict the use of
the Aircraft to so mitigate)) at any time after the fifth Business Day following
the Owner Participant's having obtained Actual Knowledge of such ineligibility
or loss of citizenship). Each party hereto agrees, upon the request and at the
sole expense of the Owner Participant, to reasonably cooperate with the Owner
Participant in complying with its obligations under the provisions of the second
sentence of this Section 8(b) and such request shall not be subject to the
indemnity contained in Section 7(c) hereof. State Street Bank and Trust Company
in its individual capacity, agrees that if at any time a responsible officer of
State Street Bank and Trust Company, shall obtain Actual Knowledge that State
Street Bank and Trust Company has ceased to be a Citizen of the United States,
it will promptly resign as Owner Trustee (if and
41
so long as such citizenship is necessary under the Federal Aviation Act as in
effect at such time or, if it is not necessary, if and so long as the Owner
Trustee's citizenship would have any adverse effect on a Certificate Holder,
Lessee or the Owner Participant), effective upon the appointment of a successor
Owner Trustee in accordance with Section 9.01 of the Trust Agreement. If the
Owner Participant or State Street Bank and Trust Company, in its individual
capacity, does not comply with the requirements of this Section 8(b), the Owner
Trustee, the Indenture Trustee, the Owner Participant and the Certificate
Holders hereby agree that a Default or an Event of Default shall not have
occurred and be continuing under the Lease due to noncompliance by Lessee with
the registration requirements in the Lease.
(c) State Street Bank and Trust Company, in its individual capacity
represents and warrants that both the principal place of business of the Owner
Trustee and the place where the Owner Trustee's records concerning the Aircraft
and all of its interest in, to and under the Operative Documents to which it is
a party are or will be kept is Boston, Massachusetts (other than such as may be
maintained or held by the Indenture Trustee pursuant to the Trust Indenture) and
has its chief executive office (as such term is used in Article 9 of the Uniform
Commercial Code) in the Commonwealth of Massachusetts. State Street Bank and
Trust Company, in its individual capacity agrees that it will not change the
location of such office to a location outside of Boston, Massachusetts, without
prior written notice to Lessee, Indenture Trustee and the Owner Participant.
(d) [Intentionally omitted.]
(e) The Owner Participant agrees that, if, at any time after the
Restricted Period and so long as no Default under Section 14(a), (b), (d)
(solely with respect to Lessee's obligations under Section 7(a) or (b)(vii) of
the Lease or Section 8 of the Lease), (f) or (g) of the Lease or Event of
Default under the Lease shall have occurred or be continuing, Lessee has
requested its consent to the registration of the Aircraft, in the name of the
Owner Trustee (or, if appropriate, in the name of Lessee or a Sublessee as a
"lessee" or a "sublessee"), at Lessee's expense, (i) upon 30 days' prior written
notice in a country listed on Exhibit G to the Lease, with which the United
States maintains diplomatic relations at the time of such request, provided that
with respect to any country listed on Exhibit G to the Lease as a "Restricted
Country" such country must at the time of such registration impose and enforce
aircraft maintenance standards not materially less stringent than those of the
FAA, or the central civil aviation authority of any of Canada, France, Germany,
Japan or
42
the United Kingdom, or (ii) upon 30 days' prior written notice in any other
country with which the United States maintains diplomatic relations at the time
of such request and the Owner Participant has not determined, acting reasonably,
that such other country would not provide substantially equivalent protection
for the rights of owner participants, lessors or lenders in similar transactions
as provided under United States laws, the Owner Participant will not, in the
case of either (i) or (ii), unreasonably withhold its consent to such change of
registration. In addition, such change of registration to a country listed on
Exhibit G shall be permitted only if such change will not result in the
imposition of, or increase the amount of, any Tax for which Lessee is not
required to indemnify or is not then willing to enter into a binding agreement
to indemnify, in a manner satisfactory in form and substance to the indemnified
party, each party referred to in clause (E) of paragraph (i) below. The Owner
Participant further agrees that the inability of Lessee to deliver to the Owner
Participant and, so long as the Lien of the Trust Indenture has not been
released, the Indenture Trustee, an opinion (reasonably satisfactory in form and
substance to the Owner Participant) of counsel reasonably acceptable to the
Owner Participant in such country listed on Exhibit G to the Lease to the effect
that the courts of such country would give effect to the Owner Trustee's title
to the Aircraft, to the registry of the Aircraft in the name of the Owner
Trustee, and to the priority of the lien under the Trust Indenture substantially
to the same extent as provided under United States law, shall constitute the
sole reasonable grounds to withhold such consent in regard to a country listed
in Exhibit G, and if said opinion is delivered, the Owner Participant will
instruct the Owner Trustee, and the Indenture Trustee, subject only to
compliance with the provisions of Section 7.02 of the Indenture, shall
cooperate, to make such change of registration.
It is further agreed, however, that prior to any such change in the
country of registry of the Aircraft to a country not listed on Exhibit G to the
Lease, the Owner Participant, the Owner Trustee in its individual capacity and,
so long as the Lien of the Trust Indenture has not been released, the Indenture
Trustee shall have received:
(i) assurances reasonably satisfactory to the Owner Participant
and the Owner Trustee in its individual capacity (A) to the effect that the
insurance or self-insurance provisions of the Lease have been compiled with
after giving effect to such change of registry, (B) of the payment by
Lessee on an after-tax basis of any expenses of the Owner Participant, the
Owner Trustee and the Indenture Trustee in connection with such change of
registry, (C) to the effect that the original indemnities (and any
additional
43
indemnities for which Lessee is then willing to enter into a binding
agreement to indemnify) in favor of the Owner Participant, the Owner
Trustee (in its individual capacity and as trustee under the Trust
Agreement) and the Indenture Trustee, under this Agreement, the Trust
Indenture and the Tax Indemnity Agreement, afford each such party
substantially the same protection as provided prior to such change of
registry, (D) as to the continuation of the Trust Indenture as a first
priority lien on the Aircraft, (E) that such change will not result in the
imposition of, or increase in the amount of, any Tax for which Lessee is
not required to indemnify, or is not then willing to enter into a binding
agreement to indemnify in a manner satisfactory in form and substance to
the indemnified party, the Owner Participant, the Indenture Trustee, the
Owner Trustee (in its individual capacity and as trustee under the Trust
Agreement), or any successor, assign or Affiliate of any thereof, or the
Trust Estate pursuant to Section 7(b) hereof; and (F) that such new country
of registry imposes and enforces aircraft maintenance standards not
materially less stringent than those of the FAA or the central civil
aviation authority of Canada, France, Germany, Japan or the United Kingdom;
and
(ii) a favorable opinion of counsel (reasonably satisfactory to
the Owner Trustee, in its individual capacity, and to the Owner
Participant) in the new jurisdiction of registry to the effect (A) that the
terms (including, without limitation, the governing-law, service-of-process
and jurisdictional-submission provisions thereof) of the Lease and the
Trust Indenture are legal, valid, binding and enforceable in such
jurisdiction, (B) that it is not necessary for the Owner Participant, the
Owner Trustee or the Indenture Trustee to register or qualify to do
business in such jurisdiction, (C) that there is no tort liability of the
owner of an aircraft not in possession thereof under the laws of such
jurisdiction other than tort liability which might have been imposed on
such owner under the laws of the United States or any state thereof (it
being understood that, in the event such latter opinion cannot be given in
a form satisfactory to the Owner Participant, such opinion shall be waived
if insurance reasonably satisfactory to Owner Participant and the Owner
Trustee, in its individual capacity, is provided, at Lessee's expense, to
cover such risk), (D) (unless Lessee shall have agreed to provide insurance
covering the risk of requisition of use or title of the Aircraft by the
government of such jurisdiction so long as the Aircraft is registered under
the laws of such jurisdiction) that the laws of such jurisdiction require
fair compensation by the government of such jurisdiction
44
payable in currency freely convertible into Dollars for the loss of use or
title of the Aircraft in the event of the requisition by such government of
such use or title, and (E) to such further effect with respect to such
other matters as the Owner Trustee, in its individual capacity, or the
Owner Participant may reasonably request.
Upon receipt by the Owner Participant and the Indenture Trustee
of an opinion of counsel meeting the foregoing requirements, Exhibit F and
Exhibit G to the Lease shall be amended to add such country.
If, at any time, the Owner Participant delivers an opinion (a
"Delisting Opinion") from a law firm (such opinion and counsel to be
reasonably satisfactory to Lessee) in a country then listed on Exhibit F or
G to the Lease to the effect that a reputable law firm located in such
jurisdiction would not as of the date of such opinion be able to deliver an
opinion of counsel as to the matters listed in subsections (A) through (D)
of subparagraph (ii) above (provided that in regard to (C) and (D), Lessee
is not willing at the time of registration to provide the insurance
required by such subsection (C) or (D)), then Exhibits F and G to the Lease
shall be amended to delete such country. Lessee shall pay the reasonable
costs of the Owner Participant in obtaining the Delisting Opinion provided
such opinion is in fact obtained in connection with Lessee's request to
change the registry of the Aircraft to, or to sublease the Aircraft in, a
country listed on Exhibit F or G to the Lease.
Lessee shall pay all reasonable fees and expenses on an after-tax
basis of the Owner Participant, the Owner Trustee and the Indenture Trustee
in connection with any change of registry of the Aircraft.
(f) The Owner Participant represents and warrants as follows:
(i) the Owner Participant is a corporation duly organized and
validly existing in good standing under the laws of its jurisdiction of
organization, and has the corporate power and authority to carry on its
business as now conducted, to own or hold under lease its properties and to
enter into and perform its obligations under the Owner Participant
Documents;
(ii) the Owner Participant Documents have been duly authorized by
all necessary corporate action on the part of the Owner Participant, do not
require any approval
45
not already obtained of stockholders of the Owner Participant or any
approval or consent not already obtained of any trustee or holders of any
indebtedness or obligations of the Owner Participant, and have been duly
executed and delivered by the Owner Participant, and neither the execution
and delivery thereof by the Owner Participant, nor the consummation of the
transactions contemplated thereby by the Owner Participant, nor compliance
by the Owner Participant with any of the terms and provisions thereof will
contravene any United States federal or state law, judgment, governmental
rule, regulation or order applicable to or binding on the Owner Participant
(it being understood that no representation or warranty is made with
respect to laws, rules or regulations relating to aviation or to the nature
of the equipment owned by the Owner Trustee, other than such laws, rules or
regulations relating to the citizenship requirements of the Owner
Participant under applicable aviation law) or contravene or result in any
breach of or constitute any default under, or result in the creation of any
Lien (other than Liens provided for or otherwise permitted in the Operative
Documents) upon the Trust Estate under, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, bank loan or credit
agreement, corporate charter, by-law or other agreement or instrument to
which the Owner Participant is a party or by which it or its properties may
be bound or affected (it being understood that no representation or
warranty is made in this subsection (f)(ii) with respect to ERISA);
(iii) each of the Owner Participant Documents constitutes a legal,
valid and binding obligation of the Owner Participant enforceable against
the Owner Participant in accordance with the terms thereof, and the trust
intended to be formed by the Trust Agreement has been duly and validly
formed;
(iv) Neither the execution and delivery by the Owner Participant
of this Agreement or any other Owner Participant Document, nor the
consummation by it of any of the transactions contemplated hereby or
thereby, requires the consent or approval of, the giving of notice to, the
registration with, the recording or filing of any document with, or the
taking of any other action in respect of, any federal or other governmental
authority or agency, except those contemplated by the Operative Documents
(it being understood that no representation or warranty is made with
respect to the laws, rules or regulations relating to aviation or to the
nature of the equipment owned by the Owner Trustee, other than such laws,
rules or regulations
46
relating to the citizenship requirements of the Owner Participant under
applicable aviation law);
(v) there are no pending or, to the knowledge of the Owner
Participant, threatened actions or proceedings against the Owner
Participant before any court or administrative agency which individually
(or in the aggregate in the case of any group of related lawsuits) purports
to affect the legality, validity or enforceability of, or which is
reasonably likely to materially adversely affect the ability of the Owner
Participant to perform its obligations under any of, the Owner Participant
Documents; and
(vi) on the Delivery Date, the Aircraft will be free of Lessor
Liens (including for this purpose Liens that would be Lessor Liens but for
the proviso to the definition of Lessor Liens) attributable to the Owner
Participant.
(g) Each of State Street Bank and Trust Company in its individual
capacity and the Owner Participant severally covenants and agrees (i) that it
shall not cause or permit to exist any Lessor Lien attributable to it with
respect to the Aircraft or any other portion of the Trust Estate, (ii) that it
will promptly, at its own expense, take such action as may be necessary duly to
discharge such Lessor Lien attributable to it and (iii) to make restitution to
the Trust Estate for any actual diminution of the assets of the Trust Estate
resulting from such Lessor Liens attributable to it. The Owner Participant
agrees to make restitution to the Trust Estate for any actual diminution of the
assets of the Trust Estate resulting from any Taxes or Expenses (as such terms
are defined in Section 7 hereof) imposed on the Trust Estate against which
Lessee is not required to indemnify the Trust Estate pursuant to Section 7
hereof, but excluding Taxes or Expenses referred to in Section 7(b)(ii)(5) and
7(b)(ii)(7) and excluding any diminution of the Trust Estate attributable to or
caused by State Street Bank and Trust Company in its individual capacity;
provided that if the Owner Participant shall make restitution to the Trust
Estate on account of any diminution of the Trust Estate attributable to or
caused by State Street Bank and Trust Company in its individual capacity, then
State Street Bank and Trust Company, in its individual capacity, shall reimburse
the Owner Participant for such amount together with interest thereon at the Past
Due Rate.
(h) First Security Bank of Utah, National Association, in its
individual capacity, covenants and agrees that it shall not cause or permit to
exist any Lien, arising as a result of (i) claims against the Indenture Trustee
not related to its interest in the Aircraft or the administration of the Trust
Estate
47
pursuant to the Trust Indenture, (ii) acts of the Indenture Trustee not
permitted by, or failure of the Indenture Trustee to take any action required
by, the Operative Documents to the extent such acts arise or such failure arises
from or constitutes gross negligence or willful misconduct, (iii) claims against
the Indenture Trustee relating to Taxes or Expenses which are excluded from the
indemnification provided by Section 7 pursuant to said Section 7, or (iv) claims
against the Indenture Trustee arising out of the transfer by the Indenture
Trustee of all or any portion of its interest in the Aircraft, the Trust Estate,
the Trust Indenture Estate or the Operative Documents other than (A) a transfer
of the Aircraft pursuant to Section 9, 10 or 19 of the Lease or Article 5 or 8
of the Trust Indenture, (B) any borrowing pursuant to Section 17 hereof or (C) a
transfer of the Aircraft pursuant to Section 15 of the Lease while an Event of
Default is continuing and prior to the time that the Indenture Trustee has
received all amounts due pursuant to the Trust Indenture.
(i) [Intentionally omitted.]
(j) The Indenture Trustee, and by the acceptance of a Loan Certificate
each Certificate Holder (and each Pass Through Trustee, so long as the relevant
Pass Through Trust Agreement is in effect), each hereby waives to the fullest
extent permitted by law the benefit of the provisions of Section 1111(b) of
Title 11 of the United States Code with respect to recourse against the Owner
Trustee (in its individual capacity) and the Owner Participant on account of any
amount payable as principal of, Premium, if any, and interest on the Loan
Certificates. If (i) all or any part of the Trust Estate becomes the property
of, or the Owner Participant becomes, a debtor subject to the reorganization
provisions of the Bankruptcy Code or any successor provision, (ii) pursuant to
such reorganization provisions the Owner Trustee (in its individual capacity) or
the Owner Participant is required, by reason of the Owner Trustee (in its
individual capacity) or the Owner Participant being held to have recourse
liability to a Certificate Holder, a Pass Through Trustee or the Indenture
Trustee, directly or indirectly (other than the recourse liability of the Owner
Participant under this Participation Agreement), to make payment on account of
any amount payable as principal, Premium, if any, or interest on the Loan
Certificates and (iii) such Certificate Holder, such Pass Through Trustee or the
Indenture Trustee actually receives any Excess Payment (as hereinafter defined)
which reflects any payment by the Owner Trustee (in its individual capacity) or
the Owner Participant on account of clause (ii) above, then such Certificate
Holder, such Pass Through Trustee or the Indenture Trustee, as the case may be,
shall promptly refund to the Owner Trustee or the Owner Participant (whichever
shall have made such
48
payment) such Excess Payment. For purposes of this Section 8(j), "Excess
Payment" means the amount by which such payment exceeds the amount which would
have been received by such Certificate Holder, such Pass Through Trustee or the
Indenture Trustee if the Owner Trustee (in its individual capacity) or the Owner
Participant had not become subject to the recourse liability referred to in
clause (ii) above. Nothing contained in this Section 8(j) shall prevent any
Certificate Holder, any Pass Through Trustee or the Indenture Trustee from
enforcing any personal recourse obligation (and retaining the proceeds thereof)
of the Owner Trustee (in its individual capacity) or the Owner Participant under
this Participation Agreement or the Trust Indenture (and any exhibits or annexes
thereto).
(k) First Security Bank of Utah, National Association, in its
individual capacity ("FSBU") and as Indenture Trustee and Pass Through Trustee
as provided below, represents as follows:
(i) it is a Citizen of the United States, that it will notify
promptly all parties to this Agreement if in its reasonable opinion its
status as a Citizen of the United States is likely to change and that it
will resign as Indenture Trustee as provided in Section 9.07 of the Trust
Indenture if it should cease to be a Citizen of the United States;
(ii) it is a national banking association and has the full
corporate power, authority and legal right under the laws of the United
States of America to enter into and perform its obligations under the Trust
Indenture, this Agreement, the Basic Agreement and each Pass Through Trust
Agreement and, in its capacity as Indenture Trustee and Pass Through
Trustee, respectively, to authenticate the Loan Certificates and the Pass
Through Certificates;
(iii) the Indenture Trustee Documents, and the authentication of
the Loan Certificates and the Pass Through Certificates have been duly
authorized by all necessary corporate action on the part of FSBU, the
Indenture Trustee and the relevant Pass Through Trustee, as it shall be a
party thereto in any such capacity, and neither the execution (or, in the
case of the Loan Certificates and the Pass Through Certificates, the
authentication) and delivery thereof in any such capacity nor the
performance by it in any such capacity of any of the terms and provisions
thereof will violate any federal or Utah law or regulation relating to the
banking or trust powers of FSBU or contravene or result in any breach of,
or constitute any default under its charter or by-laws or the provisions of
any indenture, mortgage, contract or other agreement to which FSBU, the
49
Indenture Trustee or the Pass Through Trustee is a party or by which it or
its properties may be bound or affected;
(iv) each of the Indenture Trustee Documents has been duly
executed (or, in the case of the Loan Certificates and the Pass Through
Certificates, authenticated) and delivered by FSBU, the Indenture Trustee
and the relevant Pass Through Trustee, as it shall be a party thereto in
any such capacity, and, assuming that each such agreement is the legal,
valid and binding obligation of each other party thereto (other than FSBU,
the Indenture Trustee and the relevant Pass Through Trustee), is the legal,
valid and binding obligation of FSBU, the Indenture Trustee and the
relevant Pass Through Trustee, as it shall be a party thereto in any such
capacity, enforceable against it in accordance with its terms;
(v) neither the execution (or, in the case of the Loan
Certificates and the Pass Through Certificates, the authentication) and
delivery by FSBU, the Indenture Trustee or any Pass Through Trustee, as it
is a party in any such capacity to any of the Indenture Trustee Documents,
nor the consummation by it in any such capacity of any of the transactions
contemplated hereby, by the Trust Indenture, by the Pass Through Trust
Agreements, by the Loan Certificates or by the Pass Through Certificates
requires the consent or approval of, the giving of notice to, or the
registration with, or the taking of any other action with respect to, any
Utah state or federal governmental authority or agency regulating the
banking, trust or fiduciary powers of FSBU;
(vi) there are no Taxes payable by FSBU, the Indenture Trustee or
any Pass Through Trustee imposed by the State of Utah or any political
subdivision or taxing authority thereof in connection with the execution
(or, in the case of the Loan Certificates and the Pass Through
Certificates, the authentication) and delivery by it as a party in any such
capacity to any Indenture Trustee Document or the performance by it as a
party in any such capacity of any Indenture Trustee Document (other than
franchise or other taxes based on or measured by any fees or compensation
received by FSBU, the Indenture Trustee or any Pass Through Trustee, as the
case may be, for services rendered in connection with the transactions
contemplated thereby), and there are no Taxes payable by FSBU, the
Indenture Trustee or any Pass Through Trustee imposed by the State of Utah
or any political subdivision thereof in connection with the acquisition,
possession or ownership by any Pass Through Trustee of any of the Loan
Certificates (other than franchise or other taxes based on or measured by
any fees or
50
compensation received by a Pass Through Trustee for services rendered in
connection with the transactions contemplated by the respective Pass
Through Trust Agreement) and, assuming that the trust created by the
respective Pass Through Trust Agreement will not be taxable as a
corporation, but, rather, will be characterized as a grantor trust under
subpart E, Part I of Subchapter J of the Code, such trust will not be
subject to any Taxes imposed by the State of Utah or any political
subdivision thereof;
(vii) there are no pending or threatened actions or proceedings
against any of FSBU, the Indenture Trustee, or the Pass Through Trustees
before any court or administrative agency which individually (or in the
aggregate in the case of any group of related lawsuits) purports to affect
the legality, validity or enforceability of, or which is reasonably likely
to materially adversely affect the ability of FSBU, the Indenture Trustee,
or the Pass Through Trustees to perform its obligations as a party in any
such capacity under any Indenture Trustee Document; and
(viii) except for the issuance and sale pursuant to the respective
Pass Through Trust Agreement of the Pass Through Certificates contemplated
hereby, neither FSBU nor any Pass Through Trustee has directly or
indirectly offered any Loan Certificate for sale to any Person, or
solicited any offer to acquire any Loan Certificate from any Person other
than the Owner Trustee and the Owner Participant, and neither FSBU nor any
Pass Through Trustee has authorized anyone to act on its behalf to offer
directly or indirectly any Loan Certificate for sale to any Person, or to
solicit any offer to acquire any Loan Certificate from any Person other
than the Owner Trustee and the Owner Participant, and no Pass Through
Trustee is in default under any respective Pass Through Trust Agreement.
(l) So long as the Aircraft shall be leased to Lessee under the Lease
and so long as the Loan Certificates are outstanding, the Owner Participant will
not sell, assign, convey or otherwise transfer any of its right, title or
interest in and to this Agreement, the Trust Estate or the Trust Agreement to
any person or entity, unless (i) the proposed transferee is a "Transferee" (as
defined below) and (ii) the Owner Participant and the Transferee shall have
delivered to the Owner Trustee, the Lessee and the Indenture Trustee opinions
substantially in the form of Exhibits A-1 and A-2, respectively, hereto (or
otherwise in form and substance reasonably satisfactory to Lessee and the
Indenture Trustee) of counsel reasonably satisfactory to the Indenture Trustee
and Lessee. A "Transferee" shall mean either (A) a bank or other financial
institution with a combined
51
capital, surplus and undivided profits of at least $75,000,000 or a corporation
whose net worth is at least $75,000,000, (B) any subsidiary of such a bank,
financial institution or corporation, provided that such bank, financial
institution or corporation furnishes to the Owner Trustee, the Indenture Trustee
and Lessee a guaranty substantially in the form of Exhibit C hereto with respect
to the Owner Participant's obligations, in the case of the Owner Trustee, under
the Trust Agreement and, in the case of the Indenture Trustee and Lessee, the
Owner Participant's obligations hereunder, or (C) any other entity, provided
such obligations are guaranteed by the transferor Owner Participant; provided,
however, that unless otherwise consented to by Lessee no Transferee shall be an
airline, a commercial air carrier, an air freight forwarder, an entity engaged
in the business of parcel transport by air or other similar person or a
corporation or other entity controlling, controlled by or under common control
with such an airline, a commercial air carrier, an air freight forwarder, an
entity engaged in the business of parcel transport by air or other similar
person. Each such transfer to a Transferee shall be subject to the conditions
that (M) upon giving effect to such transfer, the Transferee is a Citizen of the
United States or the Transferee, at its sole cost and expense on an after-tax
basis (including any continuing costs of the voting trust), shall have entered
into a voting trust or similar arrangement which permits the registration of the
Aircraft under the Federal Aviation Act in the name of the Owner Trustee, (N)
the Transferee has the full power and authority to enter into and carry out the
transactions contemplated hereby, (O) the Transferee enters into an agreement
substantially in the form of Exhibit B hereto (or otherwise in form and
substance reasonably satisfactory to Lessee and the Indenture Trustee), (P) such
transfer does not violate any applicable law including, without limitation, the
Federal Aviation Act, or any rules or regulations promulgated thereunder, the
Securities Act of 1933 or the Trust Indenture Act of 1939 (but not including
ERISA), (Q) the transferor Owner Participant assumes the risk of any loss of
Interest Deductions, MACRS Deductions, FSC Benefits or any Inclusion Event (each
as defined in the Tax Indemnity Agreement) resulting from such transfer, (R)
after giving effect to such transfer, there shall be no more than three Owner
Participants of record at that time, (S) such transfer will not give rise to a
Default or Event of Default under the Trust Indenture and (T) if such transfer
will result in there being more than one Owner Participant, it shall be a
condition precedent to such transfer that all such Owner Participants shall have
agreed in a manner reasonably satisfactory to Lessee that if the provisions of
the Operative Documents require or contemplate the waiver, consent or direction
of Owner Participant, such provisions shall be deemed satisfied by the waiver,
direction or consent of Owner Participants holding a majority of the beneficial
interests in
52
the Trust Estate. Upon any such transfer by the Owner Participant as above
provided, (i) the Transferee shall be deemed the Owner Participant for all
purposes hereof and of the other Operative Documents and each reference herein
to the transferor Owner Participant shall thereafter be deemed for all purposes
to be to the Transferee and the transferor Owner Participant shall be relieved
of all obligations of the transferring Owner Participant under the Owner
Participant Documents arising after the date of such transfer except to the
extent fairly attributable to acts or events occurring prior thereto and not
assumed by the transferee Owner Participant (in each case, to the extent of the
participation so transferred) and (ii) Lessee shall acknowledge its consent to
such transfer to the Transferee, shall represent to the Transferee that no Event
of Default or Event of Loss, or circumstance which with the passage of time or
the giving of notice or both would constitute an Event of Default or Event of
Loss, then exists and Lessee shall promptly obtain new insurance certificates
(consistent with the provisions of Section 11 of the Lease) that reflect the
interests of the Transferee in the Aircraft. If the Owner Participant intends to
transfer any of its interests hereunder, it shall give prior written notice
thereof as soon as practicable, but in no event less than 10 days prior thereto,
to the Indenture Trustee, the Owner Trustee and Lessee, specifying the name and
address of the proposed Transferee. The Owner Participant shall pay all of the
reasonable costs of the other parties hereto, on a net after-tax basis, of any
such transfer. For purposes of this paragraph, "net worth" shall mean the excess
of total tangible assets over total liabilities, each to be determined in
accordance with generally accepted accounting principles consistently applied.
Notwithstanding anything contained in this Section 8(l) to the contrary, each of
Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustees and,
by its acceptance of a Loan Certificate, each Certificate Holder agrees that the
Owner Participant may pledge its beneficial interest in the Trust Estate created
pursuant to the Trust Agreement to First Security Bank of Utah, National
Association, as indenture trustee (the "777B Indenture Trustee") pursuant to
that certain Trust Indenture and Mortgage (1995 777 B) dated as of May 1, 1995,
pursuant to a certain letter agreement to be entered into between [____________]
and the 777B Indenture Trustee.
(m) Notwithstanding the provisions of Section 8(r) hereof, unless
waived by each Certificate Holder, Lessee shall not be entitled to terminate the
Lease or assume the Loan Certificates on a Purchase Option Date if on such
Purchase Option Date an Event of Default under the Lease shall have occurred and
be continuing.
53
(n) State Street Bank and Trust Company and First Security Bank of
Utah, National Association, each in its individual capacity, agrees for the
benefit of Lessee to comply with the terms of the Trust Indenture which it is
required to comply with in its individual capacity.
(o) The Owner Participant represents and warrants that no part of the
funds used by it to acquire its interest in the Trust Estate constitutes assets
of any "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or of any "plan"
within the meaning of Section 4975(e)(1) of the Code (such employee benefit
plans and plans hereinafter referred to as "ERISA Plans").
(p) State Street Bank and Trust Company (A) in its individual capacity
("SSBTC") represents and warrants that:
(i) the Trust Agreement and, assuming due authorization,
execution and delivery of the Trust Agreement by the Owner Participant,
each of the other Owner Trustee Documents has been duly executed and
delivered by one of its officers who is duly authorized to execute and
deliver such instruments on behalf of the Owner Trustee;
(ii) the Trust Estate is free and clear of Lessor Liens
attributable to SSBTC, and there are no Liens affecting the title of the
Owner Trustee to the Aircraft or resulting from any act or claim against
SSBTC arising out of any event or condition not related to the ownership,
leasing, use or operation of the Aircraft or to any other transaction
contemplated by this Agreement or any of the other Operative Documents,
including any Lien resulting from the nonpayment by SSBTC of any Taxes
imposed or measured by its net income;
(iii) there has not occurred any event which constitutes (or to
the best of its knowledge would, with the passage of time or the giving of
notice or both, constitute) an Event of Default as defined in the Trust
Indenture which has been caused by or relates to SSBTC and which is
presently continuing;
(iv) it is a Massachusetts trust company duly organized and
validly existing in good standing under the laws of the Commonwealth of
Massachusetts and (assuming due authorization, execution and delivery of
the Trust Agreement by the Owner Participant) has the corporate power and
authority to enter into and perform its obligations under the Trust
Agreement, and (assuming due authorization,
54
execution and delivery of the Trust Agreement by the Owner Participant) has
full right, power and authority to enter into and perform its obligations
as Owner Trustee pursuant to the Trust Agreement under each of the other
Owner Trustee Documents;
(v) each of the Owner Trustee Documents has been duly authorized
by all necessary corporate action on its part, and neither the execution
and delivery thereof nor its performance of any of the terms and provisions
thereof will violate any federal or Massachusetts Commonwealth law or
regulation relating to its banking or trust powers or contravene or result
in any breach of, or constitute any default under, its charter or by-laws
or the provisions of any indenture, mortgage, contract or other agreement
to which it is a party or by which it or its properties may be bound or
affected;
(vi) assuming due authorization, execution and delivery of the
Trust Agreement by the Owner Participant, each of the Owner Trustee
Documents has been duly executed and delivered by it, and each of the Trust
Agreement and the Participation Agreement (to the extent executed by the
Owner Trustee in its individual capacity) is a legal, valid and binding
obligation of SSBTC and as Owner Trustee, as the case may be, enforceable
against such party in accordance with the terms thereof;
(vii) on the Delivery Date, the Owner Trustee shall have received
whatever title to the Aircraft as was conveyed to it by the Lessee;
(viii) it has not offered any interest in the Trust Estate or any
Loan Certificates or Pass Through Certificates or any similar securities
for sale to, or solicited any offer to acquire the same from, anyone other
than the Indenture Trustee, the Pass Through Trustees and the Owner
Participant, and no responsible officer or responsible employee of SSBTC
has knowledge of any such offer or solicitation, except as set forth in
Section 7(a)(xi) hereof;
(ix) assuming due authorization, execution and delivery of each of
the Owner Trustee Documents by each of the parties thereto (other than the
Owner Trustee), each of the Owner Trustee Documents is a legal, valid and
binding obligation of the Owner Trustee, enforceable against the Owner
Trustee in accordance with its respective terms;
55
(x) neither the due execution and delivery of the Owner Trustee
Documents by SSBTC, in its individual capacity or as Owner Trustee under
the Trust Agreement, as the case may be, nor the consummation by it of any
of the transactions contemplated thereby require the consent or approval
of, the giving of notice to, or the registration with, any federal or
Massachusetts Commonwealth governmental authority or agency pursuant to any
federal or Massachusetts Commonwealth law governing the banking or trust
powers of SSBTC; and
(B) SSBT solely in its capacity as Owner Trustee further represents
and warrants that:
(i) SSBT is a trust company duly organized and validly existing
in good standing under the laws of the Commonwealth of Massachusetts and
has the corporate power and authority to enter into this Agreement and to
perform its obligations hereunder;
(ii) assuming due authorization, execution and delivery of the
Trust Agreement by the Owner Participant, each of the Trust Agreement, this
Agreement, the Trust Indenture, the Lease and the Loan Certificates has
been, or on the Delivery Date will have been, duly executed and delivered
by it, and each of this Agreement, the Trust Agreement, the Lease and the
Trust Indenture, on the Delivery Date, will constitute a legal, valid and
binding obligation of the Owner Trustee, enforceable against it in
accordance with the terms thereof;
(iii) the Owner Trustee has never directly or indirectly
offered any Loan Certificate or any interest in or to the Trust Estate, the
Trust Agreement or any similar interest for sale to, or solicited any offer
to acquire any of the same from, any Person other than the Indenture
Trustee, each of the Pass Through Trustees and the Owner Participant; and
it has not authorized any Person to act on its behalf (other than for
purposes of this paragrpah, the Lessee and the Underwriters) to offer
directly or indirectly any Loan Certificate or any interest in and to the
Trust Estate, the Trust Agreement or any similar interest for sale to, or
to solicit any offer to acquire any of the same from, any Person; and
(iv) there are no pending or threatened actions or proceedings
against SSBTC or the Owner Trustee before any court or administrative
agency which, if determined adversely to it, would materially adversely
affect the ability of SSBTC or the Owner Trustee, as the
56
case may be, to perform its obligations under any of the Owner Trustee
Documents or any other documents executed by the Owner Trustee or SSBTC in
connection with the transactions contemplated by the Operative Documents.
(q) The Owner Participant agrees, solely for the benefit of Lessee,
that it will comply with any obligation expressly required of it under Section
9(c) of the Lease. The Owner Participant further covenants and agrees to pay or
cause the Owner Trustee to pay those costs and expenses specified to be paid by
the Owner Participant pursuant to the Lease and all costs and expenses that are
for the account of the Lessor pursuant to Sections 5(a), 5(c), 5(d), 5(e) and
5(f), 12 and 19(c) of the Lease.
(r) Subject to compliance by Lessee with all of its obligations under
the Lessee Documents, each of the Owner Trustee, the Indenture Trustee, each
Certificate Holder and the Owner Participant covenants and agrees that, at
Lessee's expense on a net after-tax basis (including, without limitation,
reasonable attorney's fees and expenses of each of such parties), (i) Lessee may
elect to terminate the Lease and to purchase the Aircraft pursuant to Section
19(b) of the Lease and that each of such parties will execute and deliver
appropriate documentation transferring all right, title and interest in the
Aircraft to Lessee (without recourse or warranty except as to Lessor Liens
(including for this purpose Liens that would be Lessor Liens but for the proviso
to the definition of Lessor Liens) with respect to the Owner Participant)
(including without limitation, such bills of sale and other instruments and
documents as Lessee shall reasonably request to evidence (on the public record
or otherwise) such transfer and the vesting of all right, title and interest in
and to the Aircraft in Lessee), and (ii) Lessee, in connection with such
purchase and subject to the provisions of the second paragraph of this Section
8(r), may assume (and receive a credit in an amount equal to the principal
amount of the debt assumed against the purchase price payable by Lessee pursuant
to Section 19(b) of the Lease) the obligations of the Owner Trustee pursuant to
Section 7.03 of the Trust Indenture and the Loan Certificates (and the Lease, to
the extent that the Owner Trustee's obligations thereunder are incorporated into
the Trust Indenture or the Loan Certificates), and Lessee shall confirm that its
obligations under the Lease shall be direct obligations to the Indenture Trustee
as if set forth in the Trust Indenture, and that each of the parties shall
execute and deliver appropriate documentation in form and substance reasonably
satisfactory to such parties under which Lessee will assume such obligations on
the basis of full recourse to Lessee, maintaining the security interest in the
Aircraft created by the Trust Indenture, releasing the Owner Participant and the
Owner Trustee
57
from all future obligations in respect of the Loan Certificates, the Trust
Indenture and all other Operative Documents and all such other actions
(including the furnishing of legal opinions reasonably requested by any party)
as are reasonably necessary to permit such assumption by Lessee.
If Lessee elects to assume the rights and obligations of the Owner Trustee
in accordance with Section 7.03 of the Trust Indenture in connection with the
purchase by the Lessee of the Aircraft pursuant to Section 19(b) of the Lease
and to pay the EBO Price in installments as permitted thereby, then:
(A) in addition to the provisions contemplated above, the Trust
Indenture shall be amended (a) to provide for an additional series of loan
certificates (the "EBO Certificates") to be issued to the Owner Participant
on the EBO Date to evidence the payment of the EBO Price in installments on
the dates specified in Exhibit H to the Lease (taking into account the
credit provided for above), (2) to provide that the Indenture Trustee will
make no distributions to the Owner Participant or the Owner Trustee or
otherwise in respect of the EBO Certificates prior to the payment in full
of all amounts then due and payable to the other Holders or, if an "Event
of Default" under the Trust Indenture (an "Indenture Event of Default") or
any payment Default under the Trust Indenture shall have occurred and be
continuing, prior (unless such Loan Certificates shall have been purchased
by the Owner Trustee) to the payment in full of the principal amount of,
and interest accrued on, the Loan Certificates other than the EBO
Certificates, (3) to include the failure to pay any installments of the EBO
Certificates within 10 calendar days of when due as an Event of Default,
(4) to include a right so long as the EBO Certificates shall be outstanding
for the Owner Participant to purchase the other Loan Certificates under
circumstances similar to, and on the same terms as provided in, Section
8.03(e)(ii) of the Trust Indenture (it being understood that upon any
assumption pursuant to Section 7.03 of the Trust Indenture, the provisions
of the Trust Indenture intended for the benefit of the Owner Participant
(other than provisions concerning, but only to the extent applicable to,
Excluded Payments), including, without limitation, Sections 8.03(e)(i) and
8.03(e)(iii) of the Trust Indenture providing the Owner Trustee or the
Owner Participant with certain rights, shall be of no further force and
effect), (5) to provide that the Owner Participant and the Owner Trustee
shall have no voting or consent rights under the Trust Indenture by reason
of being the holder of the EBO Certificates or otherwise until all other
Loan Certificates have either been paid in full or been purchased by the
Owner
58
Participant (pursuant to the provisions contemplated by clause (A)(4) of
this Section 8(r) by the reference therein to Section 8.03(e)(ii) of the
Trust Indenture), except that without the consent of the Owner Participant
------
the Trust Indenture could not be amended, modified or supplemented to
reduce the amount or extend the time of payment of any amount owing or
payable under the EBO Certificates, and (6) to confirm that, although the
Owner Participant cannot participate in the exercise of remedies under the
Trust Indenture, it shall not be precluded form demanding, collecting,
suing for or otherwise receiving and enforcing payment of the EBO
Certificates by demand upon Lessee; and
(B) upon Lessee's payment in full of all amounts due on or prior to
the EBO Date in accordance with Section 19(b) of the Lease and compliance
with all of the conditions to such assumption in accordance with this
Section 8(r) and Section 7.03 of the Trust Indenture, (1) the Owner Trustee
shall assign the right to the remaining installments of the EBO Price to
the Owner Participant, (2) the EBO Certificates shall be issued to the
Owner Participant in aggregate amount of such remaining installments of the
EBO Price and (3) the Owner Trustee (AA) shall transfer to Lessee, without
recourse or warranty (except as to the absence of Lessor Liens) and on an
"as is" basis, all right, title and interest of the Owner Trustee in and to
the Aircraft and (BB) shall furnish to or at the direction of Lessee one or
more bills of sale in form and substance reasonably satisfactory to Lessee
evidencing such transfer.
(s) Lessee will not consolidate with or merge into any other
corporation or convey, transfer or lease substantially all of its assets to any
Person unless:
(i) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee as an entirety shall be a
Citizen of the United States and shall be a Certificated Air Carrier;
(ii) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee as an entirety shall
execute and deliver to the Owner Trustee, the Indenture Trustee, the Owner
Participant and the Pass Through Trustees a duly authorized, valid, binding
and enforceable agreement in form and substance reasonably satisfactory to
the Owner Participant containing an assumption by such successor
corporation or Person of the due and punctual performance and observance of
59
each covenant and condition of the Operative Documents and the Pass Through
Trust Agreements to be performed or observed by Lessee;
(iii) immediately after giving effect to such transaction, no
Event of Default under the Lease shall have occurred and be continuing;
(iv) Lessee shall have delivered to the Owner Trustee, the
Indenture Trustee, the Pass Through Trustees and the Owner Participant a
certificate signed by the President or any Vice President and by the
Secretary or an Assistant Secretary of Lessee, and an opinion of counsel
(which may be Lessee's General Counsel) reasonably satisfactory to the
Owner Participant, each stating that such consolidation, merger,
conveyance, transfer or lease and the assumption agreement mentioned in
clause (ii) above comply with this Section 8(s) and that all conditions
precedent herein provided for relating to such transaction have been
complied with; and
(v) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee, shall make such filings
and recordings with the FAA pursuant to the Federal Aviation Act, as shall
be necessary or desirable to evidence such consolidation, merger,
conveyance, transfer or lease with or to such entity.
Upon any consolidation or merger, or any conveyance, transfer or lease
of substantially all of the assets of Lessee as an entirety in accordance with
this Section 8(s), the successor corporation or Person formed by such
consolidation or into which Lessee is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, Lessee under this Agreement and under the
Pass Through Trust Agreements with the same effect as if such successor
corporation or Person had been named as Lessee herein and therein. No such
conveyance, transfer or lease of substantially all of the assets of Lessee as an
entirety shall have the effect of releasing Lessee or any successor corporation
or Person which shall theretofore have become such in the manner prescribed in
this Section 8(s) from its liability in respect of any Operative Document to
which it is a party or any Pass Through Trust Agreement. Nothing contained
herein shall permit any lease, sublease or other arrangement for the use,
operation or possession of the Aircraft except in compliance with the applicable
provisions of the Lease.
60
(t) Lessee, at its expense, will, at the request of any party hereto,
take, or cause to be taken, such action with respect to the recording, filing,
rerecording and refiling of the Trust Agreement, the Lease, the Lease
Supplement, the Trust Indenture, the Trust Supplement and any financing
statements or other instruments as are necessary to maintain, so long as the
Trust Indenture or the Lease is in effect, the perfection of the security
interests created by the Trust Indenture and any security interest that may be
claimed to have been created by the Lease and the ownership interest of the
Owner Trustee in the Aircraft.
(u) Section 3 of the Lease contemplates that, under certain
circumstances, the Owner Participant will make certain recalculations of Basic
Rent, Excess Amount, Stipulated Loss Value percentages, Termination Value
percentages, Special Termination Value percentages and the EBO Percentage, and
the Owner Participant hereby agrees to make such recalculations as and when
contemplated by the Lease and subject to all the terms and conditions of the
Lease and promptly to take such further actions as may be necessary or desirable
to give effect to and to cause the Owner Trustee to give effect to the
provisions of Section 3 of the Lease.
(v) The Owner Participant hereby agrees not to revoke the Trust
Agreement or the trusts created thereunder without the prior written consent of
(i) the Lessee so long as the Lease shall remain in effect and no Event of
Default under the Lease shall have occurred and be continuing and (ii) the
Indenture Trustee so long as the Trust Indenture shall be in effect.
(w) Lessee covenants and agrees with the Owner Participant, the
Indenture Trustee and the Owner Trustee that at all times during the Term it
will be a Certificated Air Carrier
(x) (i) Each Pass Through Trustee hereby agrees that, except as
otherwise required by applicable law (including, without limitation, any law
which requires such Pass Through Trustee to act within its own discretion), it
shall not, without the prior written consent of the Owner Trustee, direct the
Indenture Trustee to take or refrain from taking any action under the Trust
Indenture that requires the approval, waiver, authorization, direction or
consent of, or notice from, the Certificate Holders holding a specified
percentage in principal amount of Outstanding (as defined in the Trust
Indenture) Loan Certificates unless such Pass Through Trustee receives a
Direction (as defined in the relevant Pass Through Trust Agreement) to so direct
the Indenture Trustee from Certificate Holders (as defined in the relevant Pass
Through Trust Agreement) holding the same percentage of Certificates (as defined
in the
61
relevant Pass Through Trust Agreement) evidencing Fractional Undivided Interests
(as defined in the relevant Pass Through Trust Agreement) in the Trust (as
defined in the relevant Pass Through Trust Agreement) holding the Loan
Certificates.
(ii) Lessee and each Pass Through Trustee hereby agree that Article X
of each Pass Through Trust Agreement (to the extent relating to the
Certificates) shall not be amended without the prior written consent of the
Owner Participant.
(iii) Each Pass Through Trustee hereby agrees that, except as
otherwise required by applicable law (including, without limitation, any
law which requires such Pass Through Trustee to act within its own
discretion), if requested to do so by the Owner Trustee or the Owner
Participant, such Pass Through Trustee shall request a Direction from the
relevant Certificate Holders to establish whether such Pass Through
Trustee, in its capacity as a Certificate Holder, may direct the Indenture
Trustee to take or refrain from taking any action under the Operative
Documents.
(y) The Owner Trustee agrees that any profit, income, interest,
dividend or gain realized upon the maturity, sale or other disposition of any
Permitted Investment made by the Indenture Trustee pursuant to Section 9.04 of
the Trust Indenture, and paid to Lessee on behalf of the Owner Trustee by the
Indenture Trustee in accordance with the terms of such Section 9.04, shall be
entirely for the account of, and the sole property of, Lessee who, for such
purposes, shall not be deemed to be acting as agent of the Owner Trustee, and
Lessee shall have no obligation to pay over such income, interest, dividend or
gain to the Owner Trustee, except to the extent the Owner Trustee or Owner
Participant are owed any amounts under the Operative Documents by Lessee and
such amounts are not paid when due, in which event the Owner Participant may
cause the Owner Trustee to distribute and apply such income, interest, dividend
or gain in satisfaction or partial satisfaction of the amounts so due.
(z) The Owner Participant hereby agrees to instruct the Owner Trustee
to promptly distribute any money received by it pursuant to Section 7.01 or
10.04 of the Trust Indenture to Lessee to the extent such amounts were paid by
Lessee or on behalf of Lessee and the Owner Trustee or the Owner Participant is
not owed any amounts under any of the Operative Documents by Lessee (and if the
Owner Trustee or Owner Participant is owed any such amount, the monies received
under Section 7.01 or 10.04 of the Trust Indenture may be applied in
satisfaction or partial satisfaction thereof). Lessee agrees to hold any money
received by it pursuant to the foregoing sentence in trust for the benefit of
the Owner Participant and may, in its discretion, invest and
62
reinvest all money so held by it in such Permitted Investments as Lessee deems
appropriate. Lessee will apply such money to the payment of previously
unclaimed payments with respect to the Loan Certificates when and as claims for
payment are made by the Holders of such Loan Certificates. As compensation for
its services pursuant to this Section 8(z), Lessee shall be entitled to an
annual fee from the Owner Participant in an amount to be agreed to at the time
by Lessee and the Owner Participant but in no event shall such fee exceed at any
time the amount of earnings on the monies so held in trust distributable at such
time to the Owner Participant. Any net losses on such investment shall be for
the account of Lessee. Any net earnings on such investment shall be distributed
from time to time by Lessee to the Owner Participant after deducting therefrom
any portion of such fee then due and unpaid. Upon the date required by
applicable law dealing with unclaimed property, Lessee will distribute to the
Owner Participant any amount held by it pursuant to this Section 8(z) and not
previously applied to the payment of the Loan Certificates, after deducting
therefrom any portion of such fee then due and unpaid.
(aa) The Owner Participant agrees that, at Lessee's expense
(including, without limitation, reasonable attorneys fees and other out-of-
pocket expense of the Owner Trustee and Owner Participant), upon request of the
Lessee, the Owner Participant will negotiate promptly in good faith with respect
to any arrangements pursuant to which the Trust Indenture may be satisfied and
discharged in respect of the Loan Certificates in accordance with subsection
(a)(ii) or (a)(iii) of Section 10.01 of the Trust Indenture, provided, that
there shall be no adverse impact upon the rights or interests of the Owner
Participant or Owner Trustee, and the Owner Trustee agrees to act upon the
instructions of the Owner Participant in connection therewith. The Owner
Trustee agrees that it will not, and the Owner Participant agrees that during
such time as an Event of Default has not occurred under the Lease it will not
cause the Owner Trustee to take any action to effect such satisfaction and
discharge except upon the request of the Lessee made pursuant to this Section
8(aa).
SECTION 9. [Intentionally Omitted].
SECTION 10. Other Documents; Amendment. Each of the Owner
--------------------------
Participant and the Owner Trustee hereby (A) agrees with Lessee, the Certificate
Holders and the Indenture Trustee to comply with all of the terms of the Trust
Agreement (as the same may hereafter be amended or supplemented from time to
time in accordance with the terms thereof) applicable to it, to the extent such
non-compliance would be adverse to such party; and (B) agrees with Lessee, the
Certificate Holders and the Indenture
63
Trustee not to amend, supplement or otherwise modify any provision of the Trust
Agreement in a manner adversely affecting such party without the prior written
consent of such party. Notwithstanding the foregoing, unless an Event of
Default shall have occurred and be continuing and so long as the Lease has not
been terminated, the Indenture Trustee and the Owner Participant hereby agree
for the benefit of Lessee that without the consent of Lessee they will not (and
the Owner Participant agrees that it will not cause the Owner Trustee to) amend,
supplement or otherwise modify any provision of the Trust Indenture in a manner
adversely affecting Lessee. The Indenture Trustee and the Owner Trustee agree
to promptly furnish to Lessee copies of any supplement, amendment, waiver or
modification of any of the Operative Documents to which Lessee is not a party.
Each Certificate Holder agrees that it will not take any action in respect of
the Trust Indenture Estate except through the Indenture Trustee pursuant to the
Trust Indenture or as otherwise permitted by the Trust Indenture.
SECTION 11. Certain Covenants of Lessee. Lessee covenants and agrees
---------------------------
with the Participants, the Indenture Trustee and the Owner Trustee, in its
capacity as such and in its individual capacity as follows:
(a) Lessee will cause to be done, executed, acknowledged and delivered
all and every such further acts, conveyances and assurances as the Owner
Trustee, the Indenture Trustee or the Owner Participant shall reasonably
require for accomplishing the purposes of this Agreement and the other
Operative Documents; provided that any instrument or other document so
executed by Lessee will not expand any obligations or limit any rights of
Lessee in respect of the transactions contemplated by any Operative
Documents. Lessee, forthwith upon delivery of the Aircraft under the Lease
shall cause the Aircraft to be duly registered, and at all times thereafter
to remain duly registered, in the name of the Owner Trustee, except as
otherwise required or permitted hereunder or under the Lease, under the
Federal Aviation Act or under the applicable law of another permitted
government of registry, or shall furnish to the Owner Trustee such
information as may be required to enable the Owner Trustee to make
application for such registration (at the expense of Lessee, including,
without limitation, reasonable attorney's fees and expenses), and shall
promptly furnish to the Owner Trustee such information as may be required
to enable the Owner Trustee to timely file any reports required to be filed
by it as the lessor under the Lease or as the owner of the Aircraft with
any governmental authority (including tax authorities).
64
(b) Lessee, at its expense, will cause the Trust Agreement, the Lease,
all Lease Supplements, all amendments to the Lease, the Trust Indenture,
and all supplements and amendments to the Trust Indenture to be promptly
filed and recorded, or filed for recording, to the extent permitted under
the Federal Aviation Act, or required under any other applicable law. Upon
the execution and delivery of the Owner Trustee's FAA Bill of Sale, the
Lease Supplement covering the Aircraft and the Trust Supplement, the Lease
and the Trust Indenture shall be filed for recording with the Federal
Aviation Administration in the following order of priority; first, the
-----
Owner Trustee's FAA Bill of Sale, second, the FAA registration application,
------
third, the Trust Indenture, with the Trust Agreement and the Trust
-----
Supplement attached, and fourth, the Lease, with the Lease Supplement
------
covering the Aircraft, the Trust Indenture and the Trust Supplement
attached. Lessee agrees to furnish the Owner Participant, the Owner
Trustee and the Indenture Trustee with copies of the foregoing documents
with recording data as promptly as practicable following the issuance of
same by the FAA.
SECTION 12. Owner for Income Tax Purposes. It is hereby agreed among
-----------------------------
Lessee, the Owner Participant and the Owner Trustee that for income tax purposes
the Owner Participant will be the owner of the Aircraft to be delivered under
the Lease and Lessee will be the lessee thereof, and each party hereto agrees to
characterize the Lease as a lease for income tax purposes.
SECTION 13. Notices; Consent to Jurisdiction. (a) All notices,
--------------------------------
demands, instructions and other communications required or permitted to be given
to or made upon any party hereto shall be in writing and shall be personally
delivered or sent by registered or certified mail, postage prepaid, or by
telecopier (with a copy of such notice to follow by registered or certified mail
or by prepaid courier), or by prepaid courier service, and shall be deemed to be
given for purposes of this Agreement on the day that such writing is delivered
or received or if given by certified mail, three Business Days after being
deposited in the mails, in accordance with the provisions of this Section 13(a).
Unless otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section 13(a), notices, demands, instructions and
other communications in writing shall be given to or made upon the respective
parties hereto at their respective addresses (or to their respective telecopier
numbers) as follows: (A) if to Lessee, the Owner Trustee, the Indenture
Trustee, the Pass Through Trustees or the Owner Participant, to the respective
addresses set forth on Schedule I hereto (and in the case of Owner Trustee a
copy shall be sent to the Owner Participant) or
65
(B) if to a subsequent Owner Participant, addressed to such subsequent Owner
Participant at such address as such subsequent Owner Participant shall have
furnished by notice to the parties hereto or (C) if to any subsequent
Certificate Holder, addressed to such Certificate Holder at its address set
forth in the Loan Certificate Register maintained pursuant to Section 2.03 of
the Trust Indenture.
(b) Each party to this Agreement including each Certificate Holder
(individually a "Party" and collectively "Parties") irrevocably agrees that any
legal suit, action or proceeding brought by any other Party, which arises solely
out of or relates solely to the Operative Documents or any of the transactions
contemplated hereby or thereby or any document referred to herein or therein,
may be instituted in the Circuit Court of the State of Illinois, Cook County or
the United States District Court for the Northern District of Illinois and that
they hereby waive the right to trial by jury in any such proceeding; provided,
however, that the foregoing provisions shall not apply to third party tort
claims (but shall apply to an indemnity claim with respect to such tort claim)
and that the foregoing shall not apply to any right a Party may have to seek
removal of such legal suit, action or proceeding to federal court or to seek
consolidation of any separate legal suits, actions or proceedings brought by any
one or more of the other Parties in the same or different jurisdictions. The
agreement set forth in this Section 13(b) is given solely for the benefit of the
Parties and such agreement is not intended to and shall not inure to the benefit
of any other person.
SECTION 14. Change of Situs of Owner Trust. The Owner Participant
------------------------------
agrees that if, at any time, the Trust Estate becomes subject to any Taxes for
which it is indemnified pursuant to Section 7(b) hereof and if, as a consequence
thereof, Lessee shall request that the situs of the trust be moved to another
state in the United States from the state in which it is then located, the situs
of the trust may be moved with the written consent of the Owner Participant
(which consent shall not be unreasonably withheld) and the Owner Participant
will take whatever action may be reasonably necessary to accomplish such
removal; provided that (A) Lessee shall provide such additional tax
indemnification, as the Owner Participant may reasonably request, (B) the rights
and obligations under the Operative Documents of the Owner Participant shall not
be altered as a result of the taking of such action, (C) the lien of the Trust
Indenture on the Trust Indenture Estate shall not be adversely affected by such
action, and the Lessee shall execute and deliver such documents as may be
requested by the Indenture Trustee to continue the perfection of the lien on the
Trust Indenture Estate and (D) the Owner Participant and the Indenture Trustee
shall
66
have received an opinion or opinions of counsel (reasonably satisfactory to the
Owner Participant) in scope, form and substance reasonably satisfactory to the
Owner Participant to the effect that (I) the trust, as thus removed, shall
remain a validly established trust, (II) any amendments to the Trust Agreement
necessitated by such removal shall have been duly authorized, executed and
delivered by the parties thereto and shall constitute the valid and binding
obligations of such parties, enforceable in accordance with their terms, (III)
such removal will not result in the imposition of, or increase in the amount of,
any Tax for which Lessee is not required to indemnify the Owner Participant, the
Owner Trustee or the Trust Estate pursuant to Section 7(b) hereof (taking into
account any additional indemnification provided by Lessee pursuant to clause (A)
of this sentence), (IV) such removal will not, in the Owner Participant's
judgment, result in any Loss of MACRS Deductions, FSC Benefits, Interest
Deductions or an Inclusion Event (as defined in the Tax Indemnity Agreement)
with respect to which Lessee is not required to indemnify the Owner Participant
pursuant to Section 5 of the Tax Indemnity Agreement (taking into account any
additional indemnification provided by Lessee pursuant to clause (A) of this
sentence), and (V) covering such other matters as the Owner Participant may
reasonably request, (E) if such removal involves the replacement of the Owner
Trustee, the Owner Participant shall have received an opinion of counsel to such
successor Owner Trustee in form and substance reasonably satisfactory to the
Owner Participant covering the matters set forth in the opinion provided
pursuant to Section 4(a)(xiii) hereof and (F) Lessee shall indemnify and hold
harmless the Owner Participant on a net after-tax basis against any and all
reasonable and actual costs and expenses including attorneys' fees and
disbursements, registration, recording or filing fees and Taxes incurred by the
Owner Trustee or Owner Participant, in connection with such change of situs.
SECTION 15. Miscellaneous. (a) Each of the Participants and the
-------------
Certificate Holders covenants and agrees that it shall not unreasonably withhold
its consent to any consent requested of the Owner Trustee, as Lessor, or the
Indenture Trustee under the terms of the Lease, which by its terms is not to be
unreasonably withheld by the Owner Trustee, as Lessor, or by the Indenture
Trustee.
(b) The representations, warranties, indemnities and agreements of
Lessee, the Owner Trustee, the Indenture Trustee, the Participants and the
Certificate Holders provided for in this Agreement, and Lessee's, the Owner
Trustee's, Indenture Trustee's, the Participants' and the Certificate Holders'
obligations under any and all thereof, shall survive the making available of the
respective Commitments by the Participants, the
67
delivery or return of the Aircraft, the transfer of any interest of the Owner
Participant in the Trust Estate or the Aircraft or any Engine or the transfer of
any interest by any Certificate Holder in any Loan Certificate or the Trust
Indenture Estate and the expiration or other termination of this Agreement or
any other Operative Document or any of the Pass Through Trust Agreements.
(c) This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument. Neither this Agreement nor any of the terms hereof may be
terminated, amended, supplemented, waived or modified, except by an instrument
in writing signed by the party against which the enforcement of the termination,
amendment, supplement, waiver or modification is sought; and no such
termination, amendment, supplement, waiver or modification shall be effective
unless a signed copy thereof shall have been delivered to the Lessee, the
Indenture Trustee and the Owner Trustee. The terms of this Agreement shall be
binding upon, and inure to the benefit of and shall be enforceable by, Lessee,
the Participants, the Indenture Trustee, the Certificate Holders and the Owner
Trustee. This Agreement shall in all respects be governed by, and construed in
accordance with, the internal laws of the State of Illinois, including all
matters of construction, validity and performance. This Agreement is being
delivered in the State of Illinois.
(d) The parties hereto agree that all of the statements,
representations, covenants and agreements made by the Owner Trustee (when made
in such capacity) contained in this Agreement and any agreement referred to
herein other than the Trust Agreement, unless expressly otherwise stated, are
made and intended only for the purpose of binding the Trust Estate and
establishing the existence of rights and remedies which can be exercised and
enforced against the Trust Estate. Therefore, anything contained in this
Agreement or such other agreements to the contrary notwithstanding (except for
any express provisions that the Owner Trustee is responsible for or is acting in
or making representations or agreements in its individual capacity), no recourse
shall be had with respect to this Agreement or such other agreements against the
Owner Trustee in its individual capacity or against any institution or person
which becomes a successor trustee or co-trustee or any officer, director,
trustee, servant or direct or indirect parent or controlling person or persons
of any of them; provided, however, that this Section 15(d) shall not be
construed to prohibit any action or proceeding against any party hereto for its
own willful misconduct or grossly negligent conduct; and provided, further, that
nothing contained in this Section 15(d) shall be construed
68
to limit the exercise and enforcement in accordance with the terms of this
Agreement or such other agreements of rights and remedies against the Trust
Estate. The foregoing provisions of this Section 15(d) shall survive the
termination of this Agreement, the other Operative Documents and the Pass
Through Trust Agreements.
(e) No Participant shall have any obligation or duty to the Lessee, to
any other Participant or to others with respect to the transactions contemplated
hereby except those obligations or duties of such Participant expressly set
forth in this Agreement and the other Operative Documents and no Participant
shall be liable for performance by any other party hereto of such other party's
obligations or duties hereunder. Without limitation of the generality of the
foregoing, under no circumstances whatsoever shall any Participant be liable to
Lessee, nor shall any Participant be liable to any other Participant, for any
action or inaction on the part of the Indenture Trustee or the Owner Trustee in
connection with the transactions contemplated herein, whether or not such action
or inaction is caused by the willful misconduct or gross negligence of the
Indenture Trustee or the Owner Trustee.
(f) This Agreement shall be binding upon and shall inure to the
benefit of and shall be enforceable against, the parties hereto and their
respective successors and permitted assigns including each successive holder of
the Owner Participant's interest and each successive holder of any Loan
Certificate issued and delivered pursuant to this Agreement or the Trust
Indenture whether or not an express assignment to such holder of rights and
obligations under this Agreement has been made.
(g) The Owner Participant hereby consents to the Owner Trustee's
appointment of Lessee as its exclusive agent pursuant to the terms of Section
7(a)(4) of the Lease.
SECTION 16. Invoices and Payment of Expenses. Each of the Owner
--------------------------------
Trustee, the Indenture Trustee, Lessee and the Participants shall promptly
submit to the Owner Participant and the Lessee for their joint prompt approval
(except in the case of Transactions Expenses referred to in clauses (i)(6), (v)
and (viii) of the definition thereof which shall be approved solely by the Owner
Participant) copies of invoices of the Transaction Expenses as they are
received. The Owner Participant agrees to transfer to the Owner Trustee from
time to time promptly upon receipt of invoices of Transaction Expenses such
amount as shall be necessary in order to enable the Owner Trustee to pay such
Transaction Expenses or to pay such amounts directly. To the extent of funds
received by it, the Owner Trustee agrees to pay
69
all invoices of Transaction Expenses that have been so approved promptly upon
receipt thereof. Notwithstanding the foregoing, in the event that the
transactions contemplated hereby shall not be consummated, Lessee shall pay all
Transaction Expenses, except that the fees, expenses and disbursements of the
Owner Participant (including those relating to its counsel) shall be borne by
the Owner Participant if such failure to consummate the transactions results
from the failure of the Owner Participant to adhere to the terms and conditions
set forth in the letter dated March 2, 1995 addressed to Lessee and Capstar
Partners and agreed to by Lessee or to close after all conditions precedent to
the Owner Participant's funding of its Commitment set forth herein have been
satisfied. To the extent Transaction Expenses exceed [_____%] of Lessor's Cost,
the Lessee may, in lieu of electing an optimization pursuant to Section 18
hereof, promptly reimburse the Owner Trustee or Owner Participant, as
appropriate, for all or a portion of the Transaction Expenses described in
clause (i)(5) and/or clause (vi) (excluding any debt placement fees included in
said clause (vi)) of the definition of Transaction Expenses.
SECTION 17. Optional Redemption of Certificates. (a) Subject to the
-----------------------------------
terms of this Section 17, in the event that at any time Lessee shall have given
written notice to the Owner Trustee, the Indenture Trustee and the Owner
Participant that there be effected a voluntary redemption of all of the
outstanding Loan Certificates by the Owner Trustee as part of a refunding or
refinancing transaction, the Owner Participant agrees to negotiate promptly in a
commercially reasonable manner to conclude an agreement with Lessee as to the
terms of such refunding or refinancing transaction (including the terms of any
debt to be issued in connection with such refunding or refinancing transaction
and the documentation to be executed in connection therewith), and if after such
negotiation Lessee and the Owner Participant shall have concluded an agreement
with respect to such terms:
(1) within ten Business Days after the reaching of such
agreement, the Owner Participant will deliver to Lessee a certificate of an
authorized representative of the Owner Participant (the "Refinancing
Certificate") setting forth (i) the proposed date on which the outstanding
Loan Certificates will be redeemed, describing the new debt to be issued
and the other aspects of such refunding or refinancing transaction to be
consummated (such date, the "Refinancing Date") and (ii) the following
information: (A) the principal amount of debt to be issued by the Owner
Trustee on the Refinancing Date, and (B) the proposed revised schedules of
Basic Rent, Excess Amount, debt amortization, Stipulated Loss Value
percentages, Termination
70
Value percentages, Special Termination Value percentages and EBO
Percentage. Within ten Business Days of its receipt of the Refinancing
Certificate, Lessee may demand a verification pursuant to Exhibit E to the
Lease of the information set forth in the Refinancing Certificate. Upon
the acceptance by Lessee of the accuracy of the information set forth in
the Refinancing Certificate or the determination pursuant to such
verification procedures of the revised Basic Rent, Excess Amount, debt
amortization, Stipulated Loss Value percentages, Termination Value
percentages, Special Termination Value percentages and EBO Percentage and
the Debt/Equity Ratio (such information, the "Refinancing Information") the
appropriate parties will take the actions specified in paragraphs (2)
through (6) below;
(2) the appropriate parties will enter into a financing or loan
agreement in form and substance reasonably satisfactory to the Owner
Participant, the Owner Trustee and the Lessee (which may involve an
underwriting agreement in connection with a public offering of such debt or
the purchase of such debt by a publicly funded entity (or entities) or the
sale of the Owner Trustee's interest in the Trust Estate and/or the
Aircraft and its resale to the Owner Trustee) with the institution or
institutions to be named therein (A) providing for (i) the issuance and
sale by the Owner Trustee to such institution or institutions on the
Refinancing Date of debt securities in an aggregate principal amount
specified in the Refinancing Information, which amount shall be at least
equal to the aggregate principal amount of all Loan Certificates
outstanding on the Refinancing Date (such debt securities, the "New Debt")
and (ii) the application of the proceeds of the sale of the New Debt to the
redemption of all such Loan Certificates on the Refinancing Date and (B)
pursuant to which the parties to the refinancing transaction (including the
Owner Participant and Lessee but excluding any public holders of debt) make
such representations, warranties and covenants as the Owner Participant or
Lessee may reasonably require;
(3) Lessee and the Owner Trustee will amend the Lease to provide
that (i) Basic Rent, Excess Amount and the EBO Percentage in respect of the
period from and after the Refinancing Date shall be as provided in the
Refinancing Information and (ii) amounts payable in respect of Stipulated
Loss Value percentages, Special Termination Value Percentages and
Termination Value percentages from and after the Refinancing Date shall be
as provided in the Refinancing Information;
71
(4) the Owner Trustee will enter into an agreement to provide for
the securing thereunder of the New Debt in like manner as the Loan
Certificates and will enter into such amendments and supplements to the
Trust Indenture (or such new indenture or other security agreement) as may
be necessary to effect such refunding or refinancing (which agreements,
amendments and supplements shall be reasonably satisfactory to the Owner
Participant);
(5) unless otherwise agreed or required by the Owner Participant,
and whether or not such refunding or refinancing transaction is
consummated, Lessee, on behalf of Lessor, shall pay on an after-tax basis
all of the reasonable Expenses of all parties to such refunding or
refinancing, including without limitation, the reasonable fees and expenses
of such parties' counsel and any related loan or commitment fees; and
(6) subject to compliance by the Owner Trustee with all
applicable terms and conditions for voluntary prepayment under the Trust
Indenture and this Agreement, each Certificate Holder of a Loan Certificate
being refinanced or refunded will transfer to the Owner Trustee the Loan
Certificates held by it immediately prior to such refunding or refinancing
for cancellation (and the Owner Trustee shall cancel the same), against
receipt by such Certificate Holder of the then outstanding principal amount
of such Loan Certificates, accrued and unpaid interest thereon, plus
Premium, if any, together with payment in full of all other amounts then
payable to such Certificate Holder and the Indenture Trustee hereunder or
under the Trust Indenture.
(b) In the case of a refunding or refinancing involving a public
offering of the New Debt, the Owner Participant shall have the right (but not
the obligation) to review and approve (which approval shall not be unreasonably
withheld) all offering materials to be employed in connection therewith. It is
expressly understood that the Owner Participant shall have no obligation
hereunder to consent thereto if, in its good faith judgment, such refunding or
refinancing (A) increases its, any of its Affiliates (other than any Affiliate
which is acting as an underwriter) or the Owner Trustee's exposure to (i)
liabilities under federal or state securities laws, (ii) regulation under state
or federal securities laws, (iii) the need to publicly disclose information that
is not generally available to the public, or (iv) being adversely affected in
its respective ability to engage in any other financing transaction, in each
case to a level unacceptable to it in its reasonable, good faith, judgment, or
(B) requires the identity of the Owner Participant
72
to be disclosed in any offering materials. Lessee shall have the right to
purchase such debt securities and apply such securities as a credit against its
obligations to pay Rent, provided that (x) in connection with such refunding or
refinancing Lessee shall have agreed to indemnify the Owner Participant with
respect to such right in a manner satisfactory to the Owner Participant, and (y)
Lessee may not, at any one time hold in the aggregate any such debt securities
having a face value in excess of that portion of the two next succeeding
installments of Basic Rent which is required to be paid to the holders of such
debt securities on account of principal and interest. Any trustee of public
debt shall be a bank or trust company having its principal place of business in
the Borough of Manhattan, City and State of New York, Chicago, Illinois,
Hartford, Connecticut or Boston, Massachusetts and having, or having a parent
willing to guarantee the obligations of such bank or trust company and having, a
combined capital and surplus of at least $100,000,000, if there be such an
institution willing, able and legally qualified to perform the duties of trustee
upon reasonable or customary terms.
(c) Lessee shall give the Indenture Trustee at least twenty-five (25)
days irrevocable written notice of the proposed date of the optional redemption.
(d) Notwithstanding the foregoing, the Owner Participant shall have no
obligation to proceed with any refunding or refinancing transaction as
contemplated by this Section 17:
(i) if in the Owner Participant's good faith judgment, such
transaction would have an adverse impact (including, without limitation the
risk of adverse tax consequences) on it;
(ii) unless a third party or parties, unaffiliated with Lessee and
Owner Participant, shall have committed to (and shall) provide the entire
financing needed to consummate the proposed refunding or refinancing
transaction, it being understood that Owner Participant shall have no
obligation to locate any such party or parties;
(iii) unless Lessee indemnifies Owner Trustee and Owner
Participant by agreement in form and substance reasonably satisfactory to
each of them, for any liability, obligation (other than the obligation to
pay principal and interest and related payments in respect of the New
Debt), cost or expense (including, without limitation, reasonable
attorneys' fees) related to or arising out of any such refunding or
refinancing transaction;
73
(iv) unless the New Debt is denominated in Dollars; or
(v) if the refinancing would increase or decrease the Owner
Participant's Commitment.
(e) There shall be no more than one redemption permitted under this
Section 17.
(f) No voluntary redemption shall occur pursuant to this Section 17
prior to the fifth anniversary of the Delivery Date.
SECTION 18. Optimization. (a) In the event that: (i) the Delivery
------------
Date occurs other than on May 15, 1995 or (ii) Transaction Expenses paid by
Lessor are determined to be other than [____%] of Lessor's Cost, the Lessee may,
pursuant to this Section 18 and in accordance with the requirements of Section
3(c) of the Lease, optimize the Basic Rent, Excess Amount, Stipulated Loss Value
percentages, Termination Value percentages, Special Termination Value
percentages and EBO Percentage subject to the proviso set forth in Section
3(c)(i) of the Lease. The Owner Participant shall deliver to Lessee and the
Indenture Trustee a certificate of an authorized representative of the Owner
Participant (the "Optimization Certificate") setting forth the proposed revised
schedules of Basic Rent, Excess Amount, Stipulated Loss Value percentages,
Termination Value percentages, Special Termination Value percentages and EBO
Percentage. Within fifteen days of its receipt of the Optimization Certificate,
Lessee may demand a verification, pursuant to Exhibit E of the Lease, of the
information set forth in the Optimization Certificate. Upon the acceptance by
Lessee of the accuracy of the information set forth in the Optimization
Certificate or the determination pursuant to such verification procedures of
such information, the Owner Participant will cause the Lessor (A) to execute an
amendment to the Lease setting forth the optimized Basic Rent, Excess Amount,
Stipulated Loss Value percentages, Termination Value percentages, Special
Termination Value percentages and EBO Percentage, and (B) the Lessee will
execute such amended Lease necessary to effectuate the foregoing.
(b) In connection with optimization adjustments of Basic Rent, Excess
Amount, Stipulated Loss Value percentages, Termination Value percentages,
Special Termination Value percentages and EBO Percentage pursuant to this
Section 18 and Section 3(c) of the Lease, none of the principal amount,
amortization schedules or interest rate of the Loan Certificates shall be
altered.
74
(c) Lessee shall pay on an after-tax basis all of the reasonable
Expenses of all parties to such optimization, including, without limitation, the
reasonable fees and expenses of such parties' counsel.
SECTION 19. Nondisclosure. Each party hereto (other than the Owner
-------------
Participant) agrees that it will use its best efforts not to disclose the
identity of the Owner Participant and the terms of the Operative Documents in
connection with the issuance or release for external publication of any article
or advertising or publicity matter relating to the terms or conditions of any of
the Operative Documents or the transactions contemplated thereby without the
prior written consent of the Owner Participant (except as expressly permitted by
the Operative Documents or (t) with respect to the terms of the Operative
Documents to the extent required in connection with a public placement of the
debt pursuant to Section 17 hereof or (u) to the extent required in connection
with a private placement of the debt pursuant to Section 17 hereof or (v) to the
extent required to appropriate regulatory authorities or in response to subpoena
or other legal process or as otherwise required by law or (w) to such party's
insurance agents, auditors and counsel or other agents or (x) in the case of any
Pass Through Trustee, the Indenture Trustee, the Owner Participant or the Owner
Trustee (as the case may be), to prospective transferees or to any successor
Owner Trustee (as the case may be), who in turn agree to use their best efforts
not to make such disclosure in breach of this Section 19 or (y) as may be
necessary or desirable in connection with the enforcement by such party of any
Operative Document).
* * *
75
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
UNITED AIR LINES, INC.,
Lessee
By:_______________________________
Vice President and Treasurer
_____________________________,
Owner Participant
By: ______________________________
Title:____________________________
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
Indenture Trustee
By: ______________________________
Title:____________________________
STATE STREET BANK AND TRUST COMPANY, not in its
individual capacity, except as expressly provided
herein, but solely as Owner Trustee,
Owner Trustee
By: ______________________________
Title:____________________________
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
in its capacity as Pass Through Trustee under each
of the Pass Through Trust Agreements
By:_______________________________
Title:____________________________
76
SCHEDULE I
Names and Addresses
Lessee:
- ------
U.S. Mail
- ---------
United Air Lines, Inc.
P.O. Box 66100
Chicago, Illinois 60666
Attn: Vice President and
Treasurer
Telecopy: (708) 952-7117
Owner Participant:
- -----------------
_______________________
_______________________
_______________________
Attn: ___________________
Telecopy: _______________
Pass Through Trustee:
- --------------------
First Security Bank of Utah,
National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Department
Telecopy: (801) 246-5053
Overnight Delivery Service
- --------------------------
United Air Lines, Inc.
1200 East Algonquin Road
Elk Grove Township, IL 60007
Attn: Vice President and
Treasurer
Payment Address
- ---------------
The Chase Manhattan Bank, N.A.
New York, N.Y.
ABA #: 021000021
Account #: 910-2-499093
Account Name:
Reference: UAL/1995 777 A
Indenture Trustee:
- -----------------
First Security Bank of Utah,
National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Department
Telecopy: (801) 246-5053
Owner Trustee:
- --------------
State Street Bank and Trust
Company
225 Franklin Street
Boston, Massachusetts 02110
(or, if given by overnight
delivery service)
Two International Place
Boston, Massachusetts 02110
Attn: _________________________
Telecopy: (617) 664-5367
I-2
SCHEDULE II
Commitments
-----------
Percentage of
Certificate Holder Lessor's Cost Dollar Amount
- ------------------ ------------- -------------
First Security Bank of Utah,
National Association, in
its capacity as Pass Through
Trustee under Pass
Through Trust Agreement 1995-A1
First Security Bank of Utah,
National Association, in its
capacity as Pass Through
Trustee under Pass Through
Trust Agreement 1995-A2
Owner Participant:
- -----------------
[__________________________] $
Total Commitments: 100.00% $
================= ======= =
Doc. No. 1.01
Aircraft N766UA
- --------------------------------------------------------------------------------
PARTICIPATION AGREEMENT
(1995 777 B)
Dated as of May 1, 1995
Among
UNITED AIR LINES, INC.,
Lessee,
______________________,
Owner Participant,
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
in its capacity as
Pass Through Trustee under each of the
Pass Through Trust Agreements,
STATE STREET BANK AND TRUST COMPANY,
Not in its Individual Capacity,
except as expressly provided herein,
but solely as Owner Trustee,
and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
In its Individual Capacity and as Indenture Trustee
---------------------------
United Air Lines, Inc.
1995 777 B Equipment Trust
One Boeing 777-222 Aircraft
---------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
SECTION 1. Certain Definitions; Participations in
Lessor's Cost of the Aircraft............................... 3
SECTION 2. Lessee's Notice of Delivery Date............................... 4
SECTION 3. Instructions to the Owner Trustee and
Indenture Trustee........................................... 5
SECTION 4. Conditions..................................................... 6
(a) Conditions Precedent to the
Participations in the
Aircraft............................................... 6
(b) Conditions Precedent to the
Obligations of Lessee.................................. 15
SECTION 5. Confidentiality of Purchase Agreement.......................... 16
SECTION 6. Extent of Interest of Certificate
Holders..................................................... 17
SECTION 7. Lessee's Representations, Warranties
and Indemnities............................................. 17
(a) In General............................................. 17
(b) General Tax Indemnity.................................. 22
(c) General Indemnity...................................... 34
(d) Withholding............................................ 40
SECTION 8. Representations, Warranties and
Covenants................................................... 40
SECTION 9. [Intentionally Omitted]........................................ 63
SECTION 10. Other Documents; Amendment..................................... 63
SECTION 11. Certain Covenants of Lessee.................................... 64
SECTION 12. Owner for Income Tax Purposes.................................. 65
SECTION 13. Notices; Consent to Jurisdiction............................... 65
SECTION 14. Change of Situs of Owner Trust................................. 66
SECTION 15. Miscellaneous.................................................. 67
SECTION 16. Invoices and Payment of Expenses............................... 69
SECTION 17. Optional Redemption of Certificates............................ 70
ii
Page
----
SECTION 18. Optimization.................................................. 74
SECTION 19. Nondisclosure................................................. 75
SCHEDULE
SCHEDULE I -- Names and Addresses
SCHEDULE II -- Commitments
SCHEDULE III -- Legal Opinions
EXHIBIT A-1 -- Form of Transferor Opinion Re: Transfer of
Owner Participant's Interest
EXHIBIT A-2 -- Form of Transferee Opinion Re: Transfer of
Owner Participant's Interest
EXHIBIT B -- Form of Assignment and Assumption Agreement
EXHIBIT C -- Form of Guaranty Agreement
iii
PARTICIPATION AGREEMENT
(1995 777 B)
THIS PARTICIPATION AGREEMENT (1995 777 B) dated as of May 1, 1995
among (i) United Air Lines, Inc., a Delaware corporation (the "Lessee"), (ii)
[____________], a corporation organized under the laws of Delaware (the "Owner
Participant"), (iii) STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company, not in its individual capacity, except as expressly provided herein,
but solely as Owner Trustee under the Trust Agreement (the "Owner Trustee"),
(iv) FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity, except as otherwise provided
herein, but solely as trustee under the Pass Through Trust Agreement (the "Pass
Through Trustee"), dated as of February 1, 1992, as amended and restated as of
May 1, 1995 (the "Basic Agreement"), in each case between the Lessee and STATE
STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, as
supplemented by Trust Supplements Nos. 1995-A1 and 1995-A2, each dated as of May
__, 1995 between the Lessee and the Pass Through Trustee creating the 1995-A1
Pass Through Trust and the 1995-A2 Pass Through Trust, respectively (the Basic
Agreement as so supplemented being the "1995-A1 Pass Through Trust Agreement"
and the "1995-A2 Pass Through Trust Agreement", respectively, each of the 1995-
A1 Pass Through Trust Agreement and the 1995-A2 Pass Through Trust Agreement
being a "Pass Through Trust Agreement") and (v) FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, a national banking association, in its individual capacity
and as Indenture Trustee under the Trust Indenture (the "Indenture Trustee").
WITNESSETH:
WHEREAS, pursuant to the Purchase Agreement between Lessee and the
Manufacturer, the Manufacturer has agreed to sell to Lessee, among other things,
certain Boeing Model 777-222 aircraft, one of which has been recently purchased
from the Manufacturer by Lessee and is the subject of this Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant is entering into the Trust Agreement pursuant
to which Trust Agreement the Owner Trustee agrees, among other things, to hold
the Trust Estate defined in Section 1.01 thereof (the "Trust Estate") for the
use and benefit of the Owner Participant; and
WHEREAS, concurrently with the execution and delivery of this
Agreement,
[Participation Agreement (1995 777 B)]
(i) Lessee and the Owner Trustee are entering into the Owner Trustee's
Purchase Agreement and Assignment (1995 777 B) dated as of May 1, 1995 (the
"Owner Trustee's Purchase Agreement"), whereby Lessee agrees to sell the
Aircraft to the Owner Trustee and assigns to the Owner Trustee certain
rights and interests of Lessee under the Purchase Agreement with respect to
the Aircraft; and
(ii) the Manufacturer has executed the Consent and Agreement (1995
777 B) dated as of May 1, 1995 substantially in the form attached to the
Owner Trustee's Purchase Agreement, with respect to the Owner Trustee's
Purchase Agreement; and
WHEREAS, the Indenture Trustee and the Owner Trustee concurrently with
the execution and delivery of this Agreement are entering into the Trust
Indenture and Mortgage (1995 777 B) dated as of May 1, 1995 pursuant to which
the Owner Trustee agrees, among other things, to issue one or more Loan
Certificates in the form set forth in Exhibit A-1 or Exhibit A-2 to the Trust
Indenture to each Pass Through Trustee on behalf of the related grantor trusts
created by the applicable Pass Through Trust Agreement as evidence of the Owner
Trustee's indebtedness to each Pass Through Trustee, which Loan Certificates are
to be secured by the mortgage and security interest in the Aircraft created
pursuant to the Trust Indenture by the Owner Trustee in favor of the Indenture
Trustee, and the Owner Trustee shall execute and deliver the Trust Supplement
covering the Aircraft, supplementing the Trust Agreement and the Trust
Indenture; and
WHEREAS, as described in Section 2 hereof, the Owner Trustee and
Lessee are entering into a Lease Agreement (1995 777 B) dated as of May 1, 1995
whereby, subject to the terms and conditions set forth therein, the Owner
Trustee agrees to lease to Lessee, and Lessee agrees to lease from the Owner
Trustee, the Aircraft on the Delivery Date; and
WHEREAS, in connection with the foregoing, each Pass Through Trustee
will issue the Pass Through Certificates substantially in the form of Exhibit A
to each Pass Through Trust Agreement; and
WHEREAS, to facilitate the Owner Trustee's issuance of the Loan
Certificates to the applicable Pass Through Trustee and the purchase of the Loan
Certificates by each such Pass Through Trustee, the Lessee has duly authorized
the execution and delivery of each of the two Pass Through Trust Agreements as
the "issuer" thereunder, as such term is defined in and solely for purposes of
the Securities Act of 1933, as amended, and of the Pass Through Certificates
being issued thereunder as the
2
[Participation Agreement (1995 777 B)]
"obligor" thereunder, as such term is defined in and solely for purposes of the
Trust Indenture Act of 1939, as amended, with respect to the Pass Through
Certificates and is undertaking to perform certain administrative and
ministerial duties thereunder and is also undertaking to pay the fees and
expenses of the Pass Through Trustees; and
WHEREAS, certain terms are used herein as defined in Section 1(a)
hereof.
NOW THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
SECTION 1. Certain Definitions; Participations in Lessor's Cost of
the Aircraft. (a) The terms "Lessee," "Owner Participant," "Pass Through
Trustee," "Owner Trustee" and "Indenture Trustee" shall have the further
meanings attributed thereto in the Lease Agreement referred to above and, except
as otherwise defined in this Agreement, terms used herein in capitalized form
shall have the meanings attributed thereto in the Lease Agreement referred to
above. Unless the context otherwise requires, any reference herein to any of
the Operative Documents refers to such document as it may be amended from time
to time in accordance with its terms and the terms of each other agreement
restricting the amendment thereof.
(b) Subject to the terms and conditions of this Agreement, (i) each of
the Pass Through Trustees agrees to finance in part, the Owner Trustee's payment
of Lessor's Cost for the Aircraft by making a secured loan to the Owner Trustee
(herein called a "Loan" and collectively, the "Loans") on a date to be
designated pursuant to Section 2 hereof, but in no event later than May 31,
1995, in the amount in Dollars equal to the amount set forth opposite its name
on Schedule II hereto and (ii) the Owner Participant hereby agrees, in
connection with its equity investment in the beneficial ownership of the
Aircraft and the sale of the Aircraft by the Lessee to the Owner Trustee
pursuant to the Owner Trustee's Bill of Sale, as contemplated hereby and by the
Owner Trustee's Purchase Agreement, to make its equity investment in the
beneficial ownership of the Aircraft on a date to be designated as set forth
above, but in no event later than May 31, 1995, in an amount in Dollars equal to
the amount set forth opposite its name on Schedule II hereto. To fund its
obligations set out in (i) above, each Pass Through Trustee shall, in accordance
with Section 2.01 of the applicable Pass Through Trust Agreement, execute,
authenticate and deliver Pass Through Certificates, dated a date not later than
the Delivery Date and of the maturities, in the principal amounts, bearing the
interest rates and of the other economic terms specified in the request of the
Company (as defined in the Basic Agreement)
3
[Participation Agreement (1995 777 B)]
delivered pursuant to such Section 2.01, and deliver such Pass Through
Certificates to the Underwriters (as defined in Section 4(a)(xvii) as specified
in such request against payment by the Underwriters of an amount equal to the
aggregate principal amount of its Loan. In the case of the Owner Participant,
the amount of its participation to be made as provided above in the payment of
Lessor's Cost and, in the case of each Pass Through Trustee, the amount of its
Loan, is hereinafter called such Participant's "Commitment" for the Aircraft.
In case any Participant shall default in its obligation to make the amount of
its Commitment available pursuant to Section 2 hereof in respect of the
Aircraft, the other Participants shall have no obligation to make any portion of
such amount available or to increase the amount of its Commitment and the
obligation of the nondefaulting Participants shall remain subject to the terms
and conditions set forth in this Agreement.
SECTION 2. Lessee's Notice of Delivery Date. Lessee agrees to give
the Owner Participant, the Owner Trustee, the Pass Through Trustees and the
Indenture Trustee at least two Business Days' prior written notice of the
Delivery Date for the Aircraft, which Delivery Date shall be a Business Day not
later than May 31, 1995, which notice shall specify the amount of Lessor's Cost
and the amount of each Participant's Commitment for the Aircraft. As to each
Participant, the making of its Commitment for such Aircraft available in the
manner required by this Section 2 shall constitute a waiver of such notice. The
Owner Trustee and the Indenture Trustee shall be deemed to have waived such
notice if the Indenture Trustee shall have received from the Owner Participant
funds in the full amount of the Owner Participant's Commitment and the proceeds
of the sale of the Loan Certificates in the full amount of the Pass Through
Trustees' Commitments.
Subject to the terms and conditions of this Agreement, and
simultaneously with receipt by the parties hereto of all amounts to be paid to
them on the Delivery Date pursuant to this Section 2, the Lessee shall transfer
title to and deliver the Aircraft to the Owner Trustee, the Owner Trustee shall
purchase and take title to, and accept delivery of, the Aircraft, and the Owner
Trustee shall lease the Aircraft to Lessee, it being understood that the
transactions described in this Section 2 are simultaneous and mutually
dependent. On the Delivery Date, subject to the terms and conditions of this
Agreement, and in consideration for the transfer of title to the Aircraft to the
Owner Trustee, the Owner Trustee and the Indenture Trustee (on behalf of the
Owner Trustee) shall pay over the funds made available to it equal to Lessor's
Cost to Lessee's account no. ____________ at First Security Bank of Utah,
National Association. In addition, subject to the terms and conditions of this
Agreement, the Owner Trustee shall, on the Delivery Date,
4
[Participation Agreement (1995 777 B)]
issue to the Pass Through Trustees the Loan Certificates to evidence the Loans
The Owner Participant agrees, subject to the terms and conditions of
this Agreement, to make its Commitment available to the Owner Trustee at the
Owner Trustee's account no. ________ at First Security Bank of Utah, National
Association, and the Pass Through Trustees agree to make their Commitment
available to the Indenture Trustee at the Indenture Trustee's account no.
_________ at First Security Bank of Utah, National Association, at or before
10:00 a.m., New York City time, on the Delivery Date specified in Lessee's
notice referred to in the first paragraph of this Section 2 (such specified
Delivery Date being herein called the "Scheduled Delivery Date").
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee.
Subject to the terms and conditions of this Agreement, the Owner Trustee and the
Indenture Trustee, upon their respective receipts in full of the Owner
Participant's and the Pass Through Trustees' Commitments for the Aircraft, as
provided in Section 2 hereof, together with instructions from such Participant
or its special counsel to release such funds to Lessee, shall transfer such
funds to the Lessee and the Owner Trustee shall purchase the Aircraft from the
Lessee and lease the Aircraft to Lessee and such action shall constitute,
without further act, authorization and direction by the Owner Participant to the
Owner Trustee and the Indenture Trustee acting on behalf of the Owner
Participant (in regard to item (a) below) and to the Owner Trustee (in regard to
items (b) - (f) below):
(a) to pay to Lessee the Lessor's Cost in the manner set forth in
Section 2;
(b) to the extent not previously accomplished by a prior
authorization, to authorize a representative or representatives of the Owner
Trustee (who shall be an employee or employees, or an agent or agents, of Lessee
designated by Lessee) to accept delivery of the Aircraft on the Delivery Date
pursuant to the Owner Trustee's Bill of Sale;
(c) to accept from the Lessee the Owner Trustee's Bill of Sale and the
Owner Trustee's FAA Bill of Sale;
(d) to execute an Aircraft Registration Application, a Lease
Supplement and a Trust Supplement, in each case covering the Aircraft;
(e) to borrow from the Pass Through Trustees amounts equal to their
respective Loans to finance a portion of Lessor's
5
[Participation Agreement (1995 777 B)]
Cost and to issue to the Pass Through Trustees Loan Certificates in the amounts
specified herein; and
(f) to take such other action as may be required to be taken by the
Owner Trustee on the Delivery Date by the terms of any Operative Document.
SECTION 4. Conditions. (a) Conditions Precedent to the Participations
in the Aircraft. It is agreed that the respective obligations of the
Participants to participate in the payments of Lessor's Cost are subject to the
satisfaction prior to or on the Delivery Date of the following conditions
precedent, except that paragraphs (iii), (xx), (xxiv) (insofar as it relates to
the Pass Through Trustees), (xxv), (xxvi) and (xxviii) shall not be a condition
precedent to the obligation of the Pass Through Trustees, and paragraphs (iv),
(x) (insofar as it relates to the Owner Participant), (xiv), (xix) and (xxvii)
shall not be a condition precedent to the obligation of the Owner Participant:
(i) The Participants shall have received due notice with respect
to such participation pursuant to Section 2 hereof (or shall have waived
such notice either in writing or as provided in Section 2).
(ii) No change shall have occurred after the date of the execution
and delivery of this Agreement in applicable law or regulations thereunder
or interpretations thereof by appropriate regulatory or judicial
authorities which, in the opinion of the Owner Participant or the Pass
Through Trustees, as the case may be, would make it a violation of law or
regulations for (x) the Lessee, the Indenture Trustee, any Participant or
the Owner Trustee to execute, deliver and perform the Operative Documents
to which any of them is a party or (y) the Pass Through Trustees or the
Owner Participant to make their respective Commitments available or, in the
case of any Pass Through Trustee, to acquire a Loan Certificate or to
realize the benefits of the security afforded by the Trust Indenture.
(iii) In the case of the Owner Participant, the Pass Through
Trustees shall have made available the amount of their respective
Commitments for the Aircraft in accordance with Section 1 hereof.
(iv) In the case of the Pass Through Trustees, the Owner
Participant shall have made available the amount of its Commitment for the
Aircraft in accordance with Section 1 hereof.
6
[Participation Agreement (1995 777 B)]
(v) The following documents shall have been duly authorized,
executed and delivered by the respective party or parties thereto, shall
each be satisfactory in form and substance to the Participants and shall be
in full force and effect and executed counterparts shall have been
delivered to the Participants, and their respective counsel, provided that
only the applicable Pass Through Trustee shall receive an executed original
of its Loan Certificate, only the Indenture Trustee, acting on behalf of
the Certificate Holders, shall receive the original counterparts of the
Lease and the Lease Supplement, only the Owner Participant shall receive a
copy of the Purchase Agreement which shall be delivered to and retained by
the Owner Trustee (the Owner Trustee and the Owner Participant and their
respective counsel may inspect the Purchase Agreement prior to the Delivery
Date but thereafter shall not have access to the same until the return of
the Aircraft to Lessor (but only to the extent the Purchase Agreement has
any continued effectiveness on such return date) or unless a Lease Default
or Event of Default shall have occurred and be continuing) and provided
further that only the Lessee and the Owner Participant shall receive copies
of the Tax Indemnity Agreement:
(1) the Lease;
(2) a Lease Supplement covering the Aircraft and dated the
Delivery Date;
(3) the Tax Indemnity Agreement;
(4) the Trust Agreement;
(5) a Trust Supplement covering the Aircraft and dated the
Delivery Date;
(6) the Owner Trustee's Bill of Sale and the Owner Trustee's
FAA Bill of Sale;
(7) the Owner Trustee's Purchase Agreement;
(8) an acceptance certificate covering the Aircraft in the
form agreed to by the Participants and Lessee (the "Acceptance
Certificate") duly completed and executed by the Owner Trustee or its
agent, which shall be a representative of Lessee, and by such
representative on behalf of Lessee;
(9) the Trust Indenture;
7
[Participation Agreement (1995 777 B)]
(10) the Loan Certificates;
(11) the Consent and Agreement;
(12) the Purchase Agreement;
(13) the Owner Participant Parent Guaranty; and
(14) the Pass Through Trust Agreements.
(vi) A Uniform Commercial Code financing statement or statements
covering all the security interests created by or pursuant to the Granting
Clause of the Trust Indenture shall have been executed and delivered by the
Owner Trustee and the Indenture Trustee, and such financing statement or
statements shall have been duly filed in all places necessary or advisable,
and any additional Uniform Commercial Code financing statements deemed
advisable by the Owner Participant or the Pass Through Trustees shall have
been executed and delivered by Lessee, the Indenture Trustee or the Owner
Trustee and duly filed.
(vii) Each Participant and the Indenture Trustee shall have
received the following, in each case in form and substance satisfactory to
it, provided that only the Owner Participant shall receive a copy of the
Purchase Agreement which shall be delivered to and retained by the Owner
Trustee (the Owner Trustee and the Owner Participant and their respective
counsel may inspect the Purchase Agreement prior to the Delivery Date but
thereafter shall not have access to the same until the return of the
Aircraft to Lessor (but only to the extent the Purchase Agreement has any
continued effectiveness on such return date) or unless a Lease Default or
Event of Default shall have occurred and be continuing):
(1) a certified copy of the Certificate of Incorporation and
By-Laws of Lessee and a copy of resolutions of the board of directors
of Lessee or the executive committee thereof, certified by the
Secretary or an Assistant Secretary of Lessee, duly authorizing the
execution, delivery and performance by Lessee of this Agreement, the
Lease, the Owner Trustee's Purchase Agreement, the Owner Trustee's
Bill of Sale, the Owner Trustee's FAA Bill of Sale, the Tax Indemnity
Agreement and each other document required to be executed and
delivered by Lessee on the Delivery Date in accordance with the
provisions hereof and thereof;
8
[Participation Agreement (1995 777 B)]
(2) such other documents and evidence with respect to
Lessee, the Manufacturer, the Owner Trustee, the Indenture Trustee and
the Participants, as the Pass Through Trustees or the Owner
Participant, or their respective counsel, may reasonably request in
order to establish the authority of such parties to consummate the
transactions contemplated by this Agreement, the taking of all
corporate proceedings in connection therewith and the compliance with
the conditions herein set forth;
(3) a certificate of Lessee (i) as to the Person or Persons
authorized to execute and deliver this Agreement, the other Lessee
Documents, and any other documents to be executed on behalf of Lessee
in connection with the transactions contemplated hereby and as to the
signature of such person or persons, and (ii) to the effect that the
application of the proceeds from the Pass Through Certificates as
provided for herein will not be inconsistent with any of the
provisions of the Pass Through Trust Agreements;
(4) a copy of the Purchase Agreement certified by the
Secretary or an Assistant Secretary of Lessee as being a true and
accurate copy of the same with all amendments attached thereto that
relate to the Manufacturer's warranties or related obligations or any
right in such Agreement assigned by the Lessee to the Owner Trustee
pursuant to the Owner Trustee's Purchase Agreement;
(5) a copy of the general authorizing resolutions of the
boards of directors (or executive committees) or other satisfactory
evidence of authorization of the Indenture Trustee, the Owner Trustee,
the Pass Through Trustees, the Owner Participant and the Owner
Participant Parent, certified as of the Delivery Date by the Secretary
or an Assistant Secretary of the Indenture Trustee, the Owner Trustee,
the Pass Through Trustees, the Owner Participant and the Owner
Participant Parent, respectively, which authorize the execution,
delivery and performance by the Indenture Trustee, the Owner Trustee,
the Pass Through Trustees, the Owner Participant and the Owner
Participant Parent of all of the Operative Documents to which it is a
party, together with such other documents and evidence with respect to
the Indenture Trustee, the Owner Trustee, the Pass Through Trustees,
the Owner Participant and the Owner Participant Parent as either the
Pass Through
9
[Participation Agreement (1995 777 B)]
Trustees (or their counsel) or the Owner Participant (or its counsel)
may reasonably request in order to establish the consummation of the
transactions contemplated by this Agreement, the taking of all
corporate proceedings in connection therewith and compliance with the
conditions herein set forth; provided, this clause shall not be a
condition precedent as to any Participant as to documents to be
provided by that Participant; and
(6) a copy of the excerpts the "United Air Lines 777
Maintenance Program" referred to in Section 5 of the Lease.
(viii) All appropriate action required to have been taken by the
Federal Aviation Administration, or any governmental or political agency,
subdivision or instrumentality of the United States, on or prior to the
Delivery Date in connection with the transactions contemplated by this
Agreement shall have been taken, and all orders, permits, waivers,
authorizations, exemptions and approvals of such entities required to be in
effect on the Delivery Date in connection with the transactions
contemplated by this Agreement shall have been issued, and all such orders,
permits, waivers, authorizations, exemptions and approvals shall be in full
force and effect on the Delivery Date.
(ix) On the Delivery Date, the following statements shall be true,
and the Participants and the Indenture Trustee shall have received evidence
satisfactory to each of them to the effect that:
(1) the Owner Trustee has good and marketable title (subject
to filing and recording of the Owner Trustee's FAA Bill of Sale with
the Federal Aviation Administration) to the Aircraft, free and clear
of Liens other than the rights of Lessee under the Lease and Lease
Supplement covering the Aircraft, the mortgage and security interest
created by the Trust Indenture, the rights of the Owner Participant
under the Trust Agreement and the Trust Supplement and Liens permitted
by clause (iii) (solely for Taxes not yet due) of Section 6 of the
Lease;
(2) application for registration of the Aircraft in the name
of the Owner Trustee (together with any required affidavits) and the
Owner Trustee's FAA Bill of Sale have been duly filed with the FAA;
10
[Participation Agreement (1995 777 B)]
(3) the Trust Agreement, the Trust Indenture and the Trust
Supplement and the Lease and the Lease Supplement have been duly filed
with the FAA for recordation;
(4) the Owner Trustee, as lessor under the Lease, and the
Indenture Trustee, as assignee of the Owner Trustee's rights under the
Lease Agreement pursuant to the Trust Indenture, are entitled to the
protection of Section 1110 of the Bankruptcy Code in connection with
the Owner Trustee's and the Indenture Trustee's right to take
possession of the Airframe and Engines in the event of a case under
Chapter 11 of the Bankruptcy Code in which the Lessee is a debtor; and
(5) the Aircraft has been duly certified by the FAA as to
type and airworthiness in accordance with the terms of the Lease and
has a current, valid U.S. standard certificate of airworthiness issued
by the FAA.
(x) On the Delivery Date, (A) the representations and warranties
of Lessee, the Owner Participant and the Owner Trustee contained in
Sections 7 and 8 of this Agreement and in the Tax Indemnity Agreement and
the Owner Participant Parent contained in the Owner Participant Parent
Guaranty shall be true and accurate as though made on and as of such date
except to the extent that such representations and warranties relate solely
to an earlier date (in which case such representations and warranties shall
have been true and accurate on and as of such earlier date), (B) no event
shall have occurred and be continuing, or would result from the purchase,
sale, lease or mortgage of the Aircraft, which constitutes (or would, with
the passage of time or the giving of notice or both, constitute) an Event
of Default as defined in the Lease or the Trust Indenture, and (C) no event
shall have occurred that might have the effect of materially and adversely
affecting the ability of Lessee to carry on its business as conducted on
December 31, 1994 or to perform its obligations under the Operative
Documents.
(xi) The Participants shall have received an opinion addressed to
the Participants, the Indenture Trustee, and the Owner Trustee from (a)
Francesca M. Maher, Vice President-Law, Deputy General Counsel and
Corporate Secretary for Lessee, in substantially the form of Schedule III-
1(a) hereto and (b) Vedder, Price, Kaufman & Kammholz, special counsel to
the Lessee, in substantially the form of Schedule III-1(b) hereto.
11
[Participation Agreement (1995 777 B)]
(xii) The Participants shall have received an opinion addressed to
the Participants, the Owner Trustee, the Indenture Trustee and Lessee from
counsel to the Manufacturer, in substantially the form of Schedule III-2
hereto.
(xiii) The Participants shall have received an opinion addressed to
the Participants, the Indenture Trustee, the Owner Trustee and Lessee, from
Bingham, Dana & Gould, special counsel for the Owner Trustee, in
substantially the form of Schedule III-3 hereto.
(xiv) The Pass Through Trustees shall have received an opinion
addressed to the Indenture Trustee, the Pass Through Trustees, the Owner
Trustee and Lessee from (a) Dewey Ballantine, special counsel to the Owner
Participant and the Owner Participant Parent, in substantially the form of
Schedule III-4(a) hereto and (b) Michael Flynn, Vice President-General
Counsel and Secretary to the Owner Participant and the Owner Participant
Parent in substantially the form of Schedule III-4(b) hereto.
(xv) The Participants shall have received an opinion addressed to
the Participants, the Indenture Trustee, the Owner Trustee and Lessee, from
Crowe & Dunlevy, P.C., special counsel in Oklahoma City, Oklahoma, in
substantially the form of Schedule III-5 hereto.
(xvi) The Participants shall have received an opinion addressed to
the Participants, the Owner Trustee and Lessee from Ray, Quinney & Nebeker,
special counsel for the Indenture Trustee and the Pass Through Trustees, in
substantially the form of Schedule III-6 hereto.
(xvii) The Owner Participant shall have received an opinion
addressed to it from Vedder, Price, Kaufman & Kammholz, special counsel to
the Lessee, substantially to the same effect as the opinion delivered
pursuant to Section 5(b)(1) of the Purchase Agreement dated ____________
(the "Underwriting Agreement") among Lessee, Merrill Lynch & Co. and Lehman
Brothers (the "Underwriter").
(xviii) The Participants and the Indenture Trustee shall have
received a certificate signed by the President or any Vice President of
Lessee, dated the Delivery Date, addressed to the Participants and the
Indenture Trustee and certifying as to the fulfillment of all conditions in
this Section 4(a) insofar as they relate to Lessee and as to the matters
stated in paragraphs (viii), (x) (insofar as it relates to Lessee), (xxii)
and (xxiii) (to the knowledge of
12
[Participation Agreement (1995 777 B)]
Lessee, except in regard to matters relating to the Participants, Indenture
Trustee or the Owner Trustee, in which event such representation shall be
to the knowledge of Lessee without any investigation whatsoever) of this
Section 4(a).
(xix) (a) The Owner Participant shall, by making its Commitment
available as provided in Section 1(b)(ii) of this Agreement, (b) the
Indenture Trustee shall by authenticating the Loan Certificates issued on
the Delivery Date, (c) the Owner Trustee shall, by accepting the Owner
Trustee's Bill of Sale and the Owner Trustee's FAA Bill of Sale and (d) the
Pass Through Trustees shall, by making their respective Commitments
available as provided in Section 1(b)(i) of this Agreement, be respectively
deemed to have reaffirmed as of the Delivery Date the representations and
warranties made by it in Section 8 of this Agreement.
(xx) The Owner Participant shall have received an opinion, in form
and substance reasonably satisfactory to the Owner Participant, from BK
Associates, independent aircraft appraisers, or such other recognized
aircraft appraiser selected by the Owner Participant, to the effect that
(A) on the Delivery Date, the fair market value of the Aircraft is equal to
Lessor's Cost; (B) on the Delivery Date, the Aircraft is expected to have
an economic useful life of at least 125% of the aggregate of the Interim
Term and the Basic Term; (C) on the Delivery Date, the Aircraft is expected
to have a residual value at the end of the Basic Term of at least 20% of
Lessor's Cost (without considering the effects of inflation or deflation
and assuming the Aircraft is in compliance with Section 5 of the Lease);
(D) on the Delivery Date, the Aircraft is expected to have a fair market
value on the EBO Date that does not exceed an amount equal to the EBO
Price; (E) the fair market value of each Engine is at least equal to Engine
Cost; and (F) the Aircraft is not limited use property.
(xxi) The Participants and the Indenture Trustee shall have
received an independent insurance broker's report, and certificates of
insurance, in form and substance reasonably satisfactory to the
Participants, as to the due compliance with the terms of Section 11 of the
Lease relating to insurance with respect to the Aircraft.
(xxii) On the Delivery Date it shall be true that no Event of Loss
(or event which with the passage of time would become an Event of Loss)
with respect to the Airframe or any Engine has occurred.
13
[Participation Agreement (1995 777 B)]
(xxiii) No action or proceeding shall have been instituted nor shall
governmental action be threatened before any court or governmental agency,
nor shall any order, judgment or decree have been issued or proposed to be
issued by any court or governmental agency at the time of the Delivery Date
to set aside, restrain, enjoin or prevent the completion and consummation
of this Agreement or the transactions contemplated hereby.
(xxiv) The respective representations and warranties of the
Indenture Trustee and the Pass Through Trustees contained in Section 8
hereof shall be true and accurate as of the Delivery Date as though made on
and as of such date except to the extent that such representations and
warranties relate solely to an earlier date (in which event such
representations and warranties shall have been true and accurate on and as
of such earlier date) and the Lessee and each Participant shall have
received a certificate signed by the Chairman of the Board, the President,
any Vice President or any Assistant Vice President of the Indenture Trustee
and the Pass Through Trustees certifying as to the foregoing matters with
respect to the Indenture Trustee and the Pass Through Trustees, as
applicable.
(xxv) The Owner Participant shall have received from Dewey
Ballantine, special counsel to the Owner Participant, a favorable opinion,
in form and substance satisfactory to the Owner Participant, with respect
to certain income tax aspects of the transactions contemplated by the
Operative Documents.
(xxvi) In the opinion of the Owner Participant and its special
counsel, no law (including tax laws), regulation or regulatory order or
holding applicable to the Owner Participant or the Owner Participant's
participation in the transactions contemplated hereby, shall have been
enacted, issued or proposed prior to the Delivery Date that would have a
material adverse impact on the Owner Participant.
(xxvii) The Pass Through Trustees shall have received a letter from
BK Associates to the effect that the fair market value of the Aircraft on
the Delivery Date is not less than 125% of the aggregate amount of the
Loans.
(xxviii) The Lessee shall have executed and delivered to Owner
Participant a letter relating to Lessee's average cost of capital together
with appropriate supporting documentation.
14
[Participation Agreement (1995 777 B)]
Promptly upon the registration of the Aircraft and the recording of
the Lease, the Trust Indenture, the Trust Agreement, the Lease Supplement and
the Trust Supplement covering the Aircraft pursuant to the Federal Aviation Act,
Lessee will cause Crowe & Dunlevy, P.C., special counsel in Oklahoma City,
Oklahoma, to deliver to the Owner Participant, the Indenture Trustee, the Pass
Through Trustees, the Owner Trustee and Lessee an opinion as to the due and
valid registration of the Aircraft in the name of the Owner Trustee, the due
recording of the Owner Trustee's FAA Bill of Sale, the Trust Indenture, the
Lease Supplement, the Trust Supplement, the Lease and the Trust Agreement and
the lack of filing of any intervening documents with respect to the Aircraft.
(b) Conditions Precedent to the Obligations of Lessee. It is agreed
that the obligations of Lessee (A) to sell the Aircraft to the Owner Trustee,
(B) to accept delivery of the Aircraft under the Lease and (C) to enter into its
other Operative Documents, are all subject to the fulfillment to the
satisfaction of Lessee prior to or on the Delivery Date of the following
conditions precedent:
(i) The conditions specified in Section 4(a)(iii), 4(a)(iv),
4(a)(viii), 4(a)(xxii) and 4(a)(xxiii) hereof shall have been satisfied,
unless such nonsatisfaction is the result of the actions of Lessee.
(ii) Those documents described in Section 4(a)(v) shall have been
duly authorized, executed and delivered by the respective party or parties
thereto (other than Lessee) in the manner specified in Section 4(a)(v),
shall each be satisfactory in form and substance to Lessee, shall be in
full force and effect on the Delivery Date, and an executed counterpart of
each thereof (other than the Loan Certificates) shall have been delivered
to Lessee or its counsel.
(iii) Lessee shall have received a copy of the general authorizing
resolutions of the boards of directors (or executive committees) or other
satisfactory evidence of authorization of the Indenture Trustee, the Owner
Trustee, the Pass Through Trustees, the Owner Participant and the Owner
Participant Parent, certified as of the Delivery Date by the Secretary or
an Assistant Secretary of the Indenture Trustee, the Owner Trustee, the
Pass Through Trustees, the Owner Participant and the Owner Participant
Parent, respectively, which authorize the execution, delivery and
performance by the Indenture Trustee, the Owner Trustee, the Pass Through
Trustees, the Owner Participant and the Owner Participant Parent of all the
Operative Documents to which
15
[Participation Agreement (1995 777 B)]
it is a party, together with such other documents and evidence with respect
to the Indenture Trustee, the Owner Trustee, the Pass Through Trustees, the
Owner Participant and the Owner Participant Parent as Lessee or its counsel
may reasonably request in order to establish the consummation of the
transactions contemplated by this Agreement, the taking of all corporate
proceedings in connection therewith and compliance with the conditions
herein set forth.
(iv) The representations and warranties of the Participants, the
Indenture Trustee and the Owner Trustee contained in Section 8 hereof and
the Owner Participant Parent in the Owner Participant Parent Guaranty shall
be true and accurate as of the Delivery Date as though made on and as of
such date except to the extent that such representations and warranties
relate solely to an earlier date (in which event such representations and
warranties shall have been true and accurate on and as of such earlier
date) and Lessee shall have received a certificate signed by the Chairman
of the Board, the President, any Vice President or any Assistant Vice
President or other authorized representative of the Indenture Trustee, the
Owner Participant, the Pass Through Trustees and the Owner Trustee,
respectively, certifying as to the foregoing matters with respect to the
Indenture Trustee, the Owner Participant and the Owner Trustee,
respectively.
(v) Lessee shall have received the opinions set forth in Sections
4(a)(xii), 4(a)(xiii), 4(a)(xiv), 4(a)(xv), and 4(a)(xvi), in each case
addressed to Lessee and dated the Delivery Date.
(vi) No change shall have occurred after the date of the execution
and delivery of this Agreement in applicable law or regulations thereunder
or interpretations thereof by appropriate regulatory authorities which, in
the opinion of Lessee, would make it a violation of law or regulations for
Lessee to enter into any transaction contemplated by the Operative
Documents.
(vii) No law (including tax laws), regulation or regulatory order
or holding applicable to the Lessee or Lessee's participation in the
transactions contemplated hereby, shall have been enacted, issued, or
proposed prior to the Delivery Date that would have a material adverse
impact on Lessee.
SECTION 5. Confidentiality of Purchase Agreement. Lessor, the
Participants, and the Indenture Trustee shall keep
16
[Participation Agreement (1995 777 B)]
the Purchase Agreement confidential and shall not disclose the same to any
Person, except (A) to prospective and permitted transferees of Lessor's, a Pass
Through Trustee's, the Owner Participant's or the Indenture Trustee's interest
who agree to hold such information confidential, (B) to the aforementioned
prospective and permitted transferees', Lessor's, Pass Through Trustees', the
Owner Participant's or the Indenture Trustee's counsel or special counsel,
independent insurance brokers or other agents who agree to hold such information
confidential, (C) as may be required by any statute, court or administrative
order or decree or governmental ruling or regulation, including Federal or state
banking examiners or tax auditors or (D) as may be necessary or desirable for
purposes of protecting the interest of any such Person or for enforcement of the
Lease by Owner Trustee, the Participants or the Indenture Trustee; provided,
however, that any and all disclosures of all or any part of the Purchase
Agreement which are permitted by (C) or (D) above shall be made only to the
extent necessary to meet the specific requirements or needs of the Persons to
whom such disclosures are hereby permitted.
SECTION 6. Extent of Interest of Certificate Holders. No Certificate
Holder shall have any further interest in, or other right with respect to, the
mortgage and security interests created by the Trust Indenture when and if the
Original Amount of, Premium, if any, and interest on all Loan Certificates held
by such Certificate Holder and all other sums payable to such Certificate Holder
hereunder, under the Trust Indenture and under such Loan Certificates shall have
been paid in full. Each Certificate Holder by its acceptance of a Loan
Certificate, agrees that it will look solely to the income and proceeds from the
Trust Indenture Estate to the extent available for distribution to such
Certificate Holder as provided in Section 2.09 of the Trust Indenture and that
neither the Owner Participant nor the Owner Trustee shall be personally liable
to any Certificate Holder for any amounts payable under the Loan Certificates,
the Trust Indenture, hereunder, or under any other Operative Documents
(including, without limitation, amounts payable as Premium), except as expressly
provided in this Agreement or (in the case of the Owner Trustee) in the Trust
Indenture.
SECTION 7. Lessee's Representations, Warranties and Indemnities. (a) In
General. Lessee represents and warrants that as of the Delivery Date:
(i) Lessee is a corporation duly organized and validly existing
in good standing pursuant to the laws of the State of Delaware; is duly
qualified to do business as a foreign corporation in each jurisdiction in
which its
17
[Participation Agreement (1995 777 B)]
operations or the nature of its business requires, except where the failure
to be so qualified would not have a material adverse effect on Lessee or
its business; is a Citizen of the United States and a Certificated Air
Carrier; holds all material licenses, certificates, permits and franchises
from the appropriate agencies of the United States of America and/or all
other governmental authorities having jurisdiction, necessary to authorize
Lessee to engage in air transport and to carry on scheduled passenger
service, in each case as presently conducted; has its chief executive
office (as such term is defined in Article 9 of the Uniform Commercial
Code) in Elk Grove Township, Illinois; and has the corporate power and
authority to conduct its business as it is presently being conducted, to
hold under lease the Aircraft and to enter into and perform its obligations
under the Lessee Documents;
(ii) the execution, delivery and performance by Lessee of the
Lessee Documents have been duly authorized by all necessary corporate
action on the part of Lessee, do not require any stockholder approval, or
approval or consent of any trustee or holders of any indebtedness or
obligations of Lessee except such as have been duly obtained, and none of
such Lessee Documents contravenes any law, judgment, governmental rule,
regulation or order binding on Lessee or the certificate of incorporation
or by-laws of Lessee or contravenes the provisions of, or constitutes a
default under, or results in the creation of any Lien (other than Permitted
Liens) upon the property of Lessee under, its certificate of incorporation
or bylaws, or any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement or other
agreement or instrument to which Lessee is a party or by which it or its
properties may be bound or affected;
(iii) neither the execution and delivery by Lessee of the Lessee
Documents nor the performance by Lessee of its obligations thereunder
require the consent or approval of, the giving of notice to, or the
registration with, or the taking of any other action in respect of any
federal, state or foreign government authority or agency, except for (A)
the orders, permits, waivers, exemptions, authorizations and approvals of
the regulatory authorities having jurisdiction over the operation of the
Aircraft by Lessee, which orders, permits, waivers, exemptions,
authorizations and approvals have been duly obtained, and are in full force
and effect, (B) the registration of the Aircraft referred to in Section
4(a)(ix)(2), (C) any normal periodic and other reporting requirements under
the applicable rules and regulations of the FAA to the extent required to
be given or obtained only
18
[Participation Agreement (1995 777 B)]
after the Delivery Date, (D) the recordings with the FAA described in the
opinion referred to in Section 4(a)(xv) and (E) any normal periodic and
other reporting requirements under the applicable rules and regulations of
the FAA to the extent required to be given or obtained only after the
Delivery Date, it being understood that the registration of the issuance
and sale of the Pass Through Certificates to be issued pursuant to the
provisions of the Pass Through Trust Agreements under the Securities Act of
1933, as amended, and under the securities laws of any state in which the
Pass Through Certificates may be offered for sale if the laws of such state
require such action has been duly accomplished and the qualification of
each Pass Through Trust Agreement under the Trust Indenture Act of 1939, as
amended, has been duly obtained;
(iv) each of the Lessee Documents has been duly executed and
delivered by Lessee and constitutes legal, valid and binding obligations of
Lessee enforceable against Lessee in accordance with the terms thereof;
(v) there are no pending or threatened actions or proceedings
before any court or administrative agency involving any Lessee Document or
the transactions contemplated hereby or which individually (or in the
aggregate in the case of any group of related lawsuits) is expected to have
a material adverse effect on the financial condition of Lessee or the
ability of Lessee to perform its obligations under the Lessee Documents;
(vi) except for (A) the registration of the Aircraft pursuant to
the Federal Aviation Act, (B) the filing for recording pursuant to said Act
of the Trust Agreement, the Lease with the Lease Supplement covering the
Aircraft, the Trust Indenture and the Trust Supplement attached thereto and
made a part thereof, and the Owner Trustee's FAA Bill of Sale, (C) the
filing of financing statements (and continuation statements at periodic
intervals) with respect to the security and other interests created by such
documents under the Uniform Commercial Code of Illinois (which financing
statement Lessee has caused to be presented in due form for filing with the
appropriate filing office in the State of Illinois) and such other states
as may be specified in the opinions furnished pursuant to Section 4(a)(xi)
hereof and (D) the taking of possession by the Indenture Trustee of the
original counterparts of the Lease and the Lease Supplement covering the
Aircraft, no further action, including any filing or recording of any
document (including any financing statement in respect thereof under
Article 9 of the Uniform Commercial
19
[Participation Agreement (1995 777 B)]
Code of any applicable jurisdiction), is necessary or advisable in order to
establish and perfect the Owner Trustee's title to and interest in the
Aircraft as against the Lessee and the Indenture Trustee's security
interest in the Aircraft as against the Owner Trustee, and in each case as
against any third parties in any applicable jurisdictions in the United
States;
(vii) there has not occurred any event which constitutes a Default
or an Event of Default under the Lease which is presently continuing and
there has not occurred any event which constitutes or would, with the
passage of time or the giving of notice, or both, constitute an Event of
Loss;
(viii) the statements of financial position of Lessee as of
December 31, 1994 and the related statements of earnings and cash flow of
Lessee for the year then ended, copies of which have been furnished to the
Participants, fairly present the financial condition of Lessee as at such
date and the results of operations and cash flow of Lessee for the period
ended on such date, in accordance with generally accepted accounting
principles consistently applied (except as may be stated in the notes
thereto), and since December 31, 1994, there has been no material adverse
change in such condition or operations, except for such matters timely
disclosed in press releases issued by UAL Corporation or Lessee or in
public filings, effective as of the date hereof, with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended,
by UAL Corporation or Lessee;
(ix) the Owner Trustee will have received good and marketable
title to the Aircraft free and clear of all Liens, except the rights of
Lessee under the Lease and the Lease Supplement covering the Aircraft, the
Lien of the Trust Indenture, the beneficial interest of the Owner
Participant in the Aircraft, and the Liens permitted by clause (iii)
(solely for Taxes not yet due) of Section 6 of the Lease;
(x) none of the proceeds from the issuance of the Loan
Certificates or from the acquisition by the Owner Participant of its
beneficial interest in the Trust Estate will be used directly or indirectly
by Lessee to purchase or carry any "margin stock" as such term is defined
in Regulation G or U of the Board of Governors of the Federal Reserve
System;
20
[Participation Agreement (1995 777 B)]
(xi) neither Lessee nor anyone acting on behalf of Lessee has (A)
directly or indirectly offered any interest in the Trust Estate for sale
to, or solicited any offer to acquire any of the same from, anyone other
than the Owner Participant, and not more than ____________ (__) other
institutions believed capable of evaluating and bearing the risks of
investment in the transactions contemplated hereby, or (B) offered any
interest in the Trust Estate or any Pass Through Certificate or any Loan
Certificate in a manner which would violate the Securities Act of 1933, as
amended, the regulations thereunder, administrative and judicial
interpretation thereof or the securities laws, rules or regulations of any
state;
(xii) Lessee is not in default in the performance of any term or
condition of the Owner Trustee's Purchase Agreement, and is not in default
in the performance of any term or condition of the Purchase Agreement which
materially adversely impairs the transactions contemplated hereby;
(xiii) no governmental approval of any kind is required of the
Owner Participant, any Pass Through Trustee, the Owner Trustee or the
Indenture Trustee for their respective execution of or performance under
this Agreement, the Pass Through Trust Agreements or any agreement
contemplated hereby solely by reason of any fact or circumstance peculiar
to: (a) Lessee, (b) the nature of the Aircraft, or (c) Lessee's proposed
operations or use of the Aircraft;
(xiv) all sales or use tax then due and for which Lessee is
responsible pursuant to Section 7(b)(i) hereof shall have been paid, other
than such taxes which are being contested by Lessee in good faith and by
appropriate proceedings so long as such proceedings do not involve any
material risk of the sale, forfeiture or loss of the Aircraft or any
interest therein;
(xv) The Aircraft has been duly certified by the FAA as to type
and airworthiness and such certification remains in full force and effect;
(xvi) Owner Trustee, as lessor under the Lease, and the Indenture
Trustee, as assignee of the Owner Trustee's rights under the Lease pursuant
to the Trust Indenture, are entitled to the protection of Section 1110 of
the Bankruptcy Code in connection with the Owner Trustee's and the
Indenture Trustee's right to take possession of the Airframe and Engines in
the event of a case under Chapter 11 of the Bankruptcy Code in which Lessee
is a debtor; and
21
[Participation Agreement (1995 777 B)]
(xvii) neither Lessee nor any subsidiary of Lessee is an
"investment company" or a company "controlled by an investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(b) General Tax Indemnity. (i) Indemnity. Except as provided in
Section 7(b)(ii) hereof, whether or not any of the transactions contemplated
herein are consummated, Lessee shall pay when due and assume liability for, and
protect, save and shall indemnify and hold harmless each Indemnitee (except
that, for purposes of this Section 7(b)(i), an Indemnitee shall not include any
Certificate Holder) from and against (x) any and all Taxes howsoever imposed
against any Indemnitee, Lessee or all or any part of the Aircraft, the Airframe,
the Engines, the Parts or any part thereof or otherwise by any federal, state or
local government or other taxing authority in the United States or by any
foreign government or any political subdivision or taxing authority thereof or
by any territory or possession of the United States or by any international
authority upon or in connection with, relating to, or measured by (A) the
assembly, manufacture, construction, substitution, improvement, location,
conditioning, installation, financing, refinancing, purchase, acquisition,
acceptance, delivery, nondelivery, transport, ownership, registration,
reregistration, possession, repossession, control, operation, use, maintenance,
repair, replacement, insuring, sale, return, abandonment, storage, redelivery,
leasing, subleasing, modification, rebuilding of, transfer of title to, transfer
of registration of, rejection, importation, mortgaging, exportation or
disposition of, or the imposition of any Lien (or the incurrence of any
liability to refund or pay over any amount as the result of any Lien) on, the
Aircraft, the Airframe, the Engines, the Parts or any part thereof, (B) the
rentals, receipts or earnings from the Aircraft, the Airframe, the Engines, the
Parts or any part thereof, (C) any amount paid or payable pursuant to any
Operative Documents or any Pass Through Trust Agreement or any document related
thereto or the property or the income or other proceeds with respect to any of
the property held in the Trust Estate or the Trust Indenture Estate or the
property held by each Pass Through Trustee under the respective Pass Through
Trust Agreement, (D) the Aircraft, the Airframe, the Engines, the Parts or any
part thereof or any contract relating to the manufacture, construction,
acquisition or delivery thereof, (E) any or all of the Operative Documents, the
Pass Through Trust Agreements, or the issuance of the Loan Certificates or the
Pass Through Certificates (or the refinancing thereof) and any other documents
contemplated hereby or thereby and amendments and supplements hereto and thereto
which have been approved by Lessee or the execution, delivery, recording or
performance of any thereof or the issuance, acquisition, holding or subsequent
transfer thereof, (F) the payment of the Original
22
[Participation Agreement (1995 777 B)]
Amount of, or interest or Premium on, or other amounts payable with respect to,
the Loan Certificates or the payment of principal of, interest on or any other
amounts payable with respect to the Pass Through Certificates, (G) otherwise
with respect to or in connection with the transactions contemplated by the
Operative Documents, or (H) any change in the Owner Trustee or the situs of the
Trust Estate made pursuant to Sections 8(c) or 14 hereof; and (y) any reasonable
out-of-pocket costs and expenses fairly attributed to any of the foregoing
incurred by any Indemnitee.
(ii) Exclusions from General Tax Indemnity. The provisions of
Section 7(b)(i) shall not apply:
(1) in the case of an Indemnitee which is the Owner
Participant, the Owner Trustee, the Trust Estate, or a successor,
assign, or Affiliate of any thereof, to any Income Tax (as defined in
Section 7(b)(xii) hereof) imposed by (A) the United States Federal
government, (B) any state or local taxing jurisdiction or authority in
the United States to the extent such Income Taxes would not have been
imposed if (I) the use, location or operation of the Aircraft, or (II)
the activities of the Lessee, to or in such state or local
jurisdiction, had been the only connection between the Indemnitee and
such jurisdiction, or (C) any foreign government or any political
subdivision or taxing authority thereof or by any territory or
possession of the United States or by any international authority,
except to the extent such Income Taxes are attributable to (I) the
use, location or operation of the Aircraft, or (II) the activities of
the Lessee, to or in such jurisdiction;
(2) to any Tax imposed on an Indemnitee which is the Owner
Participant, the Owner Trustee, or the Trust Estate, or any successor,
assign or Affiliate of any thereof, as a result of a voluntary
transfer or disposition by such Indemnitee including, without
limitation, the revocation of the trust created by the Trust Agreement
or an involuntary transfer or disposition relating to bankruptcy or
similar proceedings of all or any portion of its respective equitable
or legal ownership interest in the Aircraft, the Airframe, the
Engines, the Parts or any part thereof, the Trust Estate or the
Operative Documents and each Pass Through Trust Agreement, unless such
transfer or disposition, whether or not voluntary or involuntary,
shall occur, (A) during a period when an Event of Default has occurred
and is continuing under
23
[Participation Agreement (1995 777 B)]
the Lease at the time of transfer or disposition and such transfer is
as a result of such Event of Default, or (B) in connection with the
termination of the Lease or action or direction of the Lessee pursuant
to Sections 7, 8, 9, 10 or 19 thereof;
(3) to any Tax imposed on any Indemnitee which is the
Indenture Trustee, the Trust Indenture Estate or a Pass Through
Trustee or any successor, assign or Affiliate of any thereof, as a
result of a voluntary or involuntary transfer or other disposition of
all or any portion of its respective equitable or legal interests in
the Trust Estate or the Trust Indenture Estate or the Operative
Documents and each Pass Through Trust Agreement unless, in each case,
such transfer or disposition shall occur (A) during a period when an
Event of Default has occurred and is continuing under the Lease at the
time of transfer or disposition and such transfer or disposition is a
result of such Event of Default, or (B) in connection with the
termination of the Lease or action or direction of the Lessee pursuant
to Sections 9, 10 or 19 thereof;
(4) to any Tax imposed on the Owner Participant, Trust
Estate or Owner Trustee which results from the willful misconduct or
gross negligence of (i) the Owner Participant, to the extent imposed
on the Owner Participant, Trust Estate or Owner Trustee, or (ii) to
the extent imposed on the Owner Trustee, the Owner Trustee;
(5) to any Tax imposed on an Indemnitee which is the
Indenture Trustee, the Trust Indenture Estate or a Pass Through
Trustee which results from the willful misconduct or gross negligence
of such Indemnitee;
(6) to any Tax based on or measured by any fees received by
the Owner Trustee, the Indenture Trustee or a Pass Through Trustee in
connection with any transaction contemplated by the Operative
Documents;
(7) so long as no Event of Default or event which, with the
passage of time or the giving of notice or both, would become an Event
of Default, shall be continuing, to any Tax imposed with respect to
(A) any period after the expiration of the Term and, unless purchased
by the Lessee, return of the Aircraft, (B) the earlier discharge in
full of Lessee's obligation to
24
[Participation Agreement (1995 777 B)]
pay the Stipulated Loss Value or the Termination Value and all other
amounts due under the Lease or (C) placement in storage or parking of
the Aircraft pursuant to Section 5(d) of the Lease; provided, however,
that this Section 7(b)(ii)(8) shall not apply to any Tax (x) relating
to events or conditions occurring or matters arising upon or prior to
such expiration, discharge, storage or parking, or (y) imposed on or
with respect to any payments of Tax indemnified hereunder which are
due after such expiration, discharge, storage or parking until after
such payments have been made;
(8) in the case of an Indemnitee which is the Trust
Indenture Estate or any successor, assign or Affiliate thereof, to any
Tax in the nature of an intangible or similar tax upon or with respect
to the value of the interest of the Trust Indenture Estate or the Pass
Through Certificates, as the case may be, in any of the Loan
Certificates imposed by any government or taxing authority;
(9) to any Tax which Lessee or an Indemnitee is contesting
in good faith under the provisions of Section 7(b)(iv) hereof until
the conclusion of such contest;
(10) to any Tax imposed on the Owner Trustee or an Owner
Participant resulting from, or which would not have occurred but for,
a Lessor Lien (including for this purpose Liens that would be Lessor
Liens but for the proviso to the definition of Lessor Liens);
(11) in the case of an Indemnitee which is the Owner
Participant or the Owner Trustee, to any Taxes to the extent of the
amount of such Taxes that are imposed by any jurisdiction on and with
respect to any activities of such Indemnitee in such jurisdiction
which activities are unrelated to the transactions contemplated by the
Operative Documents and each Pass Through Trust Agreement; and
(12) to any Tax which has been properly included in the
Lessor's Cost.
The provisions of this Section 7(b)(ii) shall not apply to any
Tax imposed in respect of the receipt or accrual of any indemnity payment
made by Lessee pursuant to this Section 7(b) or Section 7(c) hereof or
pursuant to the Tax Indemnity Agreement; provided, however, that this
clause
25
[Participation Agreement (1995 777 B)]
shall not result in any duplication of any amounts of any gross-up payable
under Section 7(b)(iii) or Section 7(c) hereof or the Tax Indemnity
Agreement.
Notwithstanding the exclusions set forth in this Section 7(b) or
any other provision of the Operative Documents or the Pass Through Trust
Agreements, the Lessee hereby agrees to indemnify and hold harmless on a
net after-tax basis the Trust Estate, the Owner Trustee and the Owner
Participant for any failure to withhold U.S. Federal Income Taxes upon
payments of principal, interest, Premium or discount on the Loan
Certificates or the Pass Through Certificates, including interest and
penalties, unless the Owner Participant has been timely advised by the
Lessee in writing that such withholding is required.
(iii) Calculation of General Tax Indemnity Payments. Any payment
which Lessee shall be required to make to or for the account of any
Indemnitee in connection with any Tax which is subject to indemnification
under this Section 7(b) shall be in an amount which, after reduction by the
amount of all Taxes required to be paid by such Indemnitee in respect of
the receipt or accrual of such amount and after consideration of any
current savings of such Indemnitee resulting by way of any deduction,
credit or other tax benefit attributable to such indemnified Tax that
actually reduces any taxes for which Lessee is not actually required to
indemnify such Indemnitee pursuant to Section 7(b) hereof or the Tax
Indemnity Agreement shall be equal to the payment otherwise required
hereunder.
If, by reason of any Tax payment made to or for the account of an
Indemnitee by Lessee pursuant to this Section 7(b), such Indemnitee
subsequently realizes a tax deduction, savings or credit (including any
foreign tax credit and any reduction in Taxes) not previously taken into
account in computing such payment, such Indemnitee shall promptly pay to
Lessee an amount equal to the sum of (I) the actual reduction in Taxes, if
any, realized by such Indemnitee which is attributable to such deduction,
savings or credit and (II) the actual reduction in Taxes realized by such
Indemnitee as a result of any payment made by such Indemnitee pursuant to
this sentence; provided, however, that in the case of an Indemnitee which
is the Owner Participant or the Owner Trustee, such Indemnitee shall not be
obligated to make any payment pursuant to this Section 7(b)(iii) to the
extent that the amount calculated pursuant to (I) above would exceed (x)
the amount of all prior payments (determined without regard to any amount
paid in respect of Taxes required to be paid by such Indemnitee in
26
[Participation Agreement (1995 777 B)]
respect of the receipt or accrual of such amounts received by such
Indemnitee) from Lessee pursuant to this Section 7(b), less (y) the portion
of all prior payments computed pursuant to (I) above by such Indemnitee to
Lessee hereunder.
For purposes of this Section 7(b)(iii), items of foreign Tax of
any Indemnitee shall be deemed to be utilized by such Indemnitee as credits
or deductions for any taxable year in accordance with the following
priorities:
First, all available foreign Taxes other than those
described below in Second; and
Second, all available foreign Taxes arising out of any
equipment leasing transaction to the extent that such Indemnitee was
indemnified or held harmless for such Taxes by a lessee on a pari
passu basis.
Any Taxes that are imposed on any Indemnitee as a result of the
disallowance or reduction of any tax benefit referred to in this subsection
as to which such Indemnitee has made in full the payment to Lessee required
hereby (or as to which such Indemnitee would have made its payment but for
Section 7(b)(vii) hereof) or which is otherwise taken into account in
calculating Lessee's indemnity obligation, in a taxable year subsequent to
the utilization by such Indemnitee (including the expiration of any tax
credit carryovers or carrybacks of such Indemnitee that would not otherwise
have expired) shall be treated as a Tax for which Lessee is obligated to
indemnify such Indemnitee pursuant to the provisions of this Section 7(b)
without regard to the provisions of Section 7(b)(ii), 7(b)(iv) or the third
paragraph of this Section 7(b)(iii).
(iv) General Tax Indemnity -- Contests. If a written claim shall
be made against any Indemnitee for any Tax for which Lessee is obligated
pursuant to this Section 7(b), such Indemnitee shall notify Lessee in
writing promptly after receipt thereof (as well as the name of independent
tax counsel for purposes of this Section 7(b)(iv)) and, in any event,
within 30 days of receipt of such notice and shall provide Lessee such
information regarding such claim as Lessee may reasonably request, but the
failure to give such notice or to provide such information when required
shall not diminish Lessee's obligation hereunder unless such failure
effectively precludes Lessee's ability to (A) require such Indemnitee to
contest the Tax or (B) contest the Tax itself (in a case
27
[Participation Agreement (1995 777 B)]
where Lessee cannot require the Indemnitee to contest such Tax).
If a written claim shall be made for any Tax, other than an
Income Tax, for which Lessee is obligated pursuant to this Section 7(b),
and under applicable law of the taxing jurisdiction Lessee is allowed to
directly contest such Tax and the Tax to be contested is not reflected in a
report or return with other Taxes of any Indemnitee and if the Indemnitee
determines in good faith that it will not suffer any adverse consequences
as a result, then the Lessee shall be permitted, at its expense and in its
own name, or, if consented to by the Indemnitee, in the name of such
Indemnitee, to contest the imposition of such Tax; provided, however, that
Lessee shall not be permitted or entitled to contest any Tax (A) if such
contest will result in the risk of an imposition of criminal penalties or a
material risk of a sale, forfeiture or loss of the Aircraft, the Airframe,
the Engines, the Parts or any part thereof or the creation of any Lien
other than Liens for Taxes of Lessee (x) either not yet due or being
contested in good faith by appropriate proceedings so long as such
proceedings do not involve the risk of an imposition of criminal penalties
or the material risk of any sale, forfeiture or loss of the Aircraft, and
(y) for the payment of which such reserves, if any, as required to be
provided under generally accepted accounting principles have been provided
and, to the extent permitted by law, Lessee shall be entitled to withhold
payment during pendency of such contest, (B) if an Event of Default shall
have occurred and be continuing, unless the Lessee shall have, at the
option of the Owner Participant, either (i) provided security for its
obligations hereunder reasonably satisfactory to the Owner Participant by
placing in escrow sufficient funds to cover any such contested Tax or (ii)
paid such Tax, (C) unless in Lessee's request to the Indemnitee to contest
such Tax, Lessee shall have agreed to pay such Indemnitee on demand all
costs and expenses that such Indemnitee actually incurs in connection with
contesting such claim (including, without limitation, all costs, expenses,
losses, reasonable legal and accounting fees, disbursements, penalties,
interest and additions to tax) or (D) unless in the case of an Indemnitee
which is the Owner Participant or the Owner Trustee, or a successor, assign
or Affiliate of the Owner Participant or the Owner Trustee, prior to the
commencement of a contest Lessee shall have delivered to such Indemnitee a
written acknowledgement of Lessee's obligation to indemnify fully such
Indemnitee to the extent that the contest is not successful; provided,
however, that Lessee will not be bound by its acknowledgement of liability
if and
28
[Participation Agreement (1995 777 B)]
to the extent that the contest results in a determination which clearly and
unambiguously demonstrates that Lessee is not otherwise liable under this
Section 7(b) with respect to such Tax.
If requested by Lessee in writing (A) within 30 days of Lessee's
receipt of notice from an Indemnitee under the first paragraph of this
Section 7(b)(iv) and (B) with respect to a Tax for which Lessee is
obligated to indemnify pursuant to this Section 7(b) which is not described
in the previous paragraph exclusive of the proviso thereto, such Indemnitee
shall in good faith at Lessee's expense contest the imposition of any such
Tax. After consulting with Lessee and Lessee's counsel concerning the
forum in which the adjustment is most likely to be favorably resolved, such
Indemnitee shall, in its sole discretion, select the forum for such contest
and determine whether any such contest shall be by (A) resisting payment of
such Tax, (B) paying such Tax under protest or (C) paying such Tax and
seeking a refund or other repayment thereof. In no event shall such
Indemnitee be requested or required to contest the imposition of any Tax
for which Lessee is liable under this Section 7(b) unless (I) in Lessee's
request to the Indemnitee to contest such Tax, Lessee shall have agreed to
pay such Indemnitee on demand all reasonable costs and expenses that such
Indemnitee actually incurs in connection with contesting such claim
(including, without limitation, all costs, expenses, losses, reasonable
legal and accounting fees, disbursements, penalties, interest and additions
to tax), (II) such action to be taken will not result in the risk of an
imposition of criminal penalties or the material risk of any sale,
forfeiture or loss of the Aircraft, or the creation of any Lien other than
Liens for Taxes of Lessee (x) either not yet due or being contested in good
faith by appropriate proceedings so long as such proceedings do not involve
the risk of an imposition of criminal penalties or the material risk of any
sale, forfeiture or loss of the Aircraft and (y) for the payment of which
such reserves, if any, as are required to be provided under generally
accepted accounting principles have been provided by Lessee, (III) if such
contest shall be conducted in a manner requiring the payment of the claim,
Lessee shall have paid the amount required directly to the appropriate
authority or made an advance of the amount thereof to such Indemnitee on an
interest-free basis and agreed to indemnify the Indemnitee against any
additional net after-tax cost to such Indemnitee with respect to such
advance or payment, (IV) with regard to an Income Tax on an Indemnitee
which is the Owner Participant or the Owner Trustee, or a successor, assign
or Affiliate of the Owner Participant or the Owner Trustee,
29
[Participation Agreement (1995 777 B)]
independent tax counsel selected by such Indemnitee and reasonably
satisfactory to the Lessee shall furnish an opinion, prepared at the
Lessee's expense, to the effect that there is a reasonable basis to contest
such claim and with respect to appeal, to the effect that it is more likely
than not such appeal will be successful, (V) in the case of an Indemnitee
which is the Owner Participant or the Owner Trustee, or a successor, assign
or Affiliate of the Owner Participant or the Owner Trustee, prior to the
commencement of a contest Lessee shall have delivered to such Indemnitee a
written acknowledgment of Lessee's obligation to indemnify fully such
Indemnitee to the extent that the contest is not successful; provided,
however, that Lessee will not be bound by its acknowledgment of liability
if and to the extent that the contest results in a determination which
clearly and unambiguously demonstrates that Lessee is not otherwise liable
under this Section 7(b) with respect to such Tax, (VI) if an Event of
Default shall have occurred and be continuing, the Lessee shall have, at
the option of the Owner Participant, either (i) provided security for its
obligations hereunder reasonably satisfactory to the Owner Participant by
placing in escrow sufficient funds to cover any such contested Tax or (ii)
paid such Tax, and (VII) the amount of the indemnity computed under Section
7(b) arising from a claim for Tax exceeds $10,000. In no event shall an
Indemnitee be required to appeal or to seek leave to appeal an adverse
determination with respect to Taxes contested by, or in the name of, the
Indemnitee to the United States Supreme Court.
If any Indemnitee shall obtain a refund of all or any part of any
Tax paid by Lessee such Indemnitee shall pay Lessee an amount equal to the
sum of (I) the amount of such refund, including interest received
attributable thereto, net of taxes required to be paid by such Indemnitee
as a result of any refund and/or interest received and (II) any tax benefit
realized by such Indemnitee as a result of any payment by such Indemnitee
made pursuant to this sentence; provided, however, that in the case of any
Indemnitee which is the Owner Participant or any successor, assign or
Affiliate of the Owner Participant such amount attributable to (I) above
shall not be in excess of the amount of such Tax payment (determined
without regard to any amount paid in respect of Taxes required to be paid
by such Indemnitee in respect of the receipt or accrual of such payment or
advance made by Lessee to such Indemnitee) plus interest received, if any,
from the relevant taxing authority with respect to such Tax payment (net of
Taxes required to be paid by such Indemnitee in connection with the receipt
of such interest), it being intended that such Indemnitee shall realize a
net
30
[Participation Agreement (1995 777 B)]
benefit pursuant to this Section 7(b) only if Lessee shall first have been
reimbursed for any payments by it to such Indemnitee pursuant to this
Section 7(b) arising from the same Loss. If any Indemnitee shall have paid
Lessee any refund of all or part of any Tax paid by Lessee and it is
subsequently determined that such Indemnitee was not entitled to the
refund, such determination shall be treated as the imposition of a Tax for
which Lessee is obligated to indemnify such Indemnitee pursuant to the
provisions of this Section 7(b) without regard to Section 7(b)(ii) or
Section 7(b)(iv).
Nothing contained in this Section 7(b)(iv) shall require any
Indemnitee to contest, or permit Lessee to contest, a claim with respect to
the imposition of any Tax if such Indemnitee shall waive its right to
indemnification under this Section 7 with respect to such claim or a claim
with respect to which a previous contest pursuant to the provision of this
Section 7(b)(iv) shall have been determined adversely to the taxpayer.
(v) General Tax Indemnity -- Reports. Lessee will provide such
information (including information on the routes and operations of the
Aircraft) as may be reasonably requested by an Indemnitee or required to
enable an Indemnitee to fulfill its tax filing or audit requirements with
respect to the transactions contemplated by the Operative Documents. In
the event any return, statement or report is required to be made or filed
with respect to any Tax imposed on or indemnified against by Lessee under
this Section 7(b) (other than with respect to Income Taxes), Lessee shall
notify the Indemnitee of such requirement and (i) to the extent permitted
by law, and not otherwise requested by the Indemnitee, or required by law,
Lessee shall make and file in its own name (and pay the tax shown due on)
such return, statement or report in such manner as will show the ownership
of the Aircraft in the Owner Trustee and furnish the Indemnitee with a copy
of such return, statement or report; provided, however, that Lessee shall
have no obligation under this clause (i) to the extent such Indemnitee
after receipt of Lessee's written request shall have failed to furnish
Lessee with such information as is peculiarly within such Indemnitee's
control and is necessary to file such returns, statements or reports, and
(ii) in the case of a return, statement or report required (or requested by
the Indemnitee) to be in the name of or filed by such Indemnitee, Lessee
shall prepare and furnish such return, statement or report for filing by
such Indemnitee in such manner as shall be reasonably satisfactory to such
Indemnitee and send the same to such Indemnitee for filing
31
[Participation Agreement (1995 777 B)]
no later than 10 Business Days prior to the due date; provided, however,
that Lessee shall have no obligation under this clause (ii) to the extent
such Indemnitee after receipt of Lessee's written request shall have failed
to furnish Lessee with such information as is peculiarly within such
Indemnitee's control and is necessary to prepare such return, statement or
report. Lessee shall hold each Indemnitee harmless from and against any
liabilities, including, but not limited to penalties, additions to tax,
fines and interest, arising out of any insufficiency or inaccuracy in any
such return, statement, report or information if such insufficiency or
inaccuracy is attributable to Lessee.
(vi) General Tax Indemnity -- Payment. Except as provided in
Section 7(b)(iv) or (v) hereof, Lessee shall pay any Tax directly to the
appropriate taxing authority if legally permissible and upon demand of an
Indemnitee shall pay such Tax and any other amounts due hereunder to such
Indemnitee within 20 Business Days of such demand, but in no event shall
any such payments be made more than 10 Business Days prior to the date the
Tax to which any such payment hereunder relates is due (unless Lessee has
not received such demand at least 15 Business Days prior to such date in
which case within five Business Days after receipt of such demand), in
immediately available funds. Any such demand for payment from an
Indemnitee shall specify in reasonable detail, the payment and the facts
upon which the right to payment is based. Each Indemnitee shall promptly
forward to Lessee any notice, bill or advice received by it concerning any
Tax indemnified against hereunder. As soon as practicable after each
payment by Lessee of any Tax indemnified against hereunder, Lessee shall
furnish the appropriate Indemnitee the original or a certified copy of a
receipt for Lessee's payment of such Tax or such other evidence of payment
of such Tax as is acceptable to such Indemnitee. Lessee shall also furnish
promptly upon request such data as any Indemnitee may reasonably require to
enable such Indemnitee to comply with the requirements of any taxing
jurisdiction.
(vii) Application of Payments During Existence of Default or Event
of Default. Any amount payable to Lessee pursuant to the terms of this
Section 7(b) shall not be paid to or retained by Lessee if at the time of
such payment or retention a Default or an Event of Default shall have
occurred and be continuing under the Lease. At such time as there shall not
be continuing any Default or Event of Default, such amount shall be paid to
the Lessee to the extent not previously applied against Lessee's
obligations
32
[Participation Agreement (1995 777 B)]
hereunder as and when due after the Owner Trustee shall have declared the
Lease in default pursuant to Section 15 thereof.
(viii) Reimbursements by Indemnitees Generally. If, for any
reason, Lessee is required to make any payment with respect to any Taxes
imposed on any Indemnitee in respect of the transactions contemplated by
the Operative Documents or on the Aircraft, the Airframe, the Engines, the
Parts or any part thereof, which Taxes are not the responsibility of Lessee
under this Section 7(b), then such Indemnitee shall pay to Lessee an amount
which equals the amount paid by Lessee with respect to such Taxes plus
interest thereon, computed from the date of payment by Lessee, at the Base
Rate.
(ix) Forms, etc. Each Indemnitee agrees to furnish to Lessee from
time to time, at the Lessee's request and expense, such duly executed and
properly completed forms as may be necessary or appropriate in order to
claim any reduction of or exemption from any withholding tax imposed by any
taxing authority in respect of any payments otherwise required to be made
by Lessee pursuant to the Operative Documents and each Pass Through Trust
Agreement, which reduction or exemption may be available to such
Indemnitee. In addition, any Indemnitee shall, at Lessee's expense,
execute and deliver any forms or documents which Lessee reasonably requests
and which are reasonably related to any indemnified Taxes. Notwithstanding
the foregoing, an Indemnitee shall not be required to (A) make available
any Income Tax returns; or to (B) execute and deliver any forms or
documents which would in the good faith determination of such Indemnitee
disadvantage such Indemnitee in the context of its overall filing position
or with regard to other Taxes not indemnified under this Agreement or the
Tax Indemnity Agreement.
(x) Non-Parties. If an Indemnitee is not a party to this
Agreement, Lessee may require the Indemnitee to agree to the terms of this
Section 7(b) prior to making any payment to such Indemnitee under this
Section 7(b).
(xi) Owner Participant. For the purposes of this Section 7(b),
the term "Owner Participant" shall mean and include [__________________]
(and its permitted successors and assigns) and where appropriate the
affiliated group of corporations (and each member thereof) making a
consolidated or combined return of which [_____________] (and its permitted
successors and assigns) is a member.
33
[Participation Agreement (1995 777 B)]
(xii) Income Tax. For purposes of this Section 7, the term Income
Tax means any Tax based on or measured by or with respect to net income
(including, without limitation, capital gains taxes, minimum taxes, income
taxes collected by withholding, and taxes on tax preference items) or net
receipts and taxes imposed on gross income or gross receipts which are
expressly in lieu of a net income tax (provided, however, that sales, use,
value added, rental, license, ad valorem or property Taxes shall not
constitute an Income Tax) and Taxes which are capital, doing business,
franchise, excess profits, net worth taxes and interest, additions to tax,
penalties, or other charges in respect thereof.
(c) General Indemnity. Lessee hereby agrees to indemnify, on an
after-tax basis, each Indemnitee against, and agrees to protect, save and keep
harmless each of them from (whether or not the transactions contemplated herein
or in any of the other Operative Documents or the Pass Through Trust Agreements
are consummated), any and all Expenses imposed on, incurred by or asserted
against any Indemnitee, in any way relating to or arising out of (A) the
Operative Documents and each Pass Through Trust Agreement (and any amendments
thereto), the negotiation and the consummation of the transactions contemplated
thereby or any sublease under the Lease Agreement or the enforcement of any of
the terms of any thereof; or (B) the manufacture, design, purchase, resale,
acceptance or rejection of the Airframe or any Engine or Parts; or (C) the
Aircraft (or any portion thereof) or any Engine whether or not installed on the
Airframe or any airframe on which an Engine is installed whether or not arising
out of the finance, refinance, ownership, delivery, nondelivery, storage, lease,
sublease, possession, use, non-use, operation, maintenance, modification,
alteration, condition, sale, replacement, substitution, return or other
disposition, registration, reregistration or airworthiness of the Aircraft (or
any portion thereof) including, without limitation, latent or other defects,
whether or not discoverable, strict tort liability and any damage to property or
the environment, death or injury to any person and any claim for patent,
trademark or copyright infringement; or (D) the offer, sale, holding, transfer
or delivery of the Loan Certificates or the Pass Through Certificates, whether
before, on or after the Delivery Date (the indemnity in this clause (D) to
extend also to any person who controls an Indemnitee, its successors, assigns,
employees, directors, officers, servants and agents within the meaning of
Section 15 of the Securities Act of 1933, as amended); or (E) the offer,
holding, transfer or sale of any interest in the Trust Estate or the Trust
Agreement or any similar interest (a) on or prior to the Delivery Date, or (b)
subsequent to the Delivery Date during the continuation of an Event of Default
under the Lease or in connection with the exercise by the Lessee of its
34
[Participation Agreement (1995 777 B)]
purchase options under the Lease or in connection with a refinancing pursuant to
Section 17 hereof or in connection with the termination of the Lease or action
or direction of Lessee pursuant to Sections 7, 8, 9, 10, or 19 thereof;
provided, that the foregoing indemnity shall not extend to any Expense to the
extent resulting from or arising out of one or more of the following: (1) any
representation or warranty by such Indemnitee in the Operative Documents or in
any Pass Through Trust Agreement being incorrect, or (2) the failure by such
Indemnitee to perform or observe any agreement, covenant or condition in any of
the Operative Documents or in any Pass Through Trust Agreement including,
without limitation, the creation or existence of a Lessor Lien (including for
this purpose Liens that would be Lessor Liens but for the proviso to the
definition of Lessor Liens), or (3) the willful misconduct or the gross
negligence of such Indemnitee (other than gross negligence imputed to such
Indemnitee solely by reason of its interest in the Aircraft), or (4) (A) in the
case of such Indemnitee a disposition (voluntary or involuntary) of all or any
part of its interest in the Airframe or any Engine, (B) in the case of a
Certificate Holder a disposition (voluntary or involuntary) by such Certificate
Holder of all or any part of its interest in any Loan Certificate or (C) in the
case of any Indemnitee a disposition by such Indemnitee of all or any part of
such Indemnitee's interest in the Operative Documents or the Pass Through Trust
Agreements other than in each of (A), (B) and (C) during the continuance of an
Event of Default under the Lease or pursuant to the exercise by the Lessee of
its purchase options under the Lease or in connection with a refinancing
pursuant to Section 17 hereof or in connection with the termination of the Lease
or action or direction of Lessee pursuant to Sections 7, 8, 9, 10 or 19 thereof,
or (5) other than to the extent provided in the succeeding paragraph, any Tax
(as defined in Section 7(b) hereof) whether or not Lessee is required to
indemnify for such Tax pursuant to Section 7(b) hereof (it being understood that
Section 7(b) hereof and the Tax Indemnity Agreement and provisions requiring
payments to be made on an after-tax basis or expressly providing for additional
indemnification by Lessee exclusively provide for Lessee's liability with
respect to Taxes), or (6) the offer or sale by the Owner Participant after the
Delivery Date of any interest in the Trust Estate or the Trust Agreement or any
similar interest, unless such offer or sale shall occur (A) during a period when
an Event of Default has occurred and is continuing under the Lease at the time
of such offer or sale or (B) in connection with the exercise by Lessee of its
purchase options under the Lease or, (7) in the case of the Owner Participant, a
failure on the part of the Owner Trustee to distribute in accordance with the
Trust Agreement any amounts received and distributable by it thereunder or, in
the case of a Certificate Holder, a failure on the part of the Indenture Trustee
to distribute in accordance with the Trust
35
[Participation Agreement (1995 777 B)]
Indenture any amounts received and distributable by it thereunder to such
Certificate Holder or a failure on the part of any Pass Through Trustee to
distribute in accordance with the applicable Pass Through Trust Agreement any
amounts received and distributable by such Pass Through Trustee under such Pass
Through Trust Agreement, or (8) other than during the continuation of a Default
or an Event of Default under the Lease the authorization or giving or
withholding of any future amendments, supplements, waivers or consents with
respect to any of the Operative Documents or any Pass Through Trust Agreement
unless such amendments, supplements, waivers or consents (a) are requested by
Lessee or (b) are required or permitted pursuant to the terms of the Operative
Documents (unless the same results from the actions of an Indemnitee) (provided
if Lessee is not responsible for the Expense associated with such amendment,
supplement, waiver or consent, the party requesting the execution of the same
shall be responsible for such expense), or (9) other than to the extent provided
in the succeeding paragraph any loss of tax benefits or increase in tax
liability under any tax law whether or not Lessee is required to indemnify
therefor pursuant to this Agreement or the Tax Indemnity Agreement (it being
understood that Section 7(b) hereof and the Tax Indemnity Agreement and
provisions requiring payments to be made on an after-tax basis or expressly
providing for additional indemnification by Lessee exclusively provide for
Lessee's liability with respect to Taxes), or (10) except to the extent fairly
attributable to acts or events occurring on or prior thereto, acts or events
which occur after the earlier of: (I) the return of possession of the Airframe
or any Engine or any Part to the Owner Trustee or its designee pursuant to the
terms of the Lease (other than pursuant to Section 15 thereof, in which case
Lessee's liability under this Section 7(c) shall survive for so long as Owner
Trustee shall be entitled to exercise remedies under such Section 15), (II) the
termination of the Term in accordance with Sections 5, 9 or 19 of the Lease,
(III) the last day of the Term if Owner Trustee shall have furnished the notice
referred to in Section 10(d) of the Lease and Lessee shall have failed to return
possession to Owner Trustee on such day or (IV) the payment by Lessee of all
amounts required to be paid under the Lease following an Event of Loss (but
excluding from the terms of this subsection (IV) an Event of Loss followed by
the replacement of the Aircraft).
Notwithstanding clause 7(c)(5) or (9) above, Lessee further agrees
that any payment or indemnity pursuant to this Section 7(c) in respect of any
"Expenses" shall be in an amount which, after deduction of all Taxes required to
be paid by such recipient with respect to such payment or indemnity under the
laws of any federal, state or local government or taxing authority in the United
States, or under the laws of any taxing
36
[Participation Agreement (1995 777 B)]
authority or governmental subdivision of a foreign country, or any territory or
possession of the United States or any international authority, shall be equal
to the excess, if any, of (A) the amount of such Expense over (B) the current
net reduction in Taxes actually required to be paid by such recipient resulting
from the accrual or payment of such Expense.
Nothing in this Section 7(c) shall be construed as a guaranty by
Lessee of payments due pursuant to the Loan Certificates or the Pass Through
Certificates or of the residual value of the Aircraft.
If a claim is made against an Indemnitee involving one or more
Expenses and such Indemnitee has notice thereof, such Indemnitee shall promptly
after receiving such notice give notice of such claim to Lessee; provided that
the failure to provide such notice shall not release Lessee from any of its
obligations to indemnify hereunder or from any other obligation that the Lessee
may have to such Indemnitee at law or in equity, and no payment by Lessee to an
Indemnitee pursuant to this Section 7(c) shall be deemed to constitute a waiver
or release of any right or remedy which the Lessee may have against such
Indemnitee for any actual damages as a result of the failure by such Indemnitee
to give Lessee such notice. So long as Lessee has acknowledged its obligation
to indemnify pursuant to this Section 7(c), Lessee shall be entitled, at its
sole cost and expense, acting through counsel reasonably acceptable to the
respective Indemnitee, (A) in any judicial or administrative proceeding that
involves solely a claim for one or more Expenses, to assume responsibility for
and control thereof, (B) in any judicial or administrative proceeding involving
a claim for one or more Expenses and other claims related or unrelated to the
transactions contemplated by the Operative Documents, to assume responsibility
for and control of such claim for Expenses to the extent that the same may be
and is severed from such other claims (and such Indemnitee shall use reasonable
efforts to obtain such severance), and (C) in any other case, to be consulted by
such Indemnitee with respect to judicial proceedings subject to the control of
such Indemnitee and to be allowed, at Lessee's sole expense, to participate
therein. Notwithstanding any of the foregoing to the contrary, Lessee shall not
be entitled to assume responsibility for and control of any such judicial or
administrative proceedings if (i) any Default under Section 14(a), (b), (f) or
(g) of the Lease or an Event of Default under the Lease shall have occurred and
be continuing, (ii) if such proceedings will involve a material risk of the
sale, forfeiture or loss of, or the creation of any Lien (other than a Permitted
Lien) on, the Aircraft, the Trust Indenture Estate or the Trust Estate or any
part thereof unless Lessee shall have posted a bond or other security reasonably
satisfactory to the relevant Indemnitees in respect to such risk
37
[Participation Agreement (1995 777 B)]
or (iii) if such proceedings could, in the good faith opinion of the Indemnitee
entail any risk of criminal liability or any material risk of civil liability
(unless, in the case of such civil liability, Lessee has agreed to indemnify
against such civil liability in a manner reasonably acceptable to such
Indemnitee). The Indemnitee may participate at its own expense and with its own
counsel in any judicial proceeding controlled by Lessee pursuant to the
preceding provisions; provided, however, that if in the written opinion of
counsel to such Indemnitee (which opinion and counsel shall be reasonably
acceptable to Lessee) an actual or potential material conflict of interest
exists where it is advisable for such Indemnitee to be represented by separate
counsel, the reasonable fees and expenses of such separate counsel shall be
borne by Lessee.
The Indemnitee shall supply Lessee, at Lessee's expense, with such
information reasonably requested by Lessee as is necessary or advisable for
Lessee to control or participate in any proceeding to the extent permitted by
this Section 7(c). Such Indemnitee shall not enter into a settlement or other
compromise with respect to any Expense as to which Lessee has acknowledged its
obligation to indemnify (and if Lessee has not so acknowledged only upon 5
Business Days' prior written notice to Lessee) without the prior written consent
of Lessee (except during the continuance of any Default under Section 14(a),
(b), (f) or (g) of the Lease or an Event of Default under the Lease when such
consent shall not be required if such Indemnitee gives 30 days' prior written
notice to Lessee describing the proposed settlement or compromise), which
consent shall not be unreasonably withheld or delayed, unless such Indemnitee
waives its right to be indemnified with respect to such Expense under this
Section 7(c).
The Lessee shall supply the Indemnitee with such information
reasonably requested by the Indemnitee as is necessary or advisable for the
Indemnitee to control or participate in any proceeding to the extent permitted
by this Section 7(c).
Upon payment of any Expense pursuant to this Section 7(c), Lessee,
without any further action, shall be subrogated to any claims the Indemnitee may
have relating thereto other than claims under Section 9.06 of the Trust
Indenture or Section 5.03 or 7.01 of the Trust Agreement. The Indemnitee agrees
to give such further assurances or agreements and to cooperate with Lessee to
permit Lessee to pursue such claims, if any, to the extent reasonably requested
by Lessee.
In the event that Lessee shall have paid an amount to an Indemnitee
pursuant to this Section 7(c), and such Indemnitee
38
[Participation Agreement (1995 777 B)]
subsequently shall be reimbursed in respect of such indemnified amount from any
other person, such Indemnitee shall, unless a Default under Section 14(a), (b),
(d) (solely with respect to Lessee's obligations under Section 7(a) or (b)(viii)
of the Lease or Section 8 of the Lease), (f) or (g) of the Lease or an Event of
Default under the Lease shall have occurred and be continuing, promptly pay
Lessee but not before Lessee shall have made all payments then due to such
Indemnitee pursuant to this Section 7(c) and any other payments then due under
any of the Operative Documents, an amount equal to the sum of (I) the amount of
such reimbursement, including interest received attributable thereto, net of
taxes required to be paid by such Indemnitee as a result of any reimbursement
including interest received attributable thereto and (II) any tax benefit
actually realized by such Indemnitee as a result of any payment by such
Indemnitee made pursuant to this sentence; provided, however, that in the case
of any Indemnitee which is the Owner Participant or any successor, assign or
Affiliate of the Owner Participant such amount attributable to (I) above shall
not be in excess of the amount of such Expense payment net of any amount paid in
respect of Taxes required to be paid by such Indemnitee in respect of the
receipt or accrual of such payment or advance made by Lessee to such Indemnitee
plus interest received, if any, from the relevant taxing authority with respect
to any such Expense payment, it being intended that such Indemnitee shall
realize a net benefit pursuant to this Section 7(c) only if Lessee shall first
have been reimbursed for any payments by it to such Indemnitee pursuant to this
Section 7(c).
Lessee agrees to pay the reasonable and continuing fees and expenses
of the Indenture Trustee (including, but not limited to, the reasonable fees and
expenses of its counsel and any agent appointed in accordance with Section
9.02(c) of the Trust Indenture) and each Pass Through Trustee (including, but
not limited to, the reasonable fees and expenses of its counsel) and, as
provided in Section 6.07 of the Trust Agreement, the Owner Trustee (including,
but not limited to, the reasonable fees and expenses of its counsel), in each
case without cost, on a net after-tax basis, to the Owner Participant, for
acting as such, other than such fees and expenses which constitute Transaction
Expenses.
Lessee's obligations under the indemnities provided for in this
Agreement shall be those of a primary obligor, whether or not the Person
indemnified shall also be indemnified with respect to the same matter under the
terms of any other document or instrument, and the Person seeking
indemnification from Lessee pursuant to any provision of this Agreement may
proceed directly against Lessee without first seeking to enforce any other right
of indemnification.
39
[Participation Agreement (1995 777 B)]
To the extent permitted by applicable law, interest at the Past Due
Rate shall be paid, on demand, on any amount or indemnity not paid when due
pursuant to this Section 7 until the same shall be paid. Such interest shall be
paid in the same manner as the unpaid amount in respect of which such interest
is due.
Any amount which is payable to Lessee by any Person pursuant to this
Section 7 shall not be paid to Lessee if a Default under Section 14(a), (b), (d)
(solely with respect to Lessee's obligations under Section 7(a) or (b)(viii) of
the Lease or Section 8 of the Lease), (f) or (g) of the Lease or an Event of
Default under the Lease shall have occurred and be continuing or if any payment
is due and owing by Lessee under the Lease or to such Person under any other
Operative Document. Any such amount shall be held by such Person and, if such
Default or an Event of Default under the Lease shall have occurred and be
continuing, shall be applied against Lessee's obligations hereunder to such
Person as and when due (and, to the extent that Lessee has no obligations
hereunder to such Person, such amount shall be paid to Lessee). At such time as
there shall not be continuing any such Default or an Event of Default or there
shall not be due and owing any such payment, such amount shall be paid to Lessee
to the extent not previously applied in accordance with the immediately
preceding sentence.
(d) Withholding. If Lessee advises the Owner Trustee, the Indenture
Trustee and the relevant Certificate Holder in writing that interest on its Loan
Certificates is subject to United States withholding tax, then the Owner Trustee
shall instruct the Indenture Trustee to, and Indenture Trustee shall, withhold
as provided in Section 9.11 of the Trust Indenture.
SECTION 8. Representations, Warranties and Covenants. (a) The Owner
Participant represents that it is acquiring its interest in the Trust Estate for
investment purposes only and not with a present intent as to any resale or
distribution thereof (subject nonetheless to any requirement of law that the
disposition of its properties shall at all times be and remain within its
control) and that neither it nor anyone acting on its behalf (other than for
purposes of this paragraph, Lessee and the Underwriter) has directly or
indirectly offered any interest in the Trust Estate or any Loan Certificates or
Pass Through Certificates or any similar securities for sale to, or solicited
any offer to acquire any of the same from, anyone in a manner which would result
in a violation of the Securities Act of 1933, as amended or the securities laws,
rules and regulations of any state.
40
[Participation Agreement (1995 777 B)]
(b) Each of the Owner Participant and State Street Bank and Trust
Company, in its individual capacity, represents and warrants to the other
parties to this Agreement that it is, and on the Delivery Date will be, a
Citizen of the United States. The Owner Participant agrees, solely for the
benefit of Lessee and the Certificate Holders, that if during such time as the
Aircraft is registered in the United States (or if Lessee desires to register
the Aircraft in the United States) (i) it shall not be a Citizen of the United
States and (ii) the Aircraft shall be, or would therefore become, ineligible for
registration in the name of the Owner Trustee under the Federal Aviation Act and
regulations then applicable thereunder, then the Owner Participant shall (at its
own expense and without any reimbursement or indemnification from Lessee) as
soon as is reasonably practicable but in any event within 30 days after
obtaining Actual Knowledge of such ineligibility and of such loss of citizenship
(A) effect voting trust or other similar arrangements or take any other action
as may be necessary to prevent any deregistration or to maintain the United
States registration of the Aircraft, or (B) transfer its beneficial interest in
the Trust Estate in accordance with Section 8(l) hereof. It is understood that:
(1) the Owner Participant shall be liable to any of the other parties hereto for
any damages suffered by any such other party as the result of the representation
and warranty of the Owner Participant in the first sentence of this Section 8(b)
proving to be untrue as of the Delivery Date; and (2) the Owner Participant
shall be liable to Lessee, any Sublessee and any Certificate Holder for any
damages which may be incurred by Lessee, any Sublessee or such Certificate
Holder as a result of the Owner Participant's failure to immediately comply with
its obligations pursuant to the second sentence of this Section 8(b) unless such
failure is a result of such party's breach of its obligations to cooperate set
forth in the following sentence (including any damages suffered by any such
party (other than damages suffered by Lessee which Lessee could have mitigated
by taking reasonable steps (Lessee having no obligation to restrict the use of
the Aircraft to so mitigate)) at any time after the fifth Business Day following
the Owner Participant's having obtained Actual Knowledge of such ineligibility
or loss of citizenship). Each party hereto agrees, upon the request and at the
sole expense of the Owner Participant, to reasonably cooperate with the Owner
Participant in complying with its obligations under the provisions of the second
sentence of this Section 8(b) and such request shall not be subject to the
indemnity contained in Section 7(c) hereof. State Street Bank and Trust Company
in its individual capacity, agrees that if at any time a responsible officer of
State Street Bank and Trust Company, shall obtain Actual Knowledge that State
Street Bank and Trust Company has ceased to be a Citizen of the United States,
it will promptly resign as Owner Trustee (if and
41
[Participation Agreement (1995 777 B)]
so long as such citizenship is necessary under the Federal Aviation Act as in
effect at such time or, if it is not necessary, if and so long as the Owner
Trustee's citizenship would have any adverse effect on a Certificate Holder,
Lessee or the Owner Participant), effective upon the appointment of a successor
Owner Trustee in accordance with Section 9.01 of the Trust Agreement. If the
Owner Participant or State Street Bank and Trust Company, in its individual
capacity, does not comply with the requirements of this Section 8(b), the Owner
Trustee, the Indenture Trustee, the Owner Participant and the Certificate
Holders hereby agree that a Default or an Event of Default shall not have
occurred and be continuing under the Lease due to noncompliance by Lessee with
the registration requirements in the Lease.
(c) State Street Bank and Trust Company, in its individual capacity
represents and warrants that both the principal place of business of the Owner
Trustee and the place where the Owner Trustee's records concerning the Aircraft
and all of its interest in, to and under the Operative Documents to which it is
a party are or will be kept is Boston, Massachusetts (other than such as may be
maintained or held by the Indenture Trustee pursuant to the Trust Indenture) and
has its chief executive office (as such term is used in Article 9 of the Uniform
Commercial Code) in the Commonwealth of Massachusetts. State Street Bank and
Trust Company, in its individual capacity agrees that it will not change the
location of such office to a location outside of Boston, Massachusetts, without
prior written notice to Lessee, Indenture Trustee and the Owner Participant.
(d) [Intentionally omitted.]
(e) The Owner Participant agrees that, if, at any time after the
Restricted Period and so long as no Default under Section 14(a), (b), (d)
(solely with respect to Lessee's obligations under Section 7(a) or (b)(vii) of
the Lease or Section 8 of the Lease), (f) or (g) of the Lease or Event of
Default under the Lease shall have occurred or be continuing, Lessee has
requested its consent to the registration of the Aircraft, in the name of the
Owner Trustee (or, if appropriate, in the name of Lessee or a Sublessee as a
"lessee" or a "sublessee"), at Lessee's expense, (i) upon 30 days' prior written
notice in a country listed on Exhibit G to the Lease, with which the United
States maintains diplomatic relations at the time of such request, provided that
with respect to any country listed on Exhibit G to the Lease as a "Restricted
Country" such country must at the time of such registration impose and enforce
aircraft maintenance standards not materially less stringent than those of the
FAA, or the central civil aviation authority of any of Canada, France, Germany,
Japan or
42
[Participation Agreement (1995 777 B)]
the United Kingdom, or (ii) upon 30 days' prior written notice in any other
country with which the United States maintains diplomatic relations at the time
of such request and the Owner Participant has not determined, acting reasonably,
that such other country would not provide substantially equivalent protection
for the rights of owner participants, lessors or lenders in similar transactions
as provided under United States laws, the Owner Participant will not, in the
case of either (i) or (ii), unreasonably withhold its consent to such change of
registration. In addition, such change of registration to a country listed on
Exhibit G shall be permitted only if such change will not result in the
imposition of, or increase the amount of, any Tax for which Lessee is not
required to indemnify or is not then willing to enter into a binding agreement
to indemnify, in a manner satisfactory in form and substance to the indemnified
party, each party referred to in clause (E) of paragraph (i) below. The Owner
Participant further agrees that the inability of Lessee to deliver to the Owner
Participant and, so long as the Lien of the Trust Indenture has not been
released, the Indenture Trustee, an opinion (reasonably satisfactory in form and
substance to the Owner Participant) of counsel reasonably acceptable to the
Owner Participant in such country listed on Exhibit G to the Lease to the effect
that the courts of such country would give effect to the Owner Trustee's title
to the Aircraft, to the registry of the Aircraft in the name of the Owner
Trustee, and to the priority of the lien under the Trust Indenture substantially
to the same extent as provided under United States law, shall constitute the
sole reasonable grounds to withhold such consent in regard to a country listed
in Exhibit G, and if said opinion is delivered, the Owner Participant will
instruct the Owner Trustee, and the Indenture Trustee, subject only to
compliance with the provisions of Section 7.02 of the Indenture, shall
cooperate, to make such change of registration.
It is further agreed, however, that prior to any such change in the
country of registry of the Aircraft to a country not listed on Exhibit G to the
Lease, the Owner Participant, the Owner Trustee in its individual capacity and,
so long as the Lien of the Trust Indenture has not been released, the Indenture
Trustee shall have received:
(i) assurances reasonably satisfactory to the Owner Participant
and the Owner Trustee in its individual capacity (A) to the effect that the
insurance or self-insurance provisions of the Lease have been compiled with
after giving effect to such change of registry, (B) of the payment by
Lessee on an after-tax basis of any expenses of the Owner Participant, the
Owner Trustee and the Indenture Trustee in connection with such change of
registry, (C) to the effect that the original indemnities (and any
additional
43
[Participation Agreement (1995 777 B)]
indemnities for which Lessee is then willing to enter into a binding
agreement to indemnify) in favor of the Owner Participant, the Owner
Trustee (in its individual capacity and as trustee under the Trust
Agreement) and the Indenture Trustee, under this Agreement, the Trust
Indenture and the Tax Indemnity Agreement, afford each such party
substantially the same protection as provided prior to such change of
registry, (D) as to the continuation of the Trust Indenture as a first
priority lien on the Aircraft, (E) that such change will not result in the
imposition of, or increase in the amount of, any Tax for which Lessee is
not required to indemnify, or is not then willing to enter into a binding
agreement to indemnify in a manner satisfactory in form and substance to
the indemnified party, the Owner Participant, the Indenture Trustee, the
Owner Trustee (in its individual capacity and as trustee under the Trust
Agreement), or any successor, assign or Affiliate of any thereof, or the
Trust Estate pursuant to Section 7(b) hereof; and (F) that such new country
of registry imposes and enforces aircraft maintenance standards not
materially less stringent than those of the FAA or the central civil
aviation authority of Canada, France, Germany, Japan or the United Kingdom;
and
(ii) a favorable opinion of counsel (reasonably satisfactory to
the Owner Trustee, in its individual capacity, and to the Owner
Participant) in the new jurisdiction of registry to the effect (A) that the
terms (including, without limitation, the governing-law, service-of-process
and jurisdictional-submission provisions thereof) of the Lease and the
Trust Indenture are legal, valid, binding and enforceable in such
jurisdiction, (B) that it is not necessary for the Owner Participant, the
Owner Trustee or the Indenture Trustee to register or qualify to do
business in such jurisdiction, (C) that there is no tort liability of the
owner of an aircraft not in possession thereof under the laws of such
jurisdiction other than tort liability which might have been imposed on
such owner under the laws of the United States or any state thereof (it
being understood that, in the event such latter opinion cannot be given in
a form satisfactory to the Owner Participant, such opinion shall be waived
if insurance reasonably satisfactory to Owner Participant and the Owner
Trustee, in its individual capacity, is provided, at Lessee's expense, to
cover such risk), (D) (unless Lessee shall have agreed to provide insurance
covering the risk of requisition of use or title of the Aircraft by the
government of such jurisdiction so long as the Aircraft is registered under
the laws of such jurisdiction) that the laws of such jurisdiction require
fair compensation by the government of such jurisdiction
44
[Participation Agreement (1995 777 B)]
payable in currency freely convertible into Dollars for the loss of use or
title of the Aircraft in the event of the requisition by such government of
such use or title, and (E) to such further effect with respect to such
other matters as the Owner Trustee, in its individual capacity, or the
Owner Participant may reasonably request.
Upon receipt by the Owner Participant and the Indenture Trustee
of an opinion of counsel meeting the foregoing requirements, Exhibit F and
Exhibit G to the Lease shall be amended to add such country.
If, at any time, the Owner Participant delivers an opinion (a
"Delisting Opinion") from a law firm (such opinion and counsel to be
reasonably satisfactory to Lessee) in a country then listed on Exhibit F or
G to the Lease to the effect that a reputable law firm located in such
jurisdiction would not as of the date of such opinion be able to deliver an
opinion of counsel as to the matters listed in subsections (A) through (D)
of subparagraph (ii) above (provided that in regard to (C) and (D), Lessee
is not willing at the time of registration to provide the insurance
required by such subsection (C) or (D)), then Exhibits F and G to the Lease
shall be amended to delete such country. Lessee shall pay the reasonable
costs of the Owner Participant in obtaining the Delisting Opinion provided
such opinion is in fact obtained in connection with Lessee's request to
change the registry of the Aircraft to, or to sublease the Aircraft in, a
country listed on Exhibit F or G to the Lease.
Lessee shall pay all reasonable fees and expenses on an after-tax
basis of the Owner Participant, the Owner Trustee and the Indenture Trustee
in connection with any change of registry of the Aircraft.
(f) The Owner Participant represents and warrants as follows:
(i) the Owner Participant is a corporation duly organized and
validly existing in good standing under the laws of its jurisdiction of
organization, and has the corporate power and authority to carry on its
business as now conducted, to own or hold under lease its properties and to
enter into and perform its obligations under the Owner Participant
Documents;
(ii) the Owner Participant Documents have been duly authorized by
all necessary corporate action on the part of the Owner Participant, do not
require any approval
45
[Participation Agreement (1995 777 B)]
not already obtained of stockholders of the Owner Participant or any
approval or consent not already obtained of any trustee or holders of any
indebtedness or obligations of the Owner Participant, and have been duly
executed and delivered by the Owner Participant, and neither the execution
and delivery thereof by the Owner Participant, nor the consummation of the
transactions contemplated thereby by the Owner Participant, nor compliance
by the Owner Participant with any of the terms and provisions thereof will
contravene any United States federal or state law, judgment, governmental
rule, regulation or order applicable to or binding on the Owner Participant
(it being understood that no representation or warranty is made with
respect to laws, rules or regulations relating to aviation or to the nature
of the equipment owned by the Owner Trustee, other than such laws, rules or
regulations relating to the citizenship requirements of the Owner
Participant under applicable aviation law) or contravene or result in any
breach of or constitute any default under, or result in the creation of any
Lien (other than Liens provided for or otherwise permitted in the Operative
Documents) upon the Trust Estate under, any indenture, mortgage, chattel
mortgage, deed of trust, conditional sales contract, bank loan or credit
agreement, corporate charter, by-law or other agreement or instrument to
which the Owner Participant is a party or by which it or its properties may
be bound or affected (it being understood that no representation or
warranty is made in this subsection (f)(ii) with respect to ERISA);
(iii) each of the Owner Participant Documents constitutes a legal,
valid and binding obligation of the Owner Participant enforceable against
the Owner Participant in accordance with the terms thereof, and the trust
intended to be formed by the Trust Agreement has been duly and validly
formed;
(iv) Neither the execution and delivery by the Owner Participant
of this Agreement or any other Owner Participant Document, nor the
consummation by it of any of the transactions contemplated hereby or
thereby, requires the consent or approval of, the giving of notice to, the
registration with, the recording or filing of any document with, or the
taking of any other action in respect of, any federal or other governmental
authority or agency, except those contemplated by the Operative Documents
(it being understood that no representation or warranty is made with
respect to the laws, rules or regulations relating to aviation or to the
nature of the equipment owned by the Owner Trustee, other than such laws,
rules or regulations
46
[Participation Agreement (1995 777 B)]
relating to the citizenship requirements of the Owner Participant under
applicable aviation law);
(v) there are no pending or, to the knowledge of the Owner
Participant, threatened actions or proceedings against the Owner
Participant before any court or administrative agency which individually
(or in the aggregate in the case of any group of related lawsuits) purports
to affect the legality, validity or enforceability of, or which is
reasonably likely to materially adversely affect the ability of the Owner
Participant to perform its obligations under any of, the Owner Participant
Documents; and
(vi) on the Delivery Date, the Aircraft will be free of Lessor
Liens (including for this purpose Liens that would be Lessor Liens but for
the proviso to the definition of Lessor Liens) attributable to the Owner
Participant.
(g) Each of State Street Bank and Trust Company in its individual
capacity and the Owner Participant severally covenants and agrees (i) that it
shall not cause or permit to exist any Lessor Lien attributable to it with
respect to the Aircraft or any other portion of the Trust Estate, (ii) that it
will promptly, at its own expense, take such action as may be necessary duly to
discharge such Lessor Lien attributable to it and (iii) to make restitution to
the Trust Estate for any actual diminution of the assets of the Trust Estate
resulting from such Lessor Liens attributable to it. The Owner Participant
agrees to make restitution to the Trust Estate for any actual diminution of the
assets of the Trust Estate resulting from any Taxes or Expenses (as such terms
are defined in Section 7 hereof) imposed on the Trust Estate against which
Lessee is not required to indemnify the Trust Estate pursuant to Section 7
hereof, but excluding Taxes or Expenses referred to in Section 7(b)(ii)(5) and
7(b)(ii)(7) and excluding any diminution of the Trust Estate attributable to or
caused by State Street Bank and Trust Company in its individual capacity;
provided that if the Owner Participant shall make restitution to the Trust
Estate on account of any diminution of the Trust Estate attributable to or
caused by State Street Bank and Trust Company in its individual capacity, then
State Street Bank and Trust Company, in its individual capacity, shall reimburse
the Owner Participant for such amount together with interest thereon at the Past
Due Rate.
(h) First Security Bank of Utah, National Association, in its
individual capacity, covenants and agrees that it shall not cause or permit to
exist any Lien, arising as a result of (i) claims against the Indenture Trustee
not related to its interest in the Aircraft or the administration of the Trust
Estate
47
[Participation Agreement (1995 777 B)]
pursuant to the Trust Indenture, (ii) acts of the Indenture Trustee not
permitted by, or failure of the Indenture Trustee to take any action required
by, the Operative Documents to the extent such acts arise or such failure arises
from or constitutes gross negligence or willful misconduct, (iii) claims against
the Indenture Trustee relating to Taxes or Expenses which are excluded from the
indemnification provided by Section 7 pursuant to said Section 7, or (iv) claims
against the Indenture Trustee arising out of the transfer by the Indenture
Trustee of all or any portion of its interest in the Aircraft, the Trust Estate,
the Trust Indenture Estate or the Operative Documents other than (A) a transfer
of the Aircraft pursuant to Section 9, 10 or 19 of the Lease or Article 5 or 8
of the Trust Indenture, (B) any borrowing pursuant to Section 17 hereof or (C) a
transfer of the Aircraft pursuant to Section 15 of the Lease while an Event of
Default is continuing and prior to the time that the Indenture Trustee has
received all amounts due pursuant to the Trust Indenture.
(i) [Intentionally omitted.]
(j) The Indenture Trustee, and by the acceptance of a Loan Certificate
each Certificate Holder (and each Pass Through Trustee, so long as the relevant
Pass Through Trust Agreement is in effect), each hereby waives to the fullest
extent permitted by law the benefit of the provisions of Section 1111(b) of
Title 11 of the United States Code with respect to recourse against the Owner
Trustee (in its individual capacity) and the Owner Participant on account of any
amount payable as principal of, Premium, if any, and interest on the Loan
Certificates. If (i) all or any part of the Trust Estate becomes the property
of, or the Owner Participant becomes, a debtor subject to the reorganization
provisions of the Bankruptcy Code or any successor provision, (ii) pursuant to
such reorganization provisions the Owner Trustee (in its individual capacity) or
the Owner Participant is required, by reason of the Owner Trustee (in its
individual capacity) or the Owner Participant being held to have recourse
liability to a Certificate Holder, a Pass Through Trustee or the Indenture
Trustee, directly or indirectly (other than the recourse liability of the Owner
Participant under this Participation Agreement), to make payment on account of
any amount payable as principal, Premium, if any, or interest on the Loan
Certificates and (iii) such Certificate Holder, such Pass Through Trustee or the
Indenture Trustee actually receives any Excess Payment (as hereinafter defined)
which reflects any payment by the Owner Trustee (in its individual capacity) or
the Owner Participant on account of clause (ii) above, then such Certificate
Holder, such Pass Through Trustee or the Indenture Trustee, as the case may be,
shall promptly refund to the Owner Trustee or the Owner Participant (whichever
shall have made such
48
[Participation Agreement (1995 777 B)]
payment) such Excess Payment. For purposes of this Section 8(j), "Excess
Payment" means the amount by which such payment exceeds the amount which would
have been received by such Certificate Holder, such Pass Through Trustee or the
Indenture Trustee if the Owner Trustee (in its individual capacity) or the Owner
Participant had not become subject to the recourse liability referred to in
clause (ii) above. Nothing contained in this Section 8(j) shall prevent any
Certificate Holder, any Pass Through Trustee or the Indenture Trustee from
enforcing any personal recourse obligation (and retaining the proceeds thereof)
of the Owner Trustee (in its individual capacity) or the Owner Participant under
this Participation Agreement or the Trust Indenture (and any exhibits or annexes
thereto).
(k) First Security Bank of Utah, National Association, in its
individual capacity ("FSBU") and as Indenture Trustee and Pass Through Trustee
as provided below, represents as follows:
(i) it is a Citizen of the United States, that it will notify
promptly all parties to this Agreement if in its reasonable opinion its
status as a Citizen of the United States is likely to change and that it
will resign as Indenture Trustee as provided in Section 9.07 of the Trust
Indenture if it should cease to be a Citizen of the United States;
(ii) it is a national banking association and has the full
corporate power, authority and legal right under the laws of the United
States of America to enter into and perform its obligations under the Trust
Indenture, this Agreement, the Basic Agreement and each Pass Through Trust
Agreement and, in its capacity as Indenture Trustee and Pass Through
Trustee, respectively, to authenticate the Loan Certificates and the Pass
Through Certificates;
(iii) the Indenture Trustee Documents, and the authentication of
the Loan Certificates and the Pass Through Certificates have been duly
authorized by all necessary corporate action on the part of FSBU, the
Indenture Trustee and the relevant Pass Through Trustee, as it shall be a
party thereto in any such capacity, and neither the execution (or, in the
case of the Loan Certificates and the Pass Through Certificates, the
authentication) and delivery thereof in any such capacity nor the
performance by it in any such capacity of any of the terms and provisions
thereof will violate any federal or Utah law or regulation relating to the
banking or trust powers of FSBU or contravene or result in any breach of,
or constitute any default under its charter or by-laws or the provisions of
any indenture, mortgage, contract or other agreement to which FSBU, the
49
[Participation Agreement (1995 777 B)]
Indenture Trustee or the Pass Through Trustee is a party or by which it or
its properties may be bound or affected;
(iv) each of the Indenture Trustee Documents has been duly
executed (or, in the case of the Loan Certificates and the Pass Through
Certificates, authenticated) and delivered by FSBU, the Indenture Trustee
and the relevant Pass Through Trustee, as it shall be a party thereto in
any such capacity, and, assuming that each such agreement is the legal,
valid and binding obligation of each other party thereto (other than FSBU,
the Indenture Trustee and the relevant Pass Through Trustee), is the legal,
valid and binding obligation of FSBU, the Indenture Trustee and the
relevant Pass Through Trustee, as it shall be a party thereto in any such
capacity, enforceable against it in accordance with its terms;
(v) neither the execution (or, in the case of the Loan
Certificates and the Pass Through Certificates, the authentication) and
delivery by FSBU, the Indenture Trustee or any Pass Through Trustee, as it
is a party in any such capacity to any of the Indenture Trustee Documents,
nor the consummation by it in any such capacity of any of the transactions
contemplated hereby, by the Trust Indenture, by the Pass Through Trust
Agreements, by the Loan Certificates or by the Pass Through Certificates
requires the consent or approval of, the giving of notice to, or the
registration with, or the taking of any other action with respect to, any
Utah state or federal governmental authority or agency regulating the
banking, trust or fiduciary powers of FSBU;
(vi) there are no Taxes payable by FSBU, the Indenture Trustee or
any Pass Through Trustee imposed by the State of Utah or any political
subdivision or taxing authority thereof in connection with the execution
(or, in the case of the Loan Certificates and the Pass Through
Certificates, the authentication) and delivery by it as a party in any such
capacity to any Indenture Trustee Document or the performance by it as a
party in any such capacity of any Indenture Trustee Document (other than
franchise or other taxes based on or measured by any fees or compensation
received by FSBU, the Indenture Trustee or any Pass Through Trustee, as the
case may be, for services rendered in connection with the transactions
contemplated thereby), and there are no Taxes payable by FSBU, the
Indenture Trustee or any Pass Through Trustee imposed by the State of Utah
or any political subdivision thereof in connection with the acquisition,
possession or ownership by any Pass Through Trustee of any of the Loan
Certificates (other than franchise or other taxes based on or measured by
any fees or
50
[Participation Agreement (1995 777 B)]
compensation received by a Pass Through Trustee for services rendered in
connection with the transactions contemplated by the respective Pass
Through Trust Agreement) and, assuming that the trust created by the
respective Pass Through Trust Agreement will not be taxable as a
corporation, but, rather, will be characterized as a grantor trust under
subpart E, Part I of Subchapter J of the Code, such trust will not be
subject to any Taxes imposed by the State of Utah or any political
subdivision thereof;
(vii) there are no pending or threatened actions or proceedings
against any of FSBU, the Indenture Trustee, or the Pass Through Trustees
before any court or administrative agency which individually (or in the
aggregate in the case of any group of related lawsuits) purports to affect
the legality, validity or enforceability of, or which is reasonably likely
to materially adversely affect the ability of FSBU, the Indenture Trustee,
or the Pass Through Trustees to perform its obligations as a party in any
such capacity under any Indenture Trustee Document; and
(viii) except for the issuance and sale pursuant to the respective
Pass Through Trust Agreement of the Pass Through Certificates contemplated
hereby, neither FSBU nor any Pass Through Trustee has directly or
indirectly offered any Loan Certificate for sale to any Person, or
solicited any offer to acquire any Loan Certificate from any Person other
than the Owner Trustee and the Owner Participant, and neither FSBU nor any
Pass Through Trustee has authorized anyone to act on its behalf to offer
directly or indirectly any Loan Certificate for sale to any Person, or to
solicit any offer to acquire any Loan Certificate from any Person other
than the Owner Trustee and the Owner Participant, and no Pass Through
Trustee is in default under any respective Pass Through Trust Agreement.
(l) So long as the Aircraft shall be leased to Lessee under the Lease
and so long as the Loan Certificates are outstanding, the Owner Participant will
not sell, assign, convey or otherwise transfer any of its right, title or
interest in and to this Agreement, the Trust Estate or the Trust Agreement to
any person or entity, unless (i) the proposed transferee is a "Transferee" (as
defined below) and (ii) the Owner Participant and the Transferee shall have
delivered to the Owner Trustee, the Lessee and the Indenture Trustee opinions
substantially in the form of Exhibits A-1 and A-2, respectively, hereto (or
otherwise in form and substance reasonably satisfactory to Lessee and the
Indenture Trustee) of counsel reasonably satisfactory to the Indenture Trustee
and Lessee. A "Transferee" shall mean either (A) a bank or other financial
institution with a combined
51
[Participation Agreement (1995 777 B)]
capital, surplus and undivided profits of at least $75,000,000 or a corporation
whose net worth is at least $75,000,000, (B) any subsidiary of such a bank,
financial institution or corporation, provided that such bank, financial
institution or corporation furnishes to the Owner Trustee, the Indenture Trustee
and Lessee a guaranty substantially in the form of Exhibit C hereto with respect
to the Owner Participant's obligations, in the case of the Owner Trustee, under
the Trust Agreement and, in the case of the Indenture Trustee and Lessee, the
Owner Participant's obligations hereunder, or (C) any other entity, provided
such obligations are guaranteed by the transferor Owner Participant; provided,
however, that unless otherwise consented to by Lessee no Transferee shall be an
airline, a commercial air carrier, an air freight forwarder, an entity engaged
in the business of parcel transport by air or other similar person or a
corporation or other entity controlling, controlled by or under common control
with such an airline, a commercial air carrier, an air freight forwarder, an
entity engaged in the business of parcel transport by air or other similar
person. Each such transfer to a Transferee shall be subject to the conditions
that (M) upon giving effect to such transfer, the Transferee is a Citizen of the
United States or the Transferee, at its sole cost and expense on an after-tax
basis (including any continuing costs of the voting trust), shall have entered
into a voting trust or similar arrangement which permits the registration of the
Aircraft under the Federal Aviation Act in the name of the Owner Trustee, (N)
the Transferee has the full power and authority to enter into and carry out the
transactions contemplated hereby, (O) the Transferee enters into an agreement
substantially in the form of Exhibit B hereto (or otherwise in form and
substance reasonably satisfactory to Lessee and the Indenture Trustee), (P) such
transfer does not violate any applicable law including, without limitation, the
Federal Aviation Act, or any rules or regulations promulgated thereunder, the
Securities Act of 1933 or the Trust Indenture Act of 1939 (but not including
ERISA), (Q) the transferor Owner Participant assumes the risk of any loss of
Interest Deductions, MACRS Deductions, FSC Benefits or any Inclusion Event (each
as defined in the Tax Indemnity Agreement) resulting from such transfer, (R)
after giving effect to such transfer, there shall be no more than three Owner
Participants of record at that time, (S) such transfer will not give rise to a
Default or Event of Default under the Trust Indenture and (T) if such transfer
will result in there being more than one Owner Participant, it shall be a
condition precedent to such transfer that all such Owner Participants shall have
agreed in a manner reasonably satisfactory to Lessee that if the provisions of
the Operative Documents require or contemplate the waiver, consent or direction
of Owner Participant, such provisions shall be deemed satisfied by the waiver,
direction or consent of Owner Participants holding a majority of the beneficial
interests in
52
[Participation Agreement (1995 777 B)]
the Trust Estate. Upon any such transfer by the Owner Participant as above
provided, (i) the Transferee shall be deemed the Owner Participant for all
purposes hereof and of the other Operative Documents and each reference herein
to the transferor Owner Participant shall thereafter be deemed for all purposes
to be to the Transferee and the transferor Owner Participant shall be relieved
of all obligations of the transferring Owner Participant under the Owner
Participant Documents arising after the date of such transfer except to the
extent fairly attributable to acts or events occurring prior thereto and not
assumed by the transferee Owner Participant (in each case, to the extent of the
participation so transferred) and (ii) Lessee shall acknowledge its consent to
such transfer to the Transferee, shall represent to the Transferee that no Event
of Default or Event of Loss, or circumstance which with the passage of time or
the giving of notice or both would constitute an Event of Default or Event of
Loss, then exists and Lessee shall promptly obtain new insurance certificates
(consistent with the provisions of Section 11 of the Lease) that reflect the
interests of the Transferee in the Aircraft. If the Owner Participant intends to
transfer any of its interests hereunder, it shall give prior written notice
thereof as soon as practicable, but in no event less than 10 days prior thereto,
to the Indenture Trustee, the Owner Trustee and Lessee, specifying the name and
address of the proposed Transferee. The Owner Participant shall pay all of the
reasonable costs of the other parties hereto, on a net after-tax basis, of any
such transfer. For purposes of this paragraph, "net worth" shall mean the
excess of total tangible assets over total liabilities, each to be determined in
accordance with generally accepted accounting principles consistently applied.
Notwithstanding anything contained in this Section 8(l) to the contrary, each of
Lessee, the Owner Trustee, the Indenture Trustee, the Pass Through Trustees and,
by its acceptance of a Loan Certificate, each Certificate Holder agrees that the
Owner Participant may pledge its beneficial interest in the Trust Estate created
pursuant to the Trust Agreement to First Security Bank of Utah, National
Association, as indenture trustee (the "777B Indenture Trustee") pursuant to
that certain Trust Indenture and Mortgage (1995 777 B) dated as of May 1, 1995,
pursuant to a certain letter agreement to be entered into between [____________]
and the 777B Indenture Trustee.
(m) Notwithstanding the provisions of Section 8(r) hereof, unless
waived by each Certificate Holder, Lessee shall not be entitled to terminate the
Lease or assume the Loan Certificates on a Purchase Option Date if on such
Purchase Option Date an Event of Default under the Lease shall have occurred and
be continuing.
53
[Participation Agreement (1995 777 B)]
(n) State Street Bank and Trust Company and First Security Bank of
Utah, National Association, each in its individual capacity, agrees for the
benefit of Lessee to comply with the terms of the Trust Indenture which it is
required to comply with in its individual capacity.
(o) The Owner Participant represents and warrants that no part of the
funds used by it to acquire its interest in the Trust Estate constitutes assets
of any "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or of any "plan"
within the meaning of Section 4975(e)(1) of the Code (such employee benefit
plans and plans hereinafter referred to as "ERISA Plans").
(p) State Street Bank and Trust Company (A) in its individual capacity
("SSBTC") represents and warrants that:
(i) the Trust Agreement and, assuming due authorization,
execution and delivery of the Trust Agreement by the Owner Participant,
each of the other Owner Trustee Documents has been duly executed and
delivered by one of its officers who is duly authorized to execute and
deliver such instruments on behalf of the Owner Trustee;
(ii) the Trust Estate is free and clear of Lessor Liens
attributable to SSBTC, and there are no Liens affecting the title of the
Owner Trustee to the Aircraft or resulting from any act or claim against
SSBTC arising out of any event or condition not related to the ownership,
leasing, use or operation of the Aircraft or to any other transaction
contemplated by this Agreement or any of the other Operative Documents,
including any Lien resulting from the nonpayment by SSBTC of any Taxes
imposed or measured by its net income;
(iii) there has not occurred any event which constitutes (or to
the best of its knowledge would, with the passage of time or the giving of
notice or both, constitute) an Event of Default as defined in the Trust
Indenture which has been caused by or relates to SSBTC and which is
presently continuing;
(iv) it is a Massachusetts trust company duly organized and
validly existing in good standing under the laws of the Commonwealth of
Massachusetts and (assuming due authorization, execution and delivery of
the Trust Agreement by the Owner Participant) has the corporate power and
authority to enter into and perform its obligations under the Trust
Agreement, and (assuming due authorization,
54
[Participation Agreement (1995 777 B)]
execution and delivery of the Trust Agreement by the Owner Participant) has
full right, power and authority to enter into and perform its obligations
as Owner Trustee pursuant to the Trust Agreement under each of the other
Owner Trustee Documents;
(v) each of the Owner Trustee Documents has been duly authorized
by all necessary corporate action on its part, and neither the execution
and delivery thereof nor its performance of any of the terms and provisions
thereof will violate any federal or Massachusetts Commonwealth law or
regulation relating to its banking or trust powers or contravene or result
in any breach of, or constitute any default under, its charter or by-laws
or the provisions of any indenture, mortgage, contract or other agreement
to which it is a party or by which it or its properties may be bound or
affected;
(vi) assuming due authorization, execution and delivery of the
Trust Agreement by the Owner Participant, each of the Owner Trustee
Documents has been duly executed and delivered by it, and each of the Trust
Agreement and the Participation Agreement (to the extent executed by the
Owner Trustee in its individual capacity) is a legal, valid and binding
obligation of SSBTC and as Owner Trustee, as the case may be, enforceable
against such party in accordance with the terms thereof;
(vii) on the Delivery Date, the Owner Trustee shall have received
whatever title to the Aircraft as was conveyed to it by the Lessee;
(viii) it has not offered any interest in the Trust Estate or any
Loan Certificates or Pass Through Certificates or any similar securities
for sale to, or solicited any offer to acquire the same from, anyone other
than the Indenture Trustee, the Pass Through Trustees and the Owner
Participant, and no responsible officer or responsible employee of SSBTC
has knowledge of any such offer or solicitation, except as set forth in
Section 7(a)(xi) hereof;
(ix) assuming due authorization, execution and delivery of each of
the Owner Trustee Documents by each of the parties thereto (other than the
Owner Trustee), each of the Owner Trustee Documents is a legal, valid and
binding obligation of the Owner Trustee, enforceable against the Owner
Trustee in accordance with its respective terms;
55
[Participation Agreement (1995 777 B)]
(x) neither the due execution and delivery of the Owner Trustee
Documents by SSBTC, in its individual capacity or as Owner Trustee under
the Trust Agreement, as the case may be, nor the consummation by it of any
of the transactions contemplated thereby require the consent or approval
of, the giving of notice to, or the registration with, any federal or
Massachusetts Commonwealth governmental authority or agency pursuant to any
federal or Massachusetts Commonwealth law governing the banking or trust
powers of SSBTC; and
(B) SSBT solely in its capacity as Owner Trustee further represents
and warrants that:
(i) SSBT is a trust company duly organized and validly existing
in good standing under the laws of the Commonwealth of Massachusetts and
has the corporate power and authority to enter into this Agreement and to
perform its obligations hereunder;
(ii) assuming due authorization, execution and delivery of the
Trust Agreement by the Owner Participant, each of the Trust Agreement, this
Agreement, the Trust Indenture, the Lease and the Loan Certificates has
been, or on the Delivery Date will have been, duly executed and delivered
by it, and each of this Agreement, the Trust Agreement, the Lease and the
Trust Indenture, on the Delivery Date, will constitute a legal, valid and
binding obligation of the Owner Trustee, enforceable against it in
accordance with the terms thereof;
(iii) the Owner Trustee has never directly or indirectly
offered any Loan Certificate or any interest in or to the Trust Estate, the
Trust Agreement or any similar interest for sale to, or solicited any offer
to acquire any of the same from, any Person other than the Indenture
Trustee, each of the Pass Through Trustees and the Owner Participant; and
it has not authorized any Person to act on its behalf (other than for
purposes of this paragrpah, the Lessee and the Underwriters) to offer
directly or indirectly any Loan Certificate or any interest in and to the
Trust Estate, the Trust Agreement or any similar interest for sale to, or
to solicit any offer to acquire any of the same from, any Person; and
(iv) there are no pending or threatened actions or proceedings
against SSBTC or the Owner Trustee before any court or administrative
agency which, if determined adversely to it, would materially adversely
affect the ability of SSBTC or the Owner Trustee, as the case may be,
56
[Participation Agreement (1995 777 B)]
to perform its obligations under any of the Owner Trustee Documents or any
other documents executed by the Owner Trustee or SSBTC in connection with
the transactions contemplated by the Operative Documents.
(q) The Owner Participant agrees, solely for the benefit of Lessee,
that it will comply with any obligation expressly required of it under Section
9(c) of the Lease. The Owner Participant further covenants and agrees to pay or
cause the Owner Trustee to pay those costs and expenses specified to be paid by
the Owner Participant pursuant to the Lease and all costs and expenses that are
for the account of the Lessor pursuant to Sections 5(a), 5(c), 5(d), 5(e) and
5(f), 12 and 19(c) of the Lease.
(r) Subject to compliance by Lessee with all of its obligations under
the Lessee Documents, each of the Owner Trustee, the Indenture Trustee, each
Certificate Holder and the Owner Participant covenants and agrees that, at
Lessee's expense on a net after-tax basis (including, without limitation,
reasonable attorney's fees and expenses of each of such parties), (i) Lessee may
elect to terminate the Lease and to purchase the Aircraft pursuant to Section
19(b) of the Lease and that each of such parties will execute and deliver
appropriate documentation transferring all right, title and interest in the
Aircraft to Lessee (without recourse or warranty except as to Lessor Liens
(including for this purpose Liens that would be Lessor Liens but for the proviso
to the definition of Lessor Liens) with respect to the Owner Participant)
(including without limitation, such bills of sale and other instruments and
documents as Lessee shall reasonably request to evidence (on the public record
or otherwise) such transfer and the vesting of all right, title and interest in
and to the Aircraft in Lessee), and (ii) Lessee, in connection with such
purchase and subject to the provisions of the second paragraph of this Section
8(r), may assume (and receive a credit in an amount equal to the principal
amount of the debt assumed against the purchase price payable by Lessee pursuant
to Section 19(b) of the Lease) the obligations of the Owner Trustee pursuant to
Section 7.03 of the Trust Indenture and the Loan Certificates (and the Lease, to
the extent that the Owner Trustee's obligations thereunder are incorporated into
the Trust Indenture or the Loan Certificates), and Lessee shall confirm that its
obligations under the Lease shall be direct obligations to the Indenture Trustee
as if set forth in the Trust Indenture, and that each of the parties shall
execute and deliver appropriate documentation in form and substance reasonably
satisfactory to such parties under which Lessee will assume such obligations on
the basis of full recourse to Lessee, maintaining the security interest in the
Aircraft created by the Trust Indenture, releasing the Owner Participant and the
Owner Trustee
57
[Participation Agreement (1995 777 B)]
from all future obligations in respect of the Loan Certificates, the Trust
Indenture and all other Operative Documents and all such other actions
(including the furnishing of legal opinions reasonably requested by any party)
as are reasonably necessary to permit such assumption by Lessee.
If Lessee elects to assume the rights and obligations of the Owner Trustee
in accordance with Section 7.03 of the Trust Indenture in connection with the
purchase by the Lessee of the Aircraft pursuant to Section 19(b) of the Lease
and to pay the EBO Price in installments as permitted thereby, then:
(A) in addition to the provisions contemplated above, the Trust
Indenture shall be amended (a) to provide for an additional series of loan
certificates (the "EBO Certificates") to be issued to the Owner Participant
on the EBO Date to evidence the payment of the EBO Price in installments on
the dates specified in Exhibit H to the Lease (taking into account the
credit provided for above), (2) to provide that the Indenture Trustee will
make no distributions to the Owner Participant or the Owner Trustee or
otherwise in respect of the EBO Certificates prior to the payment in full
of all amounts then due and payable to the other Holders or, if an "Event
of Default" under the Trust Indenture (an "Indenture Event of Default") or
any payment Default under the Trust Indenture shall have occurred and be
continuing, prior (unless such Loan Certificates shall have been purchased
by the Owner Trustee) to the payment in full of the principal amount of,
and interest accrued on, the Loan Certificates other than the EBO
Certificates, (3) to include the failure to pay any installments of the EBO
Certificates within 10 calendar days of when due as an Event of Default,
(4) to include a right so long as the EBO Certificates shall be outstanding
for the Owner Participant to purchase the other Loan Certificates under
circumstances similar to, and on the same terms as provided in, Section
8.03(e)(ii) of the Trust Indenture (it being understood that upon any
assumption pursuant to Section 7.03 of the Trust Indenture, the provisions
of the Trust Indenture intended for the benefit of the Owner Participant
(other than provisions concerning, but only to the extent applicable to,
Excluded Payments), including, without limitation, Sections 8.03(e)(i) and
8.03(e)(iii) of the Trust Indenture providing the Owner Trustee or the
Owner Participant with certain rights, shall be of no further force and
effect), (5) to provide that the Owner Participant and the Owner Trustee
shall have no voting or consent rights under the Trust Indenture by reason
of being the holder of the EBO Certificates or otherwise until all other
Loan Certificates have either been paid in full or been purchased by the
Owner
58
[Participation Agreement (1995 777 B)]
Participant (pursuant to the provisions contemplated by clause (A)(4) of
this Section 8(r) by the reference therein to Section 8.03(e)(ii) of the
Trust Indenture), except that without the consent of the Owner Participant
the Trust Indenture could not be amended, modified or supplemented to
reduce the amount or extend the time of payment of any amount owing or
payable under the EBO Certificates, and (6) to confirm that, although the
Owner Participant cannot participate in the exercise of remedies under the
Trust Indenture, it shall not be precluded form demanding, collecting,
suing for or otherwise receiving and enforcing payment of the EBO
Certificates by demand upon Lessee; and
(B) upon Lessee's payment in full of all amounts due on or prior to
the EBO Date in accordance with Section 19(b) of the Lease and compliance
with all of the conditions to such assumption in accordance with this
Section 8(r) and Section 7.03 of the Trust Indenture, (1) the Owner Trustee
shall assign the right to the remaining installments of the EBO Price to
the Owner Participant, (2) the EBO Certificates shall be issued to the
Owner Participant in aggregate amount of such remaining installments of the
EBO Price and (3) the Owner Trustee (AA) shall transfer to Lessee, without
recourse or warranty (except as to the absence of Lessor Liens) and on an
"as is" basis, all right, title and interest of the Owner Trustee in and to
the Aircraft and (BB) shall furnish to or at the direction of Lessee one or
more bills of sale in form and substance reasonably satisfactory to Lessee
evidencing such transfer.
(s) Lessee will not consolidate with or merge into any other
corporation or convey, transfer or lease substantially all of its assets to any
Person unless:
(i) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee as an entirety shall be a
Citizen of the United States and shall be a Certificated Air Carrier;
(ii) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee as an entirety shall
execute and deliver to the Owner Trustee, the Indenture Trustee, the Owner
Participant and the Pass Through Trustees a duly authorized, valid, binding
and enforceable agreement in form and substance reasonably satisfactory to
the Owner Participant containing an assumption by such successor
corporation or Person of the due and punctual performance and observance of
59
[Participation Agreement (1995 777 B)]
each covenant and condition of the Operative Documents and the Pass Through
Trust Agreements to be performed or observed by Lessee;
(iii) immediately after giving effect to such transaction, no
Event of Default under the Lease shall have occurred and be continuing;
(iv) Lessee shall have delivered to the Owner Trustee, the
Indenture Trustee, the Pass Through Trustees and the Owner Participant a
certificate signed by the President or any Vice President and by the
Secretary or an Assistant Secretary of Lessee, and an opinion of counsel
(which may be Lessee's General Counsel) reasonably satisfactory to the
Owner Participant, each stating that such consolidation, merger,
conveyance, transfer or lease and the assumption agreement mentioned in
clause (ii) above comply with this Section 8(s) and that all conditions
precedent herein provided for relating to such transaction have been
complied with; and
(v) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee, shall make such filings
and recordings with the FAA pursuant to the Federal Aviation Act, as shall
be necessary or desirable to evidence such consolidation, merger,
conveyance, transfer or lease with or to such entity.
Upon any consolidation or merger, or any conveyance, transfer or lease
of substantially all of the assets of Lessee as an entirety in accordance with
this Section 8(s), the successor corporation or Person formed by such
consolidation or into which Lessee is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, Lessee under this Agreement and under the
Pass Through Trust Agreements with the same effect as if such successor
corporation or Person had been named as Lessee herein and therein. No such
conveyance, transfer or lease of substantially all of the assets of Lessee as an
entirety shall have the effect of releasing Lessee or any successor corporation
or Person which shall theretofore have become such in the manner prescribed in
this Section 8(s) from its liability in respect of any Operative Document to
which it is a party or any Pass Through Trust Agreement. Nothing contained
herein shall permit any lease, sublease or other arrangement for the use,
operation or possession of the Aircraft except in compliance with the applicable
provisions of the Lease.
60
[Participation Agreement (1995 777 B)]
(t) Lessee, at its expense, will, at the request of any party hereto,
take, or cause to be taken, such action with respect to the recording, filing,
rerecording and refiling of the Trust Agreement, the Lease, the Lease
Supplement, the Trust Indenture, the Trust Supplement and any financing
statements or other instruments as are necessary to maintain, so long as the
Trust Indenture or the Lease is in effect, the perfection of the security
interests created by the Trust Indenture and any security interest that may be
claimed to have been created by the Lease and the ownership interest of the
Owner Trustee in the Aircraft.
(u) Section 3 of the Lease contemplates that, under certain
circumstances, the Owner Participant will make certain recalculations of Basic
Rent, Excess Amount, Stipulated Loss Value percentages, Termination Value
percentages, Special Termination Value percentages and the EBO Percentage, and
the Owner Participant hereby agrees to make such recalculations as and when
contemplated by the Lease and subject to all the terms and conditions of the
Lease and promptly to take such further actions as may be necessary or desirable
to give effect to and to cause the Owner Trustee to give effect to the
provisions of Section 3 of the Lease.
(v) The Owner Participant hereby agrees not to revoke the Trust
Agreement or the trusts created thereunder without the prior written consent of
(i) the Lessee so long as the Lease shall remain in effect and no Event of
Default under the Lease shall have occurred and be continuing and (ii) the
Indenture Trustee so long as the Trust Indenture shall be in effect.
(w) Lessee covenants and agrees with the Owner Participant, the
Indenture Trustee and the Owner Trustee that at all times during the Term it
will be a Certificated Air Carrier
(x) (i) Each Pass Through Trustee hereby agrees that, except as
otherwise required by applicable law (including, without limitation, any law
which requires such Pass Through Trustee to act within its own discretion), it
shall not, without the prior written consent of the Owner Trustee, direct the
Indenture Trustee to take or refrain from taking any action under the Trust
Indenture that requires the approval, waiver, authorization, direction or
consent of, or notice from, the Certificate Holders holding a specified
percentage in principal amount of Outstanding (as defined in the Trust
Indenture) Loan Certificates unless such Pass Through Trustee receives a
Direction (as defined in the relevant Pass Through Trust Agreement) to so direct
the Indenture Trustee from Certificate Holders (as defined in the relevant Pass
Through Trust Agreement) holding the same percentage of Certificates (as defined
in the
61
[Participation Agreement (1995 777 B)]
relevant Pass Through Trust Agreement) evidencing Fractional Undivided Interests
(as defined in the relevant Pass Through Trust Agreement) in the Trust (as
defined in the relevant Pass Through Trust Agreement) holding the Loan
Certificates.
(ii) Lessee and each Pass Through Trustee hereby agree that Article X
of each Pass Through Trust Agreement (to the extent relating to the
Certificates) shall not be amended without the prior written consent of the
Owner Participant.
(iii) Each Pass Through Trustee hereby agrees that, except as
otherwise required by applicable law (including, without limitation, any
law which requires such Pass Through Trustee to act within its own
discretion), if requested to do so by the Owner Trustee or the Owner
Participant, such Pass Through Trustee shall request a Direction from the
relevant Certificate Holders to establish whether such Pass Through
Trustee, in its capacity as a Certificate Holder, may direct the Indenture
Trustee to take or refrain from taking any action under the Operative
Documents.
(y) The Owner Trustee agrees that any profit, income, interest,
dividend or gain realized upon the maturity, sale or other disposition of any
Permitted Investment made by the Indenture Trustee pursuant to Section 9.04 of
the Trust Indenture, and paid to Lessee on behalf of the Owner Trustee by the
Indenture Trustee in accordance with the terms of such Section 9.04, shall be
entirely for the account of, and the sole property of, Lessee who, for such
purposes, shall not be deemed to be acting as agent of the Owner Trustee, and
Lessee shall have no obligation to pay over such income, interest, dividend or
gain to the Owner Trustee, except to the extent the Owner Trustee or Owner
Participant are owed any amounts under the Operative Documents by Lessee and
such amounts are not paid when due, in which event the Owner Participant may
cause the Owner Trustee to distribute and apply such income, interest, dividend
or gain in satisfaction or partial satisfaction of the amounts so due.
(z) The Owner Participant hereby agrees to instruct the Owner Trustee
to promptly distribute any money received by it pursuant to Section 7.01 or
10.04 of the Trust Indenture to Lessee to the extent such amounts were paid by
Lessee or on behalf of Lessee and the Owner Trustee or the Owner Participant is
not owed any amounts under any of the Operative Documents by Lessee (and if the
Owner Trustee or Owner Participant is owed any such amount, the monies received
under Section 7.01 or 10.04 of the Trust Indenture may be applied in
satisfaction or partial satisfaction thereof). Lessee agrees to hold any money
received by it pursuant to the foregoing sentence in trust for the benefit of
the Owner Participant and may, in its discretion, invest and
62
[Participation Agreement (1995 777 B)]
reinvest all money so held by it in such Permitted Investments as Lessee deems
appropriate. Lessee will apply such money to the payment of previously
unclaimed payments with respect to the Loan Certificates when and as claims for
payment are made by the Holders of such Loan Certificates. As compensation for
its services pursuant to this Section 8(z), Lessee shall be entitled to an
annual fee from the Owner Participant in an amount to be agreed to at the time
by Lessee and the Owner Participant but in no event shall such fee exceed at any
time the amount of earnings on the monies so held in trust distributable at such
time to the Owner Participant. Any net losses on such investment shall be for
the account of Lessee. Any net earnings on such investment shall be distributed
from time to time by Lessee to the Owner Participant after deducting therefrom
any portion of such fee then due and unpaid. Upon the date required by
applicable law dealing with unclaimed property, Lessee will distribute to the
Owner Participant any amount held by it pursuant to this Section 8(z) and not
previously applied to the payment of the Loan Certificates, after deducting
therefrom any portion of such fee then due and unpaid.
(aa) The Owner Participant agrees that, at Lessee's expense
(including, without limitation, reasonable attorneys fees and other out-of-
pocket expense of the Owner Trustee and Owner Participant), upon request of the
Lessee, the Owner Participant will negotiate promptly in good faith with respect
to any arrangements pursuant to which the Trust Indenture may be satisfied and
discharged in respect of the Loan Certificates in accordance with subsection
(a)(ii) or (a)(iii) of Section 10.01 of the Trust Indenture, provided, that
there shall be no adverse impact upon the rights or interests of the Owner
Participant or Owner Trustee, and the Owner Trustee agrees to act upon the
instructions of the Owner Participant in connection therewith. The Owner
Trustee agrees that it will not, and the Owner Participant agrees that during
such time as an Event of Default has not occurred under the Lease it will not
cause the Owner Trustee to take any action to effect such satisfaction and
discharge except upon the request of the Lessee made pursuant to this Section
8(aa).
SECTION 9. [Intentionally Omitted].
SECTION 10. Other Documents; Amendment. Each of the Owner
Participant and the Owner Trustee hereby (A) agrees with Lessee, the Certificate
Holders and the Indenture Trustee to comply with all of the terms of the Trust
Agreement (as the same may hereafter be amended or supplemented from time to
time in accordance with the terms thereof) applicable to it, to the extent such
non-compliance would be adverse to such party; and (B) agrees with Lessee, the
Certificate Holders and the Indenture
63
[Participation Agreement (1995 777 B)]
Trustee not to amend, supplement or otherwise modify any provision of the Trust
Agreement in a manner adversely affecting such party without the prior written
consent of such party. Notwithstanding the foregoing, unless an Event of
Default shall have occurred and be continuing and so long as the Lease has not
been terminated, the Indenture Trustee and the Owner Participant hereby agree
for the benefit of Lessee that without the consent of Lessee they will not (and
the Owner Participant agrees that it will not cause the Owner Trustee to) amend,
supplement or otherwise modify any provision of the Trust Indenture in a manner
adversely affecting Lessee. The Indenture Trustee and the Owner Trustee agree
to promptly furnish to Lessee copies of any supplement, amendment, waiver or
modification of any of the Operative Documents to which Lessee is not a party.
Each Certificate Holder agrees that it will not take any action in respect of
the Trust Indenture Estate except through the Indenture Trustee pursuant to the
Trust Indenture or as otherwise permitted by the Trust Indenture.
SECTION 11. Certain Covenants of Lessee. Lessee covenants and agrees
with the Participants, the Indenture Trustee and the Owner Trustee, in its
capacity as such and in its individual capacity as follows:
(a) Lessee will cause to be done, executed, acknowledged and delivered
all and every such further acts, conveyances and assurances as the Owner
Trustee, the Indenture Trustee or the Owner Participant shall reasonably
require for accomplishing the purposes of this Agreement and the other
Operative Documents; provided that any instrument or other document so
executed by Lessee will not expand any obligations or limit any rights of
Lessee in respect of the transactions contemplated by any Operative
Documents. Lessee, forthwith upon delivery of the Aircraft under the Lease
shall cause the Aircraft to be duly registered, and at all times thereafter
to remain duly registered, in the name of the Owner Trustee, except as
otherwise required or permitted hereunder or under the Lease, under the
Federal Aviation Act or under the applicable law of another permitted
government of registry, or shall furnish to the Owner Trustee such
information as may be required to enable the Owner Trustee to make
application for such registration (at the expense of Lessee, including,
without limitation, reasonable attorney's fees and expenses), and shall
promptly furnish to the Owner Trustee such information as may be required
to enable the Owner Trustee to timely file any reports required to be filed
by it as the lessor under the Lease or as the owner of the Aircraft with
any governmental authority (including tax authorities).
64
[Participation Agreement (1995 777 B)]
(b) Lessee, at its expense, will cause the Trust Agreement, the Lease,
all Lease Supplements, all amendments to the Lease, the Trust Indenture,
and all supplements and amendments to the Trust Indenture to be promptly
filed and recorded, or filed for recording, to the extent permitted under
the Federal Aviation Act, or required under any other applicable law. Upon
the execution and delivery of the Owner Trustee's FAA Bill of Sale, the
Lease Supplement covering the Aircraft and the Trust Supplement, the Lease
and the Trust Indenture shall be filed for recording with the Federal
Aviation Administration in the following order of priority; first, the
Owner Trustee's FAA Bill of Sale, second, the FAA registration application,
third, the Trust Indenture, with the Trust Agreement and the Trust
Supplement attached, and fourth, the Lease, with the Lease Supplement
covering the Aircraft, the Trust Indenture and the Trust Supplement
attached. Lessee agrees to furnish the Owner Participant, the Owner
Trustee and the Indenture Trustee with copies of the foregoing documents
with recording data as promptly as practicable following the issuance of
same by the FAA.
SECTION 12. Owner for Income Tax Purposes. It is hereby agreed among
Lessee, the Owner Participant and the Owner Trustee that for income tax purposes
the Owner Participant will be the owner of the Aircraft to be delivered under
the Lease and Lessee will be the lessee thereof, and each party hereto agrees to
characterize the Lease as a lease for income tax purposes.
SECTION 13. Notices; Consent to Jurisdiction. (a) All notices,
demands, instructions and other communications required or permitted to be given
to or made upon any party hereto shall be in writing and shall be personally
delivered or sent by registered or certified mail, postage prepaid, or by
telecopier (with a copy of such notice to follow by registered or certified mail
or by prepaid courier), or by prepaid courier service, and shall be deemed to be
given for purposes of this Agreement on the day that such writing is delivered
or received or if given by certified mail, three Business Days after being
deposited in the mails, in accordance with the provisions of this Section 13(a).
Unless otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section 13(a), notices, demands, instructions and
other communications in writing shall be given to or made upon the respective
parties hereto at their respective addresses (or to their respective telecopier
numbers) as follows: (A) if to Lessee, the Owner Trustee, the Indenture
Trustee, the Pass Through Trustees or the Owner Participant, to the respective
addresses set forth on Schedule I hereto (and in the case of Owner Trustee a
copy shall be sent to the Owner Participant) or
65
[Participation Agreement (1995 777 B)]
(B) if to a subsequent Owner Participant, addressed to such subsequent Owner
Participant at such address as such subsequent Owner Participant shall have
furnished by notice to the parties hereto or (C) if to any subsequent
Certificate Holder, addressed to such Certificate Holder at its address set
forth in the Loan Certificate Register maintained pursuant to Section 2.03 of
the Trust Indenture.
(b) Each party to this Agreement including each Certificate Holder
(individually a "Party" and collectively "Parties") irrevocably agrees that any
legal suit, action or proceeding brought by any other Party, which arises solely
out of or relates solely to the Operative Documents or any of the transactions
contemplated hereby or thereby or any document referred to herein or therein,
may be instituted in the Circuit Court of the State of Illinois, Cook County or
the United States District Court for the Northern District of Illinois and that
they hereby waive the right to trial by jury in any such proceeding; provided,
however, that the foregoing provisions shall not apply to third party tort
claims (but shall apply to an indemnity claim with respect to such tort claim)
and that the foregoing shall not apply to any right a Party may have to seek
removal of such legal suit, action or proceeding to federal court or to seek
consolidation of any separate legal suits, actions or proceedings brought by any
one or more of the other Parties in the same or different jurisdictions. The
agreement set forth in this Section 13(b) is given solely for the benefit of the
Parties and such agreement is not intended to and shall not inure to the benefit
of any other person.
SECTION 14. Change of Situs of Owner Trust. The Owner Participant
agrees that if, at any time, the Trust Estate becomes subject to any Taxes for
which it is indemnified pursuant to Section 7(b) hereof and if, as a consequence
thereof, Lessee shall request that the situs of the trust be moved to another
state in the United States from the state in which it is then located, the situs
of the trust may be moved with the written consent of the Owner Participant
(which consent shall not be unreasonably withheld) and the Owner Participant
will take whatever action may be reasonably necessary to accomplish such
removal; provided that (A) Lessee shall provide such additional tax
indemnification, as the Owner Participant may reasonably request, (B) the rights
and obligations under the Operative Documents of the Owner Participant shall not
be altered as a result of the taking of such action, (C) the lien of the Trust
Indenture on the Trust Indenture Estate shall not be adversely affected by such
action, and the Lessee shall execute and deliver such documents as may be
requested by the Indenture Trustee to continue the perfection of the lien on the
Trust Indenture Estate and (D) the Owner Participant and the Indenture Trustee
shall
66
[Participation Agreement (1995 777 B)]
have received an opinion or opinions of counsel (reasonably satisfactory to the
Owner Participant) in scope, form and substance reasonably satisfactory to the
Owner Participant to the effect that (I) the trust, as thus removed, shall
remain a validly established trust, (II) any amendments to the Trust Agreement
necessitated by such removal shall have been duly authorized, executed and
delivered by the parties thereto and shall constitute the valid and binding
obligations of such parties, enforceable in accordance with their terms, (III)
such removal will not result in the imposition of, or increase in the amount of,
any Tax for which Lessee is not required to indemnify the Owner Participant, the
Owner Trustee or the Trust Estate pursuant to Section 7(b) hereof (taking into
account any additional indemnification provided by Lessee pursuant to clause (A)
of this sentence), (IV) such removal will not, in the Owner Participant's
judgment, result in any Loss of MACRS Deductions, FSC Benefits, Interest
Deductions or an Inclusion Event (as defined in the Tax Indemnity Agreement)
with respect to which Lessee is not required to indemnify the Owner Participant
pursuant to Section 5 of the Tax Indemnity Agreement (taking into account any
additional indemnification provided by Lessee pursuant to clause (A) of this
sentence), and (V) covering such other matters as the Owner Participant may
reasonably request, (E) if such removal involves the replacement of the Owner
Trustee, the Owner Participant shall have received an opinion of counsel to such
successor Owner Trustee in form and substance reasonably satisfactory to the
Owner Participant covering the matters set forth in the opinion provided
pursuant to Section 4(a)(xiii) hereof and (F) Lessee shall indemnify and hold
harmless the Owner Participant on a net after-tax basis against any and all
reasonable and actual costs and expenses including attorneys' fees and
disbursements, registration, recording or filing fees and Taxes incurred by the
Owner Trustee or Owner Participant, in connection with such change of situs.
SECTION 15. Miscellaneous. (a) Each of the Participants and the
Certificate Holders covenants and agrees that it shall not unreasonably withhold
its consent to any consent requested of the Owner Trustee, as Lessor, or the
Indenture Trustee under the terms of the Lease, which by its terms is not to be
unreasonably withheld by the Owner Trustee, as Lessor, or by the Indenture
Trustee.
(b) The representations, warranties, indemnities and agreements of
Lessee, the Owner Trustee, the Indenture Trustee, the Participants and the
Certificate Holders provided for in this Agreement, and Lessee's, the Owner
Trustee's, Indenture Trustee's, the Participants' and the Certificate Holders'
obligations under any and all thereof, shall survive the making available of the
respective Commitments by the Participants, the
67
[Participation Agreement (1995 777 B)]
delivery or return of the Aircraft, the transfer of any interest of the Owner
Participant in the Trust Estate or the Aircraft or any Engine or the transfer of
any interest by any Certificate Holder in any Loan Certificate or the Trust
Indenture Estate and the expiration or other termination of this Agreement or
any other Operative Document or any of the Pass Through Trust Agreements.
(c) This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument. Neither this Agreement nor any of the terms hereof may be
terminated, amended, supplemented, waived or modified, except by an instrument
in writing signed by the party against which the enforcement of the termination,
amendment, supplement, waiver or modification is sought; and no such
termination, amendment, supplement, waiver or modification shall be effective
unless a signed copy thereof shall have been delivered to the Lessee, the
Indenture Trustee and the Owner Trustee. The terms of this Agreement shall be
binding upon, and inure to the benefit of and shall be enforceable by, Lessee,
the Participants, the Indenture Trustee, the Certificate Holders and the Owner
Trustee. This Agreement shall in all respects be governed by, and construed in
accordance with, the internal laws of the State of Illinois, including all
matters of construction, validity and performance. This Agreement is being
delivered in the State of Illinois.
(d) The parties hereto agree that all of the statements,
representations, covenants and agreements made by the Owner Trustee (when made
in such capacity) contained in this Agreement and any agreement referred to
herein other than the Trust Agreement, unless expressly otherwise stated, are
made and intended only for the purpose of binding the Trust Estate and
establishing the existence of rights and remedies which can be exercised and
enforced against the Trust Estate. Therefore, anything contained in this
Agreement or such other agreements to the contrary notwithstanding (except for
any express provisions that the Owner Trustee is responsible for or is acting in
or making representations or agreements in its individual capacity), no recourse
shall be had with respect to this Agreement or such other agreements against the
Owner Trustee in its individual capacity or against any institution or person
which becomes a successor trustee or co-trustee or any officer, director,
trustee, servant or direct or indirect parent or controlling person or persons
of any of them; provided, however, that this Section 15(d) shall not be
construed to prohibit any action or proceeding against any party hereto for its
own willful misconduct or grossly negligent conduct; and provided, further, that
nothing contained in this Section 15(d) shall be construed
68
[Participation Agreement (1995 777 B)]
to limit the exercise and enforcement in accordance with the terms of this
Agreement or such other agreements of rights and remedies against the Trust
Estate. The foregoing provisions of this Section 15(d) shall survive the
termination of this Agreement, the other Operative Documents and the Pass
Through Trust Agreements.
(e) No Participant shall have any obligation or duty to the Lessee, to
any other Participant or to others with respect to the transactions contemplated
hereby except those obligations or duties of such Participant expressly set
forth in this Agreement and the other Operative Documents and no Participant
shall be liable for performance by any other party hereto of such other party's
obligations or duties hereunder. Without limitation of the generality of the
foregoing, under no circumstances whatsoever shall any Participant be liable to
Lessee, nor shall any Participant be liable to any other Participant, for any
action or inaction on the part of the Indenture Trustee or the Owner Trustee in
connection with the transactions contemplated herein, whether or not such action
or inaction is caused by the willful misconduct or gross negligence of the
Indenture Trustee or the Owner Trustee.
(f) This Agreement shall be binding upon and shall inure to the
benefit of and shall be enforceable against, the parties hereto and their
respective successors and permitted assigns including each successive holder of
the Owner Participant's interest and each successive holder of any Loan
Certificate issued and delivered pursuant to this Agreement or the Trust
Indenture whether or not an express assignment to such holder of rights and
obligations under this Agreement has been made.
(g) The Owner Participant hereby consents to the Owner Trustee's
appointment of Lessee as its exclusive agent pursuant to the terms of Section
7(a)(4) of the Lease.
SECTION 16. Invoices and Payment of Expenses. Each of the Owner
Trustee, the Indenture Trustee, Lessee and the Participants shall promptly
submit to the Owner Participant and the Lessee for their joint prompt approval
(except in the case of Transactions Expenses referred to in clauses (i)(6), (v)
and (viii) of the definition thereof which shall be approved solely by the Owner
Participant) copies of invoices of the Transaction Expenses as they are
received. The Owner Participant agrees to transfer to the Owner Trustee from
time to time promptly upon receipt of invoices of Transaction Expenses such
amount as shall be necessary in order to enable the Owner Trustee to pay such
Transaction Expenses or to pay such amounts directly. To the extent of funds
received by it, the Owner Trustee agrees to pay
69
[Participation Agreement (1995 777 B)]
all invoices of Transaction Expenses that have been so approved promptly upon
receipt thereof. Notwithstanding the foregoing, in the event that the
transactions contemplated hereby shall not be consummated, Lessee shall pay all
Transaction Expenses, except that the fees, expenses and disbursements of the
Owner Participant (including those relating to its counsel) shall be borne by
the Owner Participant if such failure to consummate the transactions results
from the failure of the Owner Participant to adhere to the terms and conditions
set forth in the letter dated March 2, 1995 addressed to Lessee and Capstar
Partners and agreed to by Lessee or to close after all conditions precedent to
the Owner Participant's funding of its Commitment set forth herein have been
satisfied. To the extent Transaction Expenses exceed [_____%] of Lessor's Cost,
the Lessee may, in lieu of electing an optimization pursuant to Section 18
hereof, promptly reimburse the Owner Trustee or Owner Participant, as
appropriate, for all or a portion of the Transaction Expenses described in
clause (i)(5) and/or clause (vi) (excluding any debt placement fees included in
said clause (vi)) of the definition of Transaction Expenses.
SECTION 17. Optional Redemption of Certificates. (a) Subject to the
terms of this Section 17, in the event that at any time Lessee shall have given
written notice to the Owner Trustee, the Indenture Trustee and the Owner
Participant that there be effected a voluntary redemption of all of the
outstanding Loan Certificates by the Owner Trustee as part of a refunding or
refinancing transaction, the Owner Participant agrees to negotiate promptly in a
commercially reasonable manner to conclude an agreement with Lessee as to the
terms of such refunding or refinancing transaction (including the terms of any
debt to be issued in connection with such refunding or refinancing transaction
and the documentation to be executed in connection therewith), and if after such
negotiation Lessee and the Owner Participant shall have concluded an agreement
with respect to such terms:
(1) within ten Business Days after the reaching of such
agreement, the Owner Participant will deliver to Lessee a certificate of an
authorized representative of the Owner Participant (the "Refinancing
Certificate") setting forth (i) the proposed date on which the outstanding
Loan Certificates will be redeemed, describing the new debt to be issued
and the other aspects of such refunding or refinancing transaction to be
consummated (such date, the "Refinancing Date") and (ii) the following
information: (A) the principal amount of debt to be issued by the Owner
Trustee on the Refinancing Date, and (B) the proposed revised schedules of
Basic Rent, Excess Amount, debt amortization, Stipulated Loss Value
percentages, Termination
70
[Participation Agreement (1995 777 B)]
Value percentages, Special Termination Value percentages and EBO
Percentage. Within ten Business Days of its receipt of the Refinancing
Certificate, Lessee may demand a verification pursuant to Exhibit E to the
Lease of the information set forth in the Refinancing Certificate. Upon
the acceptance by Lessee of the accuracy of the information set forth in
the Refinancing Certificate or the determination pursuant to such
verification procedures of the revised Basic Rent, Excess Amount, debt
amortization, Stipulated Loss Value percentages, Termination Value
percentages, Special Termination Value percentages and EBO Percentage and
the Debt/Equity Ratio (such information, the "Refinancing Information") the
appropriate parties will take the actions specified in paragraphs (2)
through (6) below;
(2) the appropriate parties will enter into a financing or loan
agreement in form and substance reasonably satisfactory to the Owner
Participant, the Owner Trustee and the Lessee (which may involve an
underwriting agreement in connection with a public offering of such debt or
the purchase of such debt by a publicly funded entity (or entities) or the
sale of the Owner Trustee's interest in the Trust Estate and/or the
Aircraft and its resale to the Owner Trustee) with the institution or
institutions to be named therein (A) providing for (i) the issuance and
sale by the Owner Trustee to such institution or institutions on the
Refinancing Date of debt securities in an aggregate principal amount
specified in the Refinancing Information, which amount shall be at least
equal to the aggregate principal amount of all Loan Certificates
outstanding on the Refinancing Date (such debt securities, the "New Debt")
and (ii) the application of the proceeds of the sale of the New Debt to the
redemption of all such Loan Certificates on the Refinancing Date and (B)
pursuant to which the parties to the refinancing transaction (including the
Owner Participant and Lessee but excluding any public holders of debt) make
such representations, warranties and covenants as the Owner Participant or
Lessee may reasonably require;
(3) Lessee and the Owner Trustee will amend the Lease to provide
that (i) Basic Rent, Excess Amount and the EBO Percentage in respect of the
period from and after the Refinancing Date shall be as provided in the
Refinancing Information and (ii) amounts payable in respect of Stipulated
Loss Value percentages, Special Termination Value Percentages and
Termination Value percentages from and after the Refinancing Date shall be
as provided in the Refinancing Information;
71
[Participation Agreement (1995 777 B)]
(4) the Owner Trustee will enter into an agreement to provide for
the securing thereunder of the New Debt in like manner as the Loan
Certificates and will enter into such amendments and supplements to the
Trust Indenture (or such new indenture or other security agreement) as may
be necessary to effect such refunding or refinancing (which agreements,
amendments and supplements shall be reasonably satisfactory to the Owner
Participant);
(5) unless otherwise agreed or required by the Owner Participant,
and whether or not such refunding or refinancing transaction is
consummated, Lessee, on behalf of Lessor, shall pay on an after-tax basis
all of the reasonable Expenses of all parties to such refunding or
refinancing, including without limitation, the reasonable fees and expenses
of such parties' counsel and any related loan or commitment fees; and
(6) subject to compliance by the Owner Trustee with all
applicable terms and conditions for voluntary prepayment under the Trust
Indenture and this Agreement, each Certificate Holder of a Loan Certificate
being refinanced or refunded will transfer to the Owner Trustee the Loan
Certificates held by it immediately prior to such refunding or refinancing
for cancellation (and the Owner Trustee shall cancel the same), against
receipt by such Certificate Holder of the then outstanding principal amount
of such Loan Certificates, accrued and unpaid interest thereon, plus
Premium, if any, together with payment in full of all other amounts then
payable to such Certificate Holder and the Indenture Trustee hereunder or
under the Trust Indenture.
(b) In the case of a refunding or refinancing involving a public
offering of the New Debt, the Owner Participant shall have the right (but not
the obligation) to review and approve (which approval shall not be unreasonably
withheld) all offering materials to be employed in connection therewith. It is
expressly understood that the Owner Participant shall have no obligation
hereunder to consent thereto if, in its good faith judgment, such refunding or
refinancing (A) increases its, any of its Affiliates (other than any Affiliate
which is acting as an underwriter) or the Owner Trustee's exposure to (i)
liabilities under federal or state securities laws, (ii) regulation under state
or federal securities laws, (iii) the need to publicly disclose information that
is not generally available to the public, or (iv) being adversely affected in
its respective ability to engage in any other financing transaction, in each
case to a level unacceptable to it in its reasonable, good faith, judgment, or
(B) requires the identity of the Owner Participant
72
[Participation Agreement (1995 777 B)]
to be disclosed in any offering materials. Lessee shall have the right to
purchase such debt securities and apply such securities as a credit against its
obligations to pay Rent, provided that (x) in connection with such refunding or
refinancing Lessee shall have agreed to indemnify the Owner Participant with
respect to such right in a manner satisfactory to the Owner Participant, and (y)
Lessee may not, at any one time hold in the aggregate any such debt securities
having a face value in excess of that portion of the two next succeeding
installments of Basic Rent which is required to be paid to the holders of such
debt securities on account of principal and interest. Any trustee of public
debt shall be a bank or trust company having its principal place of business in
the Borough of Manhattan, City and State of New York, Chicago, Illinois,
Hartford, Connecticut or Boston, Massachusetts and having, or having a parent
willing to guarantee the obligations of such bank or trust company and having, a
combined capital and surplus of at least $100,000,000, if there be such an
institution willing, able and legally qualified to perform the duties of trustee
upon reasonable or customary terms.
(c) Lessee shall give the Indenture Trustee at least twenty-five (25)
days irrevocable written notice of the proposed date of the optional redemption.
(d) Notwithstanding the foregoing, the Owner Participant shall have no
obligation to proceed with any refunding or refinancing transaction as
contemplated by this Section 17:
(i) if in the Owner Participant's good faith judgment, such
transaction would have an adverse impact (including, without limitation the
risk of adverse tax consequences) on it;
(ii) unless a third party or parties, unaffiliated with Lessee and
Owner Participant, shall have committed to (and shall) provide the entire
financing needed to consummate the proposed refunding or refinancing
transaction, it being understood that Owner Participant shall have no
obligation to locate any such party or parties;
(iii) unless Lessee indemnifies Owner Trustee and Owner
Participant by agreement in form and substance reasonably satisfactory to
each of them, for any liability, obligation (other than the obligation to
pay principal and interest and related payments in respect of the New
Debt), cost or expense (including, without limitation, reasonable
attorneys' fees) related to or arising out of any such refunding or
refinancing transaction;
73
[Participation Agreement (1995 777 B)]
(iv) unless the New Debt is denominated in Dollars; or
(v) if the refinancing would increase or decrease the Owner
Participant's Commitment.
(e) There shall be no more than one redemption permitted under this
Section 17.
(f) No voluntary redemption shall occur pursuant to this Section 17
prior to the fifth anniversary of the Delivery Date.
SECTION 18. Optimization. (a) In the event that: (i) the Delivery
Date occurs other than on May 15, 1995 or (ii) Transaction Expenses paid by
Lessor are determined to be other than [____%] of Lessor's Cost, the Lessee may,
pursuant to this Section 18 and in accordance with the requirements of Section
3(c) of the Lease, optimize the Basic Rent, Excess Amount, Stipulated Loss Value
percentages, Termination Value percentages, Special Termination Value
percentages and EBO Percentage subject to the proviso set forth in Section
3(c)(i) of the Lease. The Owner Participant shall deliver to Lessee and the
Indenture Trustee a certificate of an authorized representative of the Owner
Participant (the "Optimization Certificate") setting forth the proposed revised
schedules of Basic Rent, Excess Amount, Stipulated Loss Value percentages,
Termination Value percentages, Special Termination Value percentages and EBO
Percentage. Within fifteen days of its receipt of the Optimization Certificate,
Lessee may demand a verification, pursuant to Exhibit E of the Lease, of the
information set forth in the Optimization Certificate. Upon the acceptance by
Lessee of the accuracy of the information set forth in the Optimization
Certificate or the determination pursuant to such verification procedures of
such information, the Owner Participant will cause the Lessor (A) to execute an
amendment to the Lease setting forth the optimized Basic Rent, Excess Amount,
Stipulated Loss Value percentages, Termination Value percentages, Special
Termination Value percentages and EBO Percentage, and (B) the Lessee will
execute such amended Lease necessary to effectuate the foregoing.
(b) In connection with optimization adjustments of Basic Rent, Excess
Amount, Stipulated Loss Value percentages, Termination Value percentages,
Special Termination Value percentages and EBO Percentage pursuant to this
Section 18 and Section 3(c) of the Lease, none of the principal amount,
amortization schedules or interest rate of the Loan Certificates shall be
altered.
74
[Participation Agreement (1995 777 B)]
(c) Lessee shall pay on an after-tax basis all of the reasonable
Expenses of all parties to such optimization, including, without limitation, the
reasonable fees and expenses of such parties' counsel.
SECTION 19. Nondisclosure. Each party hereto (other than the Owner
Participant) agrees that it will use its best efforts not to disclose the
identity of the Owner Participant and the terms of the Operative Documents in
connection with the issuance or release for external publication of any article
or advertising or publicity matter relating to the terms or conditions of any of
the Operative Documents or the transactions contemplated thereby without the
prior written consent of the Owner Participant (except as expressly permitted by
the Operative Documents or (t) with respect to the terms of the Operative
Documents to the extent required in connection with a public placement of the
debt pursuant to Section 17 hereof or (u) to the extent required in connection
with a private placement of the debt pursuant to Section 17 hereof or (v) to the
extent required to appropriate regulatory authorities or in response to subpoena
or other legal process or as otherwise required by law or (w) to such party's
insurance agents, auditors and counsel or other agents or (x) in the case of any
Pass Through Trustee, the Indenture Trustee, the Owner Participant or the Owner
Trustee (as the case may be), to prospective transferees or to any successor
Owner Trustee (as the case may be), who in turn agree to use their best efforts
not to make such disclosure in breach of this Section 19 or (y) as may be
necessary or desirable in connection with the enforcement by such party of any
Operative Document).
* * *
75
[Participation Agreement (1995 777 B)]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
UNITED AIR LINES, INC.,
Lessee
By:_______________________________
Vice President and Treasurer
______________________________,
Owner Participant
By: ______________________________
Title:____________________________
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
Indenture Trustee
By: ______________________________
Title:____________________________
STATE STREET BANK AND TRUST COMPANY, not in its
individual capacity, except as expressly provided
herein, but solely as Owner Trustee,
Owner Trustee
By: ______________________________
Title:____________________________
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
in its capacity as Pass Through Trustee under each
of the Pass Through Trust Agreements
By:_______________________________
Title:____________________________
76
[Participation Agreement (1995 777 B)]
SCHEDULE I
Names and Addresses
Lessee:
- ------
U.S. Mail Overnight Delivery Service
- --------- --------------------------
United Air Lines, Inc. United Air Lines, Inc.
P.O. Box 66100 1200 East Algonquin Road
Chicago, Illinois 60666 Elk Grove Township, IL 60007
Attn: Vice President and Attn: Vice President and
Treasurer Treasurer
Telecopy: (708) 952-7117
Payment Address
---------------
Owner Participant:
- ----------------- The Chase Manhattan Bank, N.A.
New York, N.Y.
_______________________ ABA #: 021000021
_______________________
_______________________ Account #: 910-2-499093
_______________________ Account Name:
Reference: UAL/1995 777 B
Attn: ______________________
Telecopy: __________________
Pass Through Trustee:
- --------------------
First Security Bank of Utah,
National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust
Department
Telecopy: (801) 246-5053
[Participation Agreement (1995 777 B)]
Indenture Trustee:
- -----------------
First Security Bank of Utah, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Department
Telecopy: (801) 246-5053
Owner Trustee:
- --------------
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(or, if given by overnight
delivery service)
Two International Place
Boston, Massachusetts 02110
Attn: _________________________
Telecopy: (617) 664-5367
I-2
[Participation Agreement (1995 777 B)]
SCHEDULE II
Commitments
-----------
Percentage of
Certificate Holder Lessor's Cost Dollar Amount
- ------------------ ------------- -------------
First Security Bank of Utah,
National Association, in
its capacity as Pass Through
Trustee under Pass
Through Trust Agreement 1995-A1
First Security Bank of Utah,
National Association, in its
capacity as Pass Through
Trustee under Pass Through
Trust Agreement 1995-A2
Owner Participant:
- -----------------
[__________________________] $
Total Commitments: 100.00% $
================= ======= =
Doc. No. 1.01
Aircraft N189UA
- --------------------------------------------------------------------------------
FIRST AMENDED AND RESTATED PARTICIPATION AGREEMENT
(1993 747 A)
Dated as of May 1, 1995
Among
UNITED AIR LINES, INC.,
Lessee,
___________________,
Owner Participant,
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
in its capacity as
Pass Through Trustee under each of the
Pass Through Trust Agreements,
STATE STREET BANK AND TRUST COMPANY,
Not in its Individual Capacity,
except as expressly provided herein,
but solely as Owner Trustee,
and
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
In its Individual Capacity and as Indenture Trustee
---------------------------
United Air Lines, Inc.
1993 747 A Equipment Trust
One Boeing 747-422 Aircraft
---------------------------
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
SECTION 1. Certain Definitions; Participations in Lessor's
Cost of the Aircraft................................................... 3
SECTION 2. Lessee's Notice of Delivery Date................................ 4
SECTION 3. Instructions to the Owner Trustee and Indenture
Trustee................................................................ 4
SECTION 4. Conditions...................................................... 4
(a) Conditions Precedent to the Participations in the Aircraft........ 4
(b) Conditions Precedent to the Obligations of Lessee................. 4
SECTION 5. Confidentiality of Purchase Agreement........................... 5
SECTION 6. Extent of Interest of Certificate Holders....................... 5
SECTION 7. Lessee's Representations, Warranties and Indemnities............ 6
(a) In General........................................................ 6
(b) General Tax Indemnity............................................. 10
(c) General Indemnity................................................. 22
(d) Withholding....................................................... 28
SECTION 8. Representations, Warranties and Covenants........................ 29
SECTION 9. [Intentionally Omitted]......................................... 51
SECTION 10. Other Documents; Amendment..................................... 51
SECTION 11. Certain Covenants of Lessee.................................... 51
SECTION 12. Owner for Income Tax Purposes.................................. 52
SECTION 13. Notices; Consent to Jurisdiction............................... 52
SECTION 14. Change of Situs of Owner Trust................................. 53
SECTION 15. Miscellaneous.................................................. 55
SECTION 16. Invoices and Payment of Expenses............................... 57
SECTION 17. Optional Redemption of Certificates............................ 57
SECTION 18. Optimization................................................... 61
SECTION 19. Nondisclosure.................................................. 62
ii
SCHEDULES
SCHEDULE I - Names and Addresses
SCHEDULE II - Commitments
SCHEDULE III - Legal Opinions
EXHIBIT A-1 - Form of Transferor Opinion Re: Transfer of
Owner Participant's Interest
EXHIBIT A-2 - Form of Transferee Opinion Re: Transfer of
Owner Participant's Interest
EXHIBIT B - Form of Assignment and Assumption Agreement
iii
FIRST AMENDED AND RESTATED PARTICIPATION AGREEMENT
(1993 747 A)
THIS FIRST AMENDED AND RESTATED PARTICIPATION AGREEMENT (1993 747 A)
dated as of May 1, 1995 (this "Agreement") among (i) United Air Lines, Inc., a
Delaware corporation (the "Lessee"), (ii) _________________, a corporation
organized under the laws of Delaware (the "Owner Participant"), (iii) STATE
STREET BANK AND TRUST COMPANY, a Massachusetts trust company, not in its
individual capacity, except as expressly provided herein, but solely as Owner
Trustee under the Trust Agreement (the "Owner Trustee") as successor to the
Original Owner Trustee (as defined below), (iv) FIRST SECURITY BANK OF UTAH,
NATIONAL ASSOCIATION, a national banking association, not in its individual
capacity, except as otherwise provided herein, but solely as trustee under the
Pass Through Trust Agreement (the "Pass Through Trustee"), dated as of February
1, 1992, as amended and restated as of May 1, 1995 (the "Basic Agreement"), in
each case between the Lessee and STATE STREET BANK AND TRUST COMPANY OF
CONNECTICUT, NATIONAL ASSOCIATION, as supplemented by Trust Supplements Nos.
1995-A1 and 1995-A2, each dated as of May __, 1995 between the Lessee and the
Pass Through Trustee creating the 1995-A1 Pass Through Trust and the 1995-A2
Pass Through Trust, respectively (the Basic Agreement as so supplemented being
the "1995-A1 Pass Through Trust Agreement" and the "1995-A2 Pass Through Trust
Agreement", respectively, each of the 1995-A1 Pass Through Trust Agreement and
the 1995-A2 Pass Through Trust Agreement being a "Pass Through Trust Agreement")
and (v) FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION, a national banking
association, in its individual capacity and as Indenture Trustee under the Trust
Indenture (the "Indenture Trustee") as successor to the Original Indenture
Trustee (as defined below), amends and restates that certain Participation
Agreement (1993 747 A) dated as of April 1, 1993 among Lessee, the Owner
Participant, Wilmington Trust Company, not in its individual capacity except as
expressly provided therein (the "Original Owner Trustee"), State Street Bank and
Trust Company of Connecticut, National Association, as Indenture Trustee (the
"Original Indenture Trustee") and The Chase Manhattan Bank, N.A., as an Original
Loan Participant, as amended by that certain First Amendment to Participation
Agreement (1993 747 A) dated as of December 1, 1993 among Lessee, the Owner
Participant, the Original Owner Trustee, the Original Indenture Trustee and The
Chase Manhattan Bank. N.A., Berliner Handels Und Frankfurter Bank and NBD Bank,
N.A., as Original Loan Participants (collectively, the "Original Loan
Participants"), as further amended by that certain Second Amendment to
Participation Agreement (1993 747 A) dated as of July 1, 1994 among Lessee, the
Owner Participant, the Original Owner Trustee, the Original
[First Amended and Restated
Participation Agreement (1993 747 A)]
Indenture Trustee and The Mitsubishi Trust and Banking Corporation, New York
Branch (the "Successor Original Loan Participant") (such Participation
Agreement, as amended as set forth above, being referred to herein as the
"Original Participation Agreement").
WITNESSETH:
WHEREAS, except as otherwise defined in this Agreement, capitalized
terms used herein shall have the meanings attributed thereto in Section 1
hereof;
WHEREAS, as contemplated by Section 20 of the Original Participation
Agreement, the outstanding Loan Certificates held by the Successor Original Loan
Participant are, concurrently with the execution and delivery of this Amendment,
being refinanced by the issuance to each Pass Through Trustee of new Loan
Certificates in the aggregate principal amount of $_________ and the proceeds
of such issuance are, concurrently with the execution and delivery of this
Agreement, being applied to the payment of all the unpaid principal on such
outstanding Loan Certificates in an amount equal to $____________; and
WHEREAS, the parties hereto desire to amend and restate the Original
Participation Agreement in its entirety and the parties hereto desire and intend
that the terms, provisions and agreements herein set forth shall have the same
force and effect as though originally executed and delivered in the place of the
Original Participation Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Owner Participant is entering into the First Amended and Restated
Trust Agreement (1993 747 A) (the "Trust Agreement") pursuant to which Trust
Agreement the Owner Trustee agrees, among other things, to hold the Trust Estate
defined in Section 1.01 thereof (the "Trust Estate") for the use and benefit of
the Owner Participant; and
WHEREAS, the Indenture Trustee and the Owner Trustee concurrently with
the execution and delivery of this Agreement are entering into the Third Amended
and Restated Trust Indenture and Mortgage (1993 747 A) dated as of May 1, 1995
(the "Trust Indenture") pursuant to which the Owner Trustee agrees, among other
things, to issue one or more Loan Certificates in the form set forth in Exhibit
A-1 or Exhibit A-2 to the Trust Indenture to each Pass Through Trustee on behalf
of the related grantor trusts created by the applicable Pass Through Trust
Agreement as evidence of the Owner Trustee's indebtedness to each Pass Through
2
[First Amended and Restated
Participation Agreement (1993 747 A)]
Trustee, which Loan Certificates are to be secured by the mortgage and security
interest in the Aircraft created pursuant to the Trust Indenture by the Owner
Trustee in favor of the Indenture Trustee, and the Owner Trustee shall execute
and deliver the Trust Supplement covering the Aircraft, supplementing the Trust
Agreement and the Trust Indenture; and
WHEREAS, as described in Section 2 hereof, the Owner Trustee and
Lessee are entering into the Second Amended and Restated Lease Agreement (1993
747 A) dated as of May 1, 1995 (the "Lease Agreement") whereby, subject to the
terms and conditions set forth therein, the Owner Trustee agrees to lease to
Lessee, and Lessee agrees to lease from the Owner Trustee, the Aircraft on the
Delivery Date; and
WHEREAS, in connection with the foregoing, each Pass Through Trustee
will issue the Pass Through Certificates substantially in the form of Exhibit A
to each Pass Through Trust Agreement; and
WHEREAS, to facilitate the Owner Trustee's issuance of the Loan
Certificates to the applicable Pass Through Trustee and the purchase of the Loan
Certificates by each such Pass Through Trustee, the Lessee has duly authorized
the execution and delivery of each of the two Pass Through Trust Agreements as
the "issuer" thereunder, as such term is defined in and solely for purposes of
the Securities Act of 1933, as amended, and of the Pass Through Certificates
being issued thereunder as the "obligor" thereunder, as such term is defined in
and solely for purposes of the Trust Indenture Act of 1939, as amended, with
respect to the Pass Through Certificates and is undertaking to perform certain
administrative and ministerial duties thereunder and is also undertaking to pay
the fees and expenses of the Pass Through Trustees; and
WHEREAS, certain terms are used herein as defined in Section 1(a)
hereof.
NOW THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
SECTION 1. Certain Definitions; Participations in Lessor's Cost of
the Aircraft. (a) The terms "Lessee," "Owner Participant," "Pass Through
Trustee," "Owner Trustee" and "Indenture Trustee" shall have the further
meanings attributed thereto in the Lease Agreement referred to above and, except
as otherwise defined in this Agreement, terms used herein in capitalized form
shall have the meanings attributed thereto in the Lease Agreement referred to
above. Unless the context
3
[First Amended and Restated
Participation Agreement (1993 747 A)]
otherwise requires, any reference herein to any of the Operative Documents
refers to such document as it may be amended from time to time in accordance
with its terms and the terms of each other agreement restricting the amendment
thereof.
(b) Subject to the terms and conditions of the Original Participation
Agreement, (i) the Original Loan Participant agreed to finance, in part, the
Owner Trustee's payment of Lessor's Cost for the Aircraft by making a secured
loan to the Owner Trustee (herein called the "Loan") on a date designated
pursuant to Section 2 thereof, but in no event later than May 15, 1993, in the
amount in Dollars equal to the percentage of Lessor's Cost set forth opposite
its name on Schedule II thereto and (ii) the Owner Participant agreed, in
connection with its equity investment in the beneficial ownership of the
Aircraft and the sale of the Aircraft by the Lessee to the Owner Trustee
pursuant to the Owner Trustee's Bill of Sale, as contemplated thereby and by the
Owner Trustee's Purchase Agreement, to make its equity investment in the
beneficial ownership of the Aircraft on a date designated as set forth above,
but in no event later than May 15, 1993, in an amount in Dollars equal to the
percentage of Lessor's Cost set forth opposite its name on Schedule II thereto.
SECTION 2. Lessee's Notice of Delivery Date.
[Intentionally Omitted].
SECTION 3. Instructions to the Owner Trustee and Indenture Trustee.
[Intentionally Omitted].
SECTION 4. Conditions. (a) Conditions Precedent to the
Participations in the Aircraft. It is agreed that the respective obligations of
the Original Loan Participant and the Owner Participant to participate in the
payments of Lessor's Cost were subject to the satisfaction prior to or on the
Delivery Date of the conditions precedent set forth in Section 4(a) of the
Original Participation Agreement and the respective obligations of the OP and
the Pass Through Trustees to enter into a refinancing are set forth in the
Redemption and Refinancing Agreement.
(b) Conditions Precedent to the Obligations of Lessee. It is agreed
that the obligations of Lessee (A) to sell the Aircraft to the Owner Trustee,
(B) to accept delivery of the Aircraft under the Lease and (C) to enter into its
other Operative Documents, were all subject to the fulfillment to the
satisfaction of Lessee prior to or on the Delivery Date of the conditions
precedent set forth in the Original Participation Agreement and the obligations
of Lessee to enter into a
4
[First Amended and Restated
Participation Agreement (1993 747 A)]
refinancing transaction are set forth in the Redemption and Refinancing
Agreement.
SECTION 5. Confidentiality of Purchase Agreement. Lessor, the
Participants, and the Indenture Trustee shall keep the Purchase Agreement
confidential and shall not disclose the same to any Person, except (A) to
prospective and permitted transferees of Lessor's, a Pass Through Trustee's, the
Owner Participant's or the Indenture Trustee's interest who agree to hold such
information confidential, (B) to the aforementioned prospective and permitted
transferees', Lessor's, Pass Through Trustees', the Owner Participant's or the
Indenture Trustee's counsel or special counsel, independent insurance brokers or
other agents who agree to hold such information confidential, (C) as may be
required by any statute, court or administrative order or decree or governmental
ruling or regulation, including Federal or state banking examiners or tax
auditors or (D) as may be necessary or desirable for purposes of protecting the
interest of any such Person or for enforcement of the Lease by Owner Trustee,
the Participants or the Indenture Trustee; provided, however, that any and all
disclosures of all or any part of the Purchase Agreement which are permitted by
(C) or (D) above shall be made only to the extent necessary to meet the specific
requirements or needs of the Persons to whom such disclosures are hereby
permitted.
SECTION 6. Extent of Interest of Certificate Holders. No Certificate
Holder shall have any further interest in, or other right with respect to, the
mortgage and security interests created by the Trust Indenture when and if the
Original Amount of, Premium, if any, and interest on all Loan Certificates held
by such Certificate Holder and all other sums payable to such Certificate Holder
hereunder, under the Trust Indenture and under such Loan Certificates shall have
been paid in full. Each Certificate Holder by its acceptance of a Loan
Certificate, agrees that it will look solely to the income and proceeds from the
Trust Indenture Estate to the extent available for distribution to such
Certificate Holder as provided in Section 2.09 of the Trust Indenture and that
neither the Owner Participant nor the Owner Trustee shall be personally liable
to any Certificate Holder for any amounts payable under the Loan Certificates,
the Trust Indenture, hereunder, or under any other Operative Documents
(including, without limitation, amounts payable as Premium), except as expressly
provided in this Agreement or (in the case of the Owner Trustee) in the Trust
Indenture.
5
[First Amended and Restated
Participation Agreement (1993 747 A)]
SECTION 7. Lessee's Representations, Warranties and Indemnities.
(a) In General. Lessee represents and warrants that as of the
Delivery Date:
(i) Lessee is a corporation duly organized and validly existing
in good standing pursuant to the laws of the State of Delaware; is duly
qualified to do business as a foreign corporation in each jurisdiction in
which its operations or the nature of its business requires, except where
the failure to be so qualified would not have a material adverse effect on
Lessee or its business; is a Citizen of the United States and a
Certificated Air Carrier; holds all material licenses, certificates,
permits and franchises from the appropriate agencies of the United States
of America and/or all other governmental authorities having jurisdiction,
necessary to authorize Lessee to engage in air transport and to carry on
scheduled passenger service, in each case as presently conducted; has its
chief executive office (as such term is defined in Article 9 of the Uniform
Commercial Code) in Elk Grove Township, Illinois; and has the corporate
power and authority to conduct its business as it is presently being
conducted, to hold under lease the Aircraft and to enter into and perform
its obligations under the Lessee Documents;
(ii) the execution, delivery and performance by Lessee of the
Lessee Documents have been duly authorized by all necessary corporate
action on the part of Lessee, do not require any stockholder approval, or
approval or consent of any trustee or holders of any indebtedness or
obligations of Lessee except such as have been duly obtained, and none of
such Lessee Documents contravenes any law, judgment, governmental rule,
regulation or order binding on Lessee or the certificate of incorporation
or by-laws of Lessee or contravenes the provisions of, or constitutes a
default under, or results in the creation of any Lien (other than Permitted
Liens) upon the property of Lessee under, its certificate of incorporation
or bylaws, or any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, bank loan or credit agreement or other
agreement or instrument to which Lessee is a party or by which it or its
properties may be bound or affected;
(iii) neither the execution and delivery by Lessee of the Lessee
Documents nor the performance by Lessee of its obligations thereunder
require the consent or approval of, the giving of notice to, or the
registration with, or the taking of any other action in respect of any
federal, state or foreign government authority or agency, except for (A)
6
[First Amended and Restated
Participation Agreement (1993 747 A)]
the orders, permits, waivers, exemptions, authorizations and approvals of
the regulatory authorities having jurisdiction over the operation of the
Aircraft by Lessee, which orders, permits, waivers, exemptions,
authorizations and approvals have been duly obtained, and are in full force
and effect, (B) the registration of the Aircraft referred to in Section
4(a)(ix)(2) and (C) any normal periodic and other reporting requirements
under the applicable rules and regulations of the FAA to the extent
required to be given or obtained only after the Delivery Date;
(iv) each of the Lessee Documents has been duly executed and
delivered by Lessee and constitutes legal, valid and binding obligations of
Lessee enforceable against Lessee in accordance with the terms thereof;
(v) there are no pending or threatened actions or proceedings
before any court or administrative agency involving any Lessee Document or
the transactions contemplated hereby or which individually (or in the
aggregate in the case of any group of related lawsuits) is expected to have
a material adverse effect on the financial condition of Lessee or the
ability of Lessee to perform its obligations under the Lessee Documents;
(vi) except for (A) the registration of the Aircraft pursuant to
the Federal Aviation Act, (B) the filing for recording pursuant to said Act
of the Trust Agreement, the Lease with the Lease Supplement covering the
Aircraft, the Trust Indenture and the Trust Supplement attached thereto and
made a part thereof, and the Owner Trustee's FAA Bill of Sale, (C) the
filing of financing statements (and continuation statements at periodic
intervals) with respect to the security and other interests created by such
documents under the Uniform Commercial Code of Illinois (which financing
statement Lessee has caused to be presented in due form for filing with the
appropriate filing office in the State of Illinois) and such other states
as may be specified in the opinions furnished pursuant to Section 4(a)(xi)
hereof and (D) the taking of possession by the Indenture Trustee of the
original counterparts of the Lease and the Lease Supplement covering the
Aircraft, no further action, including any filing or recording of any
document (including any financing statement in respect thereof under
Article 9 of the Uniform Commercial Code of any applicable jurisdiction),
is necessary or advisable in order to establish and perfect the Owner
Trustee's title to and interest in the Aircraft as against the Lessee and
the Indenture Trustee's security interest in
7
[First Amended and Restated
Participation Agreement (1993 747 A)]
the Aircraft as against the Owner Trustee, and in each case as against any
third parties in any applicable jurisdictions in the United States;
(vii) there has not occurred any event which constitutes a Default
or an Event of Default under the Lease which is presently continuing and
there has not occurred any event which constitutes or would, with the
passage of time or the giving of notice, or both, constitute an Event of
Loss;
(viii) the statements of financial position of Lessee as of
December 31, 1992 and the related statements of earnings and cash flow of
Lessee for the year then ended, copies of which have been furnished to the
Participants, fairly present the financial condition of Lessee as at such
date and the results of operations and cash flow of Lessee for the period
ended on such date, in accordance with generally accepted accounting
principles consistently applied (except as may be stated in the notes
thereto), and since December 31, 1992, there has been no material adverse
change in such condition or operations, except for such matters timely
disclosed in press releases issued by UAL Corporation or Lessee or in
public filings, effective as of the date hereof, with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended,
by UAL Corporation or Lessee;
(ix) the Owner Trustee will have received good and marketable
title to the Aircraft free and clear of all Liens, except the rights of
Lessee under the Lease and the Lease Supplement covering the Aircraft, the
Lien of the Trust Indenture, the beneficial interest of the Owner
Participant in the Aircraft, and the Liens permitted by clause (iii)
(solely for Taxes not yet due) of Section 6 of the Lease;
(x) none of the proceeds from the issuance of the Loan
Certificates or from the acquisition by the Owner Participant of its
beneficial interest in the Trust Estate will be used directly or indirectly
by Lessee to purchase or carry any "margin stock" as such term is defined
in Regulation G or U of the Board of Governors of the Federal Reserve
System;
(xi) neither Lessee nor anyone acting on behalf of Lessee has (A)
directly or indirectly offered any interest in the Trust Estate for sale
to, or solicited any offer to acquire any of the same from, anyone other
than the Owner
8
[First Amended and Restated
Participation Agreement (1993 747 A)]
Participant, and not more than twenty-five (25) other institutions believed
capable of evaluating and bearing the risks of investment in the
transactions contemplated hereby, or (B) offered any interest in the Trust
Estate or any Pass Through Certificate or any Loan Certificate in a manner
which would violate the Securities Act of 1933, as amended, the regulations
thereunder, administrative and judicial interpretation thereof or the
securities laws, rules or regulations of any state;
(xii) Lessee is not in default in the performance of any term or
condition of the Owner Trustee's Purchase Agreement, and is not in default
in the performance of any term or condition of the Purchase Agreement which
materially adversely impairs the transactions contemplated hereby;
(xiii) no governmental approval of any kind is required of the
Owner Participant, the Original Loan Participant, the Owner Trustee or the
Indenture Trustee for their respective execution of or performance under
this Agreement, the Pass Through Trust Agreements or any agreement
contemplated hereby solely by reason of any fact or circumstance peculiar
to: (a) Lessee, (b) the nature of the Aircraft, or (c) Lessee's proposed
operations or use of the Aircraft;
(xiv) all sales or use tax then due and for which Lessee is
responsible pursuant to Section 7(b)(i) hereof shall have been paid, other
than such taxes which are being contested by Lessee in good faith and by
appropriate proceedings so long as such proceedings do not involve any
material risk of the sale, forfeiture or loss of the Aircraft or any
interest therein;
(xv) The Aircraft has been duly certified by the FAA as to type
and airworthiness and such certification remains in full force and effect;
(xvi) Owner Trustee, as lessor under the Lease, and the Indenture
Trustee, as assignee of the Owner Trustee's rights under the Lease pursuant
to the Trust Indenture, are entitled to the protection of Section 1110 of
the Bankruptcy Code in connection with the Owner Trustee's and the
Indenture Trustee's right to take possession of the Airframe and Engines in
the event of a case under Chapter 11 of the Bankruptcy Code in which Lessee
is a debtor; and
(xvii) neither Lessee nor any subsidiary of Lessee is an
"investment company" or a company "controlled by an
9
[First Amended and Restated
Participation Agreement (1993 747 A)]
investment company" within the meaning of the Investment Company Act of
1940, as amended.
(b) General Tax Indemnity. (i) Indemnity. Except as provided in
Section 7(b)(ii) hereof, whether or not any of the transactions contemplated
herein are consummated, Lessee shall pay when due and assume liability for, and
protect, save and shall indemnify and hold harmless each Indemnitee (except
that, for purposes of this Section 7(b)(i), an Indemnitee shall not include any
Certificate Holder) from and against (x) any and all Taxes howsoever imposed
against any Indemnitee, Lessee or all or any part of the Aircraft, the Airframe,
the Engines, the Parts or any part thereof or otherwise by any federal, state or
local government or other taxing authority in the United States or by any
foreign government or any political subdivision or taxing authority thereof or
by any territory or possession of the United States or by any international
authority upon or in connection with, relating to, or measured by (A) the
assembly, manufacture, construction, substitution, improvement, location,
conditioning, installation, financing, refinancing, purchase, acquisition,
acceptance, delivery, nondelivery, transport, ownership, registration,
reregistration, possession, repossession, control, operation, use, maintenance,
repair, replacement, insuring, sale, return, abandonment, storage, redelivery,
leasing, subleasing, modification, rebuilding of, transfer of title to, transfer
of registration of, rejection, importation, mortgaging, exportation or
disposition of, or the imposition of any Lien (or the incurrence of any
liability to refund or pay over any amount as the result of any Lien) on, the
Aircraft, the Airframe, the Engines, the Parts or any part thereof, (B) the
rentals, receipts or earnings from the Aircraft, the Airframe, the Engines, the
Parts or any part thereof, (C) any amount paid or payable pursuant to any
Operative Documents or any Pass Through Trust Agreement or any document related
thereto or the property or the income or other proceeds with respect to any of
the property held in the Trust Estate or the Trust Indenture Estate or the
property held by each Pass Through Trustee under the respective Pass Through
Trust Agreement, (D) the Aircraft, the Airframe, the Engines, the Parts or any
part thereof or any contract relating to the manufacture, construction,
acquisition or delivery thereof, (E) any or all of the Operative Documents, the
Pass Through Trust Agreements, or the issuance of the Loan Certificates or the
Pass Through Certificates (or the refinancing thereof) and any other documents
contemplated hereby or thereby and amendments and supplements hereto and thereto
which have been approved by Lessee or the execution, delivery, recording or
performance of any thereof or the issuance, acquisition, holding or subsequent
transfer thereof, (F) the payment of the Original Amount of, or interest or
Premium on, or other amounts payable
10
[First Amended and Restated
Participation Agreement (1993 747 A)]
with respect to, the Loan Certificates or the payment of principal of, interest
on or any other amounts payable with respect to the Pass Through Certificates,
(G) otherwise with respect to or in connection with the transactions
contemplated by the Operative Documents, or (H) any change in the Owner Trustee
or the situs of the Trust Estate made pursuant to Sections 8(c) or 14 hereof;
and (y) any reasonable out-of-pocket costs and expenses fairly attributed to any
of the foregoing incurred by any Indemnitee.
(ii) Exclusions from General Tax Indemnity. The provisions of
Section 7(b)(i) shall not apply:
(1) in the case of an Indemnitee which is the Owner
Participant, the Owner Trustee, the Trust Estate, or a successor,
assign, or Affiliate of any thereof, to any Income Tax (as defined in
Section 7(b)(xii) hereof) imposed by (A) the United States Federal
government, (B) any state or local taxing jurisdiction or authority in
the United States to the extent such Income Taxes would not have been
imposed if (I) the use, location or operation of the Aircraft, or (II)
the activities of the Lessee, to or in such state or local
jurisdiction, had been the only connection between the Indemnitee and
such jurisdiction, or (C) any foreign government or any political
subdivision or taxing authority thereof or by any territory or
possession of the United States or by any international authority,
except to the extent such Income Taxes are attributable to (I) the
use, location or operation of the Aircraft, or (II) the activities of
the Lessee, to or in such jurisdiction;
(2) to any Tax imposed on an Indemnitee which is the Owner
Participant, the Owner Trustee, or the Trust Estate, or any successor,
assign or Affiliate of any thereof, as a result of a voluntary
transfer or disposition by such Indemnitee including, without
limitation, the revocation of the trust created by the Trust Agreement
or an involuntary transfer or disposition relating to bankruptcy or
similar proceedings of all or any portion of its respective equitable
or legal ownership interest in the Aircraft, the Airframe, the
Engines, the Parts or any part thereof, the Trust Estate or the
Operative Documents and each Pass Through Trust Agreement, unless such
transfer or disposition, whether or not voluntary or involuntary,
shall occur, (A) during a period when an Event of Default has occurred
and is continuing under
11
[First Amended and Restated
Participation Agreement (1993 747 A)]
the Lease at the time of transfer or disposition and such transfer is
as a result of such Event of Default, or (B) in connection with the
termination of the Lease or action or direction of the Lessee pursuant
to Sections 7, 8, 9, 10 or 19 thereof;
(3) to any Tax imposed on any Indemnitee which is the
Indenture Trustee, the Trust Indenture Estate or a Pass Through
Trustee or any successor, assign or Affiliate of any thereof, as a
result of a voluntary or involuntary transfer or other disposition of
all or any portion of its respective equitable or legal interests in
the Trust Estate or the Trust Indenture Estate or the Operative
Documents and each Pass Through Trust Agreement unless, in each case,
such transfer or disposition shall occur (A) during a period when an
Event of Default has occurred and is continuing under the Lease at the
time of transfer or disposition and such transfer or disposition is a
result of such Event of Default, or (B) in connection with the
termination of the Lease or action or direction of the Lessee pursuant
to Sections 9, 10 or 19 thereof;
(4) to any Tax imposed on the Owner Participant, Trust
Estate or Owner Trustee which results from the willful misconduct or
gross negligence of (i) the Owner Participant, to the extent imposed
on the Owner Participant, Trust Estate or Owner Trustee, or (ii) to
the extent imposed on the Owner Trustee, the Owner Trustee;
(5) to any Tax imposed on an Indemnitee which is the
Indenture Trustee, the Trust Indenture Estate or a Pass Through
Trustee which results from the willful misconduct or gross negligence
of such Indemnitee;
(6) to any Tax based on or measured by any fees received by
the Owner Trustee, the Indenture Trustee or a Pass Through Trustee in
connection with any transaction contemplated by the Operative
Documents;
(7) so long as no Event of Default or event which, with the
passage of time or the giving of notice or both, would become an Event
of Default, shall be continuing, to any Tax imposed with respect to
(A) any period after the expiration of the Term and, unless purchased
by the Lessee, return of the Aircraft, (B)
12
[First Amended and Restated
Participation Agreement (1993 747 A)]
the earlier discharge in full of Lessee's obligation to pay the
Stipulated Loss Value or the Termination Value and all other amounts
due under the Lease or (C) placement in storage or parking of the
Aircraft pursuant to Section 5(d) of the Lease; provided, however,
that this Section 7(b)(ii)(8) shall not apply to any Tax (x) relating
to events or conditions occurring or matters arising upon or prior to
such expiration, discharge, storage or parking, or (y) imposed on or
with respect to any payments of Tax indemnified hereunder which are
due after such expiration, discharge, storage or parking until after
such payments have been made;
(8) in the case of an Indemnitee which is the Trust
Indenture Estate or any successor, assign or Affiliate thereof, to any
Tax in the nature of an intangible or similar tax upon or with respect
to the value of the interest of the Trust Indenture Estate or the Pass
Through Certificates, as the case may be, in any of the Loan
Certificates imposed by any government or taxing authority;
(9) to any Tax which Lessee or an Indemnitee is contesting
in good faith under the provisions of Section 7(b)(iv) hereof until
the conclusion of such contest;
(10) to any Tax imposed on the Owner Trustee or an Owner
Participant resulting from, or which would not have occurred but for,
a Lessor Lien (including for this purpose Liens that would be Lessor
Liens but for the proviso to the definition of Lessor Liens);
(11) in the case of an Indemnitee which is the Owner
Participant or the Owner Trustee, to any Taxes to the extent of the
amount of such Taxes that are imposed by any jurisdiction on and with
respect to any activities of such Indemnitee in such jurisdiction
which activities are unrelated to the transactions contemplated by the
Operative Documents and each Pass Through Trust Agreement; and
(12) to any Tax which has been properly included in the
Lessor's Cost.
The provisions of this Section 7(b)(ii) shall not apply to any
Tax imposed in respect of the receipt or accrual of any indemnity payment
made by Lessee pursuant to
13
[First Amended and Restated
Participation Agreement (1993 747 A)]
this Section 7(b) or Section 7(c) hereof or pursuant to the Tax Indemnity
Agreement; provided, however, that this clause shall not result in any
duplication of any amounts of any gross-up payable under Section 7(b)(iii)
or Section 7(c) hereof or the Tax Indemnity Agreement.
Notwithstanding the exclusions set forth in this Section 7(b) or
any other provision of the Operative Documents or the Pass Through Trust
Agreements, the Lessee hereby agrees to indemnify and hold harmless on a
net after-tax basis the Trust Estate, the Owner Trustee and the Owner
Participant for any failure to withhold U.S. Federal Income Taxes upon
payments of principal, interest, Premium or discount on the Loan
Certificates or the Pass Through Certificates, including interest and
penalties, unless the Owner Participant has been timely advised by the
Lessee in writing that such withholding is required.
(iii) Calculation of General Tax Indemnity Payments. Any payment
which Lessee shall be required to make to or for the account of any
Indemnitee in connection with any Tax which is subject to indemnification
under this Section 7(b) shall be in an amount which, after reduction by the
amount of all Taxes required to be paid by such Indemnitee in respect of
the receipt or accrual of such amount and after consideration of any
current savings of such Indemnitee resulting by way of any deduction,
credit or other tax benefit attributable to such indemnified Tax that
actually reduces any taxes for which Lessee is not actually required to
indemnify such Indemnitee pursuant to Section 7(b) hereof or the Tax
Indemnity Agreement shall be equal to the payment otherwise required
hereunder.
If, by reason of any Tax payment made to or for the account of an
Indemnitee by Lessee pursuant to this Section 7(b), such Indemnitee
subsequently realizes a tax deduction, savings or credit (including any
foreign tax credit and any reduction in Taxes) not previously taken into
account in computing such payment, such Indemnitee shall promptly pay to
Lessee an amount equal to the sum of (I) the actual reduction in Taxes, if
any, realized by such Indemnitee which is attributable to such deduction,
savings or credit and (II) the actual reduction in Taxes realized by such
Indemnitee as a result of any payment made by such Indemnitee pursuant to
this sentence; provided, however, that in the case of an Indemnitee which
is the Owner Participant or the Owner Trustee, such Indemnitee shall not be
obligated to make any payment pursuant to this Section 7(b)(iii) to the
extent that the amount calculated pursuant
14
[First Amended and Restated
Participation Agreement (1993 747 A)]
to (I) above would exceed (x) the amount of all prior payments (determined
without regard to any amount paid in respect of Taxes required to be paid
by such Indemnitee in respect of the receipt or accrual of such amounts
received by such Indemnitee) from Lessee pursuant to this Section 7(b),
less (y) the portion of all prior payments computed pursuant to (I) above
by such Indemnitee to Lessee hereunder.
For purposes of this Section 7(b)(iii), items of foreign Tax of
any Indemnitee shall be deemed to be utilized by such Indemnitee as credits
or deductions for any taxable year in accordance with the following
priorities:
First, all available foreign Taxes other than those
described below in Second; and
Second, all available foreign Taxes arising out of any
equipment leasing transaction to the extent that such Indemnitee was
indemnified or held harmless for such Taxes by a lessee on a pari
passu basis.
Any Taxes that are imposed on any Indemnitee as a result of the
disallowance or reduction of any tax benefit referred to in this subsection
as to which such Indemnitee has made in full the payment to Lessee required
hereby (or as to which such Indemnitee would have made its payment but for
Section 7(b)(vii) hereof) or which is otherwise taken into account in
calculating Lessee's indemnity obligation, in a taxable year subsequent to
the utilization by such Indemnitee (including the expiration of any tax
credit carryovers or carrybacks of such Indemnitee that would not otherwise
have expired) shall be treated as a Tax for which Lessee is obligated to
indemnify such Indemnitee pursuant to the provisions of this Section 7(b)
without regard to the provisions of Section 7(b)(ii), 7(b)(iv) or the third
paragraph of this Section 7(b)(iii).
(iv) General Tax Indemnity -- Contests. If a written claim shall
be made against any Indemnitee for any Tax for which Lessee is obligated
pursuant to this Section 7(b), such Indemnitee shall notify Lessee in
writing promptly after receipt thereof (as well as the name of independent
tax counsel for purposes of this Section 7(b)(iv)) and, in any event,
within 30 days of receipt of such notice and shall provide Lessee such
information regarding such claim as Lessee may reasonably request, but the
failure to give such notice or to provide such information when required
shall not diminish Lessee's
15
[First Amended and Restated
Participation Agreement (1993 747 A)]
obligation hereunder unless such failure effectively precludes Lessee's
ability to (A) require such Indemnitee to contest the Tax or (B) contest
the Tax itself (in a case where Lessee cannot require the Indemnitee to
contest such Tax).
If a written claim shall be made for any Tax, other than an
Income Tax, for which Lessee is obligated pursuant to this Section 7(b),
and under applicable law of the taxing jurisdiction Lessee is allowed to
directly contest such Tax and the Tax to be contested is not reflected in a
report or return with other Taxes of any Indemnitee and if the Indemnitee
determines in good faith that it will not suffer any adverse consequences
as a result, then the Lessee shall be permitted, at its expense and in its
own name, or, if consented to by the Indemnitee, in the name of such
Indemnitee, to contest the imposition of such Tax; provided, however, that
Lessee shall not be permitted or entitled to contest any Tax (A) if such
contest will result in the risk of an imposition of criminal penalties or a
material risk of a sale, forfeiture or loss of the Aircraft, the Airframe,
the Engines, the Parts or any part thereof or the creation of any Lien
other than Liens for Taxes of Lessee (x) either not yet due or being
contested in good faith by appropriate proceedings so long as such
proceedings do not involve the risk of an imposition of criminal penalties
or the material risk of any sale, forfeiture or loss of the Aircraft, and
(y) for the payment of which such reserves, if any, as required to be
provided under generally accepted accounting principles have been provided
and, to the extent permitted by law, Lessee shall be entitled to withhold
payment during pendency of such contest, (B) if an Event of Default shall
have occurred and be continuing, unless the Lessee shall have, at the
option of the Owner Participant, either (i) provided security for its
obligations hereunder reasonably satisfactory to the Owner Participant by
placing in escrow sufficient funds to cover any such contested Tax or (ii)
paid such Tax, (C) unless in Lessee's request to the Indemnitee to contest
such Tax, Lessee shall have agreed to pay such Indemnitee on demand all
costs and expenses that such Indemnitee actually incurs in connection with
contesting such claim (including, without limitation, all costs, expenses,
losses, reasonable legal and accounting fees, disbursements, penalties,
interest and additions to tax) or (D) unless in the case of an Indemnitee
which is the Owner Participant or the Owner Trustee, or a successor, assign
or Affiliate of the Owner Participant or the Owner Trustee, prior to the
commencement of a contest Lessee shall have delivered to such Indemnitee
16
[First Amended and Restated
Participation Agreement (1993 747 A)]
a written acknowledgement of Lessee's obligation to indemnify fully such
Indemnitee to the extent that the contest is not successful; provided,
however, that Lessee will not be bound by its acknowledgement of liability
if and to the extent that the contest results in a determination which
clearly and unambiguously demonstrates that Lessee is not otherwise liable
under this Section 7(b) with respect to such Tax.
If requested by Lessee in writing (A) within 30 days of Lessee's
receipt of notice from an Indemnitee under the first paragraph of this
Section 7(b)(iv) and (B) with respect to a Tax for which Lessee is
obligated to indemnify pursuant to this Section 7(b) which is not described
in the previous paragraph exclusive of the proviso thereto, such Indemnitee
shall in good faith at Lessee's expense contest the imposition of any such
Tax. After consulting with Lessee and Lessee's counsel concerning the
forum in which the adjustment is most likely to be favorably resolved, such
Indemnitee shall, in its sole discretion, select the forum for such contest
and determine whether any such contest shall be by (A) resisting payment of
such Tax, (B) paying such Tax under protest or (C) paying such Tax and
seeking a refund or other repayment thereof. In no event shall such
Indemnitee be requested or required to contest the imposition of any Tax
for which Lessee is liable under this Section 7(b) unless (I) in Lessee's
request to the Indemnitee to contest such Tax, Lessee shall have agreed to
pay such Indemnitee on demand all reasonable costs and expenses that such
Indemnitee actually incurs in connection with contesting such claim
(including, without limitation, all costs, expenses, losses, reasonable
legal and accounting fees, disbursements, penalties, interest and additions
to tax), (II) such action to be taken will not result in the risk of an
imposition of criminal penalties or the material risk of any sale,
forfeiture or loss of the Aircraft, or the creation of any Lien other than
Liens for Taxes of Lessee (x) either not yet due or being contested in good
faith by appropriate proceedings so long as such proceedings do not involve
the risk of an imposition of criminal penalties or the material risk of any
sale, forfeiture or loss of the Aircraft and (y) for the payment of which
such reserves, if any, as are required to be provided under generally
accepted accounting principles have been provided by Lessee, (III) if such
contest shall be conducted in a manner requiring the payment of the claim,
Lessee shall have paid the amount required directly to the appropriate
authority or made an advance of the amount thereof to such Indemnitee on an
interest-free basis and agreed to indemnify the Indemnitee
17
[First Amended and Restated
Participation Agreement (1993 747 A)]
against any additional net after-tax cost to such Indemnitee with respect
to such advance or payment, (IV) with regard to an Income Tax on an
Indemnitee which is the Owner Participant or the Owner Trustee, or a
successor, assign or Affiliate of the Owner Participant or the Owner
Trustee, independent tax counsel selected by such Indemnitee and reasonably
satisfactory to the Lessee shall furnish an opinion, prepared at the
Lessee's expense, to the effect that there is a reasonable basis to contest
such claim and with respect to appeal, to the effect that it is more likely
than not such appeal will be successful, (V) in the case of an Indemnitee
which is the Owner Participant or the Owner Trustee, or a successor, assign
or Affiliate of the Owner Participant or the Owner Trustee, prior to the
commencement of a contest Lessee shall have delivered to such Indemnitee a
written acknowledgment of Lessee's obligation to indemnify fully such
Indemnitee to the extent that the contest is not successful; provided,
however, that Lessee will not be bound by its acknowledgment of liability
if and to the extent that the contest results in a determination which
clearly and unambiguously demonstrates that Lessee is not otherwise liable
under this Section 7(b) with respect to such Tax, (VI) if an Event of
Default shall have occurred and be continuing, the Lessee shall have, at
the option of the Owner Participant, either (i) provided security for its
obligations hereunder reasonably satisfactory to the Owner Participant by
placing in escrow sufficient funds to cover any such contested Tax or (ii)
paid such Tax, and (VII) the amount of the indemnity computed under Section
7(b) arising from a claim for Tax exceeds $10,000. In no event shall an
Indemnitee be required to appeal or to seek leave to appeal an adverse
determination with respect to Taxes contested by, or in the name of, the
Indemnitee to the United States Supreme Court.
If any Indemnitee shall obtain a refund of all or any part of any
Tax paid by Lessee such Indemnitee shall pay Lessee an amount equal to the
sum of (I) the amount of such refund, including interest received
attributable thereto, net of taxes required to be paid by such Indemnitee
as a result of any refund and/or interest received and (II) any tax benefit
realized by such Indemnitee as a result of any payment by such Indemnitee
made pursuant to this sentence; provided, however, that in the case of any
Indemnitee which is the Owner Participant or any successor, assign or
Affiliate of the Owner Participant such amount attributable to (I) above
shall not be in excess of the amount of such Tax payment (determined
without regard to any amount paid in respect of Taxes required to be paid
by such Indemnitee in
18
[First Amended and Restated
Participation Agreement (1993 747 A)]
respect of the receipt or accrual of such payment or advance made by Lessee
to such Indemnitee) plus interest received, if any, from the relevant
taxing authority with respect to such Tax payment (net of Taxes required to
be paid by such Indemnitee in connection with the receipt of such
interest), it being intended that such Indemnitee shall realize a net
benefit pursuant to this Section 7(b) only if Lessee shall first have been
reimbursed for any payments by it to such Indemnitee pursuant to this
Section 7(b) arising from the same Loss. If any Indemnitee shall have paid
Lessee any refund of all or part of any Tax paid by Lessee and it is
subsequently determined that such Indemnitee was not entitled to the
refund, such determination shall be treated as the imposition of a Tax for
which Lessee is obligated to indemnify such Indemnitee pursuant to the
provisions of this Section 7(b) without regard to Section 7(b)(ii) or
Section 7(b)(iv).
Nothing contained in this Section 7(b)(iv) shall require any
Indemnitee to contest, or permit Lessee to contest, a claim with respect to
the imposition of any Tax if such Indemnitee shall waive its right to
indemnification under this Section 7 with respect to such claim or a claim
with respect to which a previous contest pursuant to the provision of this
Section 7(b)(iv) shall have been determined adversely to the taxpayer.
(v) General Tax Indemnity -- Reports. Lessee will provide such
information (including information on the routes and operations of the
Aircraft) as may be reasonably requested by an Indemnitee or required to
enable an Indemnitee to fulfill its tax filing or audit requirements with
respect to the transactions contemplated by the Operative Documents. In
the event any return, statement or report is required to be made or filed
with respect to any Tax imposed on or indemnified against by Lessee under
this Section 7(b) (other than with respect to Income Taxes), Lessee shall
notify the Indemnitee of such requirement and (i) to the extent permitted
by law, and not otherwise requested by the Indemnitee, or required by law,
Lessee shall make and file in its own name (and pay the tax shown due on)
such return, statement or report in such manner as will show the ownership
of the Aircraft in the Owner Trustee and furnish the Indemnitee with a copy
of such return, statement or report; provided, however, that Lessee shall
have no obligation under this clause (i) to the extent such Indemnitee
after receipt of Lessee's written request shall have failed to furnish
Lessee with such information as is peculiarly within such Indemnitee's
control and is necessary
19
[First Amended and Restated
Participation Agreement (1993 747 A)]
to file such returns, statements or reports, and (ii) in the case of a
return, statement or report required (or requested by the Indemnitee) to be
in the name of or filed by such Indemnitee, Lessee shall prepare and
furnish such return, statement or report for filing by such Indemnitee in
such manner as shall be reasonably satisfactory to such Indemnitee and send
the same to such Indemnitee for filing no later than 10 Business Days prior
to the due date; provided, however, that Lessee shall have no obligation
under this clause (ii) to the extent such Indemnitee after receipt of
Lessee's written request shall have failed to furnish Lessee with such
information as is peculiarly within such Indemnitee's control and is
necessary to prepare such return, statement or report. Lessee shall hold
each Indemnitee harmless from and against any liabilities, including, but
not limited to penalties, additions to tax, fines and interest, arising out
of any insufficiency or inaccuracy in any such return, statement, report or
information if such insufficiency or inaccuracy is attributable to Lessee.
(vi) General Tax Indemnity -- Payment. Except as provided in
Section 7(b)(iv) or (v) hereof, Lessee shall pay any Tax directly to the
appropriate taxing authority if legally permissible and upon demand of an
Indemnitee shall pay such Tax and any other amounts due hereunder to such
Indemnitee within 20 Business Days of such demand, but in no event shall
any such payments be made more than 10 Business Days prior to the date the
Tax to which any such payment hereunder relates is due (unless Lessee has
not received such demand at least 15 Business Days prior to such date in
which case within five Business Days after receipt of such demand), in
immediately available funds. Any such demand for payment from an
Indemnitee shall specify in reasonable detail, the payment and the facts
upon which the right to payment is based. Each Indemnitee shall promptly
forward to Lessee any notice, bill or advice received by it concerning any
Tax indemnified against hereunder. As soon as practicable after each
payment by Lessee of any Tax indemnified against hereunder, Lessee shall
furnish the appropriate Indemnitee the original or a certified copy of a
receipt for Lessee's payment of such Tax or such other evidence of payment
of such Tax as is acceptable to such Indemnitee. Lessee shall also furnish
promptly upon request such data as any Indemnitee may reasonably require to
enable such Indemnitee to comply with the requirements of any taxing
jurisdiction.
20
[First Amended and Restated
Participation Agreement (1993 747 A)]
(vii) Application of Payments During Existence of Default or Event
of Default. Any amount payable to Lessee pursuant to the terms of this
Section 7(b) shall not be paid to or retained by Lessee if at the time of
such payment or retention a Default or an Event of Default shall have
occurred and be continuing under the Lease. At such time as there shall
not be continuing any Default or Event of Default, such amount shall be
paid to the Lessee to the extent not previously applied against Lessee's
obligations hereunder as and when due after the Owner Trustee shall have
declared the Lease in default pursuant to Section 15 thereof.
(viii) Reimbursements by Indemnitees Generally. If, for any
reason, Lessee is required to make any payment with respect to any Taxes
imposed on any Indemnitee in respect of the transactions contemplated by
the Operative Documents or on the Aircraft, the Airframe, the Engines, the
Parts or any part thereof, which Taxes are not the responsibility of Lessee
under this Section 7(b), then such Indemnitee shall pay to Lessee an amount
which equals the amount paid by Lessee with respect to such Taxes plus
interest thereon, computed from the date of payment by Lessee, at the Base
Rate.
(ix) Forms, etc. Each Indemnitee agrees to furnish to Lessee from
time to time, at the Lessee's request and expense, such duly executed and
properly completed forms as may be necessary or appropriate in order to
claim any reduction of or exemption from any withholding tax imposed by any
taxing authority in respect of any payments otherwise required to be made
by Lessee pursuant to the Operative Documents and each Pass Through Trust
Agreement, which reduction or exemption may be available to such
Indemnitee. In addition, any Indemnitee shall, at Lessee's expense,
execute and deliver any forms or documents which Lessee reasonably requests
and which are reasonably related to any indemnified Taxes. Notwithstanding
the foregoing, an Indemnitee shall not be required to (A) make available
any Income Tax returns; or to (B) execute and deliver any forms or
documents which would in the good faith determination of such Indemnitee
disadvantage such Indemnitee in the context of its overall filing position
or with regard to other Taxes not indemnified under this Agreement or the
Tax Indemnity Agreement.
(x) Non-Parties. If an Indemnitee is not a party to this
Agreement, Lessee may require the Indemnitee to
21
[First Amended and Restated
Participation Agreement (1993 747 A)]
agree to the terms of this Section 7(b) prior to making any payment to such
Indemnitee under this Section 7(b).
(xi) Owner Participant. For the purposes of this Section 7(b),
the term "Owner Participant" shall mean and include ____________________
(and its permitted successors and assigns) and where appropriate the
affiliated group of corporations (and each member thereof) making a
consolidated or combined return of which _________________ (and its
permitted successors and assigns) is a member.
(xii) Income Tax. For purposes of this Section 7, the term Income
Tax means any Tax based on or measured by or with respect to net income
(including, without limitation, capital gains taxes, minimum taxes, income
taxes collected by withholding, and taxes on tax preference items) or net
receipts and taxes imposed on gross income or gross receipts which are
expressly in lieu of a net income tax (provided, however, that sales, use,
value added, rental, license, ad valorem or property Taxes shall not
constitute an Income Tax) and Taxes which are capital, doing business,
franchise, excess profits, net worth taxes and interest, additions to tax,
penalties, or other charges in respect thereof.
(c) General Indemnity. Lessee hereby agrees to indemnify, on an
after-tax basis, each Indemnitee against, and agrees to protect, save and keep
harmless each of them from (whether or not the transactions contemplated herein
or in any of the other Operative Documents or the Pass Through Trust Agreements
are consummated), any and all Expenses imposed on, incurred by or asserted
against any Indemnitee, in any way relating to or arising out of (A) the
Operative Documents and each Pass Through Trust Agreement (and any amendments
thereto), the negotiation and the consummation of the transactions contemplated
thereby or any sublease under the Lease Agreement or the enforcement of any of
the terms of any thereof; or (B) the manufacture, design, purchase, resale,
acceptance or rejection of the Airframe or any Engine or Parts; or (C) the
Aircraft (or any portion thereof) or any Engine whether or not installed on the
Airframe or any airframe on which an Engine is installed whether or not arising
out of the finance, refinance, ownership, delivery, nondelivery, storage, lease,
sublease, possession, use, non-use, operation, maintenance, modification,
alteration, condition, sale, replacement, substitution, return or other
disposition, registration, reregistration or airworthiness of the Aircraft (or
any portion thereof) including, without limitation, latent or other defects,
whether or not discoverable, strict tort liability and any damage to property or
the environment, death or injury to any person and any claim for patent,
trademark or
22
[First Amended and Restated
Participation Agreement (1993 747 A)]
copyright infringement; or (D) the offer, sale, holding, transfer or delivery of
the Loan Certificates or the Pass Through Certificates, whether before, on or
after the Delivery Date (the indemnity in this clause (D) to extend also to any
person who controls an Indemnitee, its successors, assigns, employees,
directors, officers, servants and agents within the meaning of Section 15 of the
Securities Act of 1933, as amended); or (E) the offer, holding, transfer or sale
of any interest in the Trust Estate or the Trust Agreement or any similar
interest (a) on or prior to the Delivery Date, or (b) subsequent to the Delivery
Date during the continuation of an Event of Default under the Lease or in
connection with the exercise by the Lessee of its purchase options under the
Lease or in connection with a refinancing pursuant to Section 17 hereof or in
connection with the termination of the Lease or action or direction of Lessee
pursuant to Sections 7, 8, 9, 10, or 19 thereof; provided, that the foregoing
indemnity shall not extend to any Expense to the extent resulting from or
arising out of one or more of the following: (1) any representation or warranty
by such Indemnitee in the Operative Documents or in any Pass Through Trust
Agreement being incorrect, or (2) the failure by such Indemnitee to perform or
observe any agreement, covenant or condition in any of the Operative Documents
or in any Pass Through Trust Agreement including, without limitation, the
creation or existence of a Lessor Lien (including for this purpose Liens that
would be Lessor Liens but for the proviso to the definition of Lessor Liens), or
(3) the willful misconduct or the gross negligence of such Indemnitee (other
than gross negligence imputed to such Indemnitee solely by reason of its
interest in the Aircraft), or (4) (A) in the case of such Indemnitee a
disposition (voluntary or involuntary) of all or any part of its interest in the
Airframe or any Engine, (B) in the case of a Certificate Holder a disposition
(voluntary or involuntary) by such Certificate Holder of all or any part of its
interest in any Loan Certificate or (C) in the case of any Indemnitee a
disposition by such Indemnitee of all or any part of such Indemnitee's interest
in the Operative Documents or the Pass Through Trust Agreements other than in
each of (A), (B) and (C) during the continuance of an Event of Default under the
Lease or pursuant to the exercise by the Lessee of its purchase options under
the Lease or in connection with a refinancing pursuant to Section 17 hereof or
in connection with the termination of the Lease or action or direction of Lessee
pursuant to Sections 7, 8, 9, 10 or 19 thereof, or (5) other than to the extent
provided in the succeeding paragraph, any Tax (as defined in Section 7(b)
hereof) whether or not Lessee is required to indemnify for such Tax pursuant to
Section 7(b) hereof (it being understood that Section 7(b) hereof and the Tax
Indemnity Agreement and provisions requiring payments to be made on an after-tax
basis or expressly providing for additional
23
[First Amended and Restated
Participation Agreement (1993 747 A)]
indemnification by Lessee exclusively provide for Lessee's liability with
respect to Taxes), or (6) the offer or sale by the Owner Participant after the
Delivery Date of any interest in the Trust Estate or the Trust Agreement or any
similar interest, unless such offer or sale shall occur (A) during a period when
an Event of Default has occurred and is continuing under the Lease at the time
of such offer or sale or (B) in connection with the exercise by Lessee of its
purchase options under the Lease or, (7) in the case of the Owner Participant, a
failure on the part of the Owner Trustee to distribute in accordance with the
Trust Agreement any amounts received and distributable by it thereunder or, in
the case of a Certificate Holder, a failure on the part of the Indenture Trustee
to distribute in accordance with the Trust Indenture any amounts received and
distributable by it thereunder to such Certificate Holder or a failure on the
part of any Pass Through Trustee to distribute in accordance with the applicable
Pass Through Trust Agreement any amounts received and distributable by such Pass
Through Trustee under such Pass Through Trust Agreement, or (8) other than
during the continuation of a Default or an Event of Default under the Lease the
authorization or giving or withholding of any future amendments, supplements,
waivers or consents with respect to any of the Operative Documents or any Pass
Through Trust Agreement unless such amendments, supplements, waivers or consents
(a) are requested by Lessee or (b) are required or permitted pursuant to the
terms of the Operative Documents (unless the same results from the actions of an
Indemnitee) (provided if Lessee is not responsible for the Expense associated
with such amendment, supplement, waiver or consent, the party requesting the
execution of the same shall be responsible for such expense), or (9) other than
to the extent provided in the succeeding paragraph any loss of tax benefits or
increase in tax liability under any tax law whether or not Lessee is required to
indemnify therefor pursuant to this Agreement or the Tax Indemnity Agreement (it
being understood that Section 7(b) hereof and the Tax Indemnity Agreement and
provisions requiring payments to be made on an after-tax basis or expressly
providing for additional indemnification by Lessee exclusively provide for
Lessee's liability with respect to Taxes), or (10) except to the extent fairly
attributable to acts or events occurring on or prior thereto, acts or events
which occur after the earlier of: (I) the return of possession of the Airframe
or any Engine or any Part to the Owner Trustee or its designee pursuant to the
terms of the Lease (other than pursuant to Section 15 thereof, in which case
Lessee's liability under this Section 7(c) shall survive for so long as Owner
Trustee shall be entitled to exercise remedies under such Section 15), (II) the
termination of the Term in accordance with Sections 5, 9 or 19 of the Lease,
(III) the last day of the Term if Owner Trustee shall have furnished the notice
24
[First Amended and Restated
Participation Agreement (1993 747 A)]
referred to in Section 10(d) of the Lease and Lessee shall have failed to return
possession to Owner Trustee on such day or (IV) the payment by Lessee of all
amounts required to be paid under the Lease following an Event of Loss (but
excluding from the terms of this subsection (IV) an Event of Loss followed by
the replacement of the Aircraft).
Notwithstanding clause 7(c)(5) or (9) above, Lessee further agrees
that any payment or indemnity pursuant to this Section 7(c) in respect of any
"Expenses" shall be in an amount which, after deduction of all Taxes required to
be paid by such recipient with respect to such payment or indemnity under the
laws of any federal, state or local government or taxing authority in the United
States, or under the laws of any taxing authority or governmental subdivision of
a foreign country, or any territory or possession of the United States or any
international authority, shall be equal to the excess, if any, of (A) the amount
of such Expense over (B) the current net reduction in Taxes actually required to
be paid by such recipient resulting from the accrual or payment of such Expense.
Nothing in this Section 7(c) shall be construed as a guaranty by
Lessee of payments due pursuant to the Loan Certificates or the Pass Through
Certificates or of the residual value of the Aircraft.
If a claim is made against an Indemnitee involving one or more
Expenses and such Indemnitee has notice thereof, such Indemnitee shall promptly
after receiving such notice give notice of such claim to Lessee; provided that
the failure to provide such notice shall not release Lessee from any of its
obligations to indemnify hereunder or from any other obligation that the Lessee
may have to such Indemnitee at law or in equity, and no payment by Lessee to an
Indemnitee pursuant to this Section 7(c) shall be deemed to constitute a waiver
or release of any right or remedy which the Lessee may have against such
Indemnitee for any actual damages as a result of the failure by such Indemnitee
to give Lessee such notice. So long as Lessee has acknowledged its obligation
to indemnify pursuant to this Section 7(c), Lessee shall be entitled, at its
sole cost and expense, acting through counsel reasonably acceptable to the
respective Indemnitee, (A) in any judicial or administrative proceeding that
involves solely a claim for one or more Expenses, to assume responsibility for
and control thereof, (B) in any judicial or administrative proceeding involving
a claim for one or more Expenses and other claims related or unrelated to the
transactions contemplated by the Operative Documents, to assume responsibility
for and control of such claim for Expenses to the extent that the same may be
and is severed from such other claims (and such Indemnitee shall use
25
[First Amended and Restated
Participation Agreement (1993 747 A)]
reasonable efforts to obtain such severance), and (C) in any other case, to be
consulted by such Indemnitee with respect to judicial proceedings subject to the
control of such Indemnitee and to be allowed, at Lessee's sole expense, to
participate therein. Notwithstanding any of the foregoing to the contrary,
Lessee shall not be entitled to assume responsibility for and control of any
such judicial or administrative proceedings if (i) any Default under Section
14(a), (b), (f) or (g) of the Lease or an Event of Default under the Lease shall
have occurred and be continuing, (ii) if such proceedings will involve a
material risk of the sale, forfeiture or loss of, or the creation of any Lien
(other than a Permitted Lien) on, the Aircraft, the Trust Indenture Estate or
the Trust Estate or any part thereof unless Lessee shall have posted a bond or
other security reasonably satisfactory to the relevant Indemnitees in respect to
such risk or (iii) if such proceedings could, in the good faith opinion of the
Indemnitee entail any risk of criminal liability or any material risk of civil
liability (unless, in the case of such civil liability, Lessee has agreed to
indemnify against such civil liability in a manner reasonably acceptable to such
Indemnitee). The Indemnitee may participate at its own expense and with its own
counsel in any judicial proceeding controlled by Lessee pursuant to the
preceding provisions; provided, however, that if in the written opinion of
counsel to such Indemnitee (which opinion and counsel shall be reasonably
acceptable to Lessee) an actual or potential material conflict of interest
exists where it is advisable for such Indemnitee to be represented by separate
counsel, the reasonable fees and expenses of such separate counsel shall be
borne by Lessee.
The Indemnitee shall supply Lessee, at Lessee's expense, with such
information reasonably requested by Lessee as is necessary or advisable for
Lessee to control or participate in any proceeding to the extent permitted by
this Section 7(c). Such Indemnitee shall not enter into a settlement or other
compromise with respect to any Expense as to which Lessee has acknowledged its
obligation to indemnify (and if Lessee has not so acknowledged only upon 5
Business Days' prior written notice to Lessee) without the prior written consent
of Lessee (except during the continuance of any Default under Section 14(a),
(b), (f) or (g) of the Lease or an Event of Default under the Lease when such
consent shall not be required if such Indemnitee gives 30 days' prior written
notice to Lessee describing the proposed settlement or compromise), which
consent shall not be unreasonably withheld or delayed, unless such Indemnitee
waives its right to be indemnified with respect to such Expense under this
Section 7(c).
26
[First Amended and Restated
Participation Agreement (1993 747 A)]
The Lessee shall supply the Indemnitee with such information
reasonably requested by the Indemnitee as is necessary or advisable for the
Indemnitee to control or participate in any proceeding to the extent permitted
by this Section 7(c).
Upon payment of any Expense pursuant to this Section 7(c), Lessee,
without any further action, shall be subrogated to any claims the Indemnitee may
have relating thereto other than claims under Section 9.06 of the Trust
Indenture or Section 5.03 or 7.01 of the Trust Agreement. The Indemnitee agrees
to give such further assurances or agreements and to cooperate with Lessee to
permit Lessee to pursue such claims, if any, to the extent reasonably requested
by Lessee.
In the event that Lessee shall have paid an amount to an Indemnitee
pursuant to this Section 7(c), and such Indemnitee subsequently shall be
reimbursed in respect of such indemnified amount from any other person, such
Indemnitee shall, unless a Default under Section 14(a), (b), (d) (solely with
respect to Lessee's obligations under Section 7(a) or (b)(viii) of the Lease or
Section 8 of the Lease), (f) or (g) of the Lease or an Event of Default under
the Lease shall have occurred and be continuing, promptly pay Lessee but not
before Lessee shall have made all payments then due to such Indemnitee pursuant
to this Section 7(c) and any other payments then due under any of the Operative
Documents, an amount equal to the sum of (I) the amount of such reimbursement,
including interest received attributable thereto, net of taxes required to be
paid by such Indemnitee as a result of any reimbursement including interest
received attributable thereto and (II) any tax benefit actually realized by such
Indemnitee as a result of any payment by such Indemnitee made pursuant to this
sentence; provided, however, that in the case of any Indemnitee which is the
Owner Participant or any successor, assign or Affiliate of the Owner Participant
such amount attributable to (I) above shall not be in excess of the amount of
such Expense payment net of any amount paid in respect of Taxes required to be
paid by such Indemnitee in respect of the receipt or accrual of such payment or
advance made by Lessee to such Indemnitee plus interest received, if any, from
the relevant taxing authority with respect to any such Expense payment, it being
intended that such Indemnitee shall realize a net benefit pursuant to this
Section 7(c) only if Lessee shall first have been reimbursed for any payments by
it to such Indemnitee pursuant to this Section 7(c).
Lessee agrees to pay the reasonable and continuing fees and expenses
of the Indenture Trustee (including, but not limited to, the reasonable fees and
expenses of its counsel and any agent
27
[First Amended and Restated
Participation Agreement (1993 747 A)]
appointed in accordance with Section 9.02(c) of the Trust Indenture) and each
Pass Through Trustee (including, but not limited to, the reasonable fees and
expenses of its counsel) and, as provided in Section 6.07 of the Trust
Agreement, the Owner Trustee (including, but not limited to, the reasonable fees
and expenses of its counsel), in each case without cost, on a net after-tax
basis, to the Owner Participant, for acting as such, other than such fees and
expenses which constitute Transaction Expenses.
Lessee's obligations under the indemnities provided for in this
Agreement shall be those of a primary obligor, whether or not the Person
indemnified shall also be indemnified with respect to the same matter under the
terms of any other document or instrument, and the Person seeking
indemnification from Lessee pursuant to any provision of this Agreement may
proceed directly against Lessee without first seeking to enforce any other right
of indemnification.
To the extent permitted by applicable law, interest at the Past Due
Rate shall be paid, on demand, on any amount or indemnity not paid when due
pursuant to this Section 7 until the same shall be paid. Such interest shall be
paid in the same manner as the unpaid amount in respect of which such interest
is due.
Any amount which is payable to Lessee by any Person pursuant to this
Section 7 shall not be paid to Lessee if a Default under Section 14(a), (b), (d)
(solely with respect to Lessee's obligations under Section 7(a) or (b)(viii) of
the Lease or Section 8 of the Lease), (f) or (g) of the Lease or an Event of
Default under the Lease shall have occurred and be continuing or if any payment
is due and owing by Lessee under the Lease or to such Person under any other
Operative Document. Any such amount shall be held by such Person and, if such
Default or an Event of Default under the Lease shall have occurred and be
continuing, shall be applied against Lessee's obligations hereunder to such
Person as and when due (and, to the extent that Lessee has no obligations
hereunder to such Person, such amount shall be paid to Lessee). At such time as
there shall not be continuing any such Default or an Event of Default or there
shall not be due and owing any such payment, such amount shall be paid to Lessee
to the extent not previously applied in accordance with the immediately
preceding sentence.
(d) Withholding. If Lessee advises the Owner Trustee, the Indenture
Trustee and the relevant Certificate Holder in writing that interest on its Loan
Certificates is subject to United States withholding tax, then the Owner Trustee
shall
28
[First Amended and Restated
Participation Agreement (1993 747 A)]
instruct the Indenture Trustee to, and Indenture Trustee shall, withhold as
provided in Section 9.11 of the Trust Indenture.
SECTION 8. Representations, Warranties and Covenants. (a) The Owner
Participant represents that it is acquiring its interest in the Trust Estate for
investment purposes only and not with a present intent as to any resale or
distribution thereof (subject nonetheless to any requirement of law that the
disposition of its properties shall at all times be and remain within its
control) and that neither it nor anyone acting on its behalf (other than for
purposes of this paragraph, Lessee and the Underwriter) has directly or
indirectly offered any interest in the Trust Estate or any Loan Certificates or
Pass Through Certificates or any similar securities for sale to, or solicited
any offer to acquire any of the same from, anyone in a manner which would result
in a violation of the Securities Act of 1933, as amended or the securities laws,
rules and regulations of any state.
(b) Each of the Owner Participant and State Street Bank and Trust
Company, in its individual capacity, represents and warrants to the other
parties to this Agreement that it is, and on the Delivery Date will be, a
Citizen of the United States. The Owner Participant agrees, solely for the
benefit of Lessee and the Certificate Holders, that if during such time as the
Aircraft is registered in the United States (or if Lessee desires to register
the Aircraft in the United States) (i) it shall not be a Citizen of the United
States and (ii) the Aircraft shall be, or would therefore become, ineligible for
registration in the name of the Owner Trustee under the Federal Aviation Act and
regulations then applicable thereunder, then the Owner Participant shall (at its
own expense and without any reimbursement or indemnification from Lessee) as
soon as is reasonably practicable but in any event within 30 days after
obtaining Actual Knowledge of such ineligibility and of such loss of citizenship
(A) effect voting trust or other similar arrangements or take any other action
as may be necessary to prevent any deregistration or to maintain the United
States registration of the Aircraft, or (B) transfer its beneficial interest in
the Trust Estate in accordance with Section 8(l) hereof. It is understood that:
(1) the Owner Participant shall be liable to any of the other parties hereto for
any damages suffered by any such other party as the result of the representation
and warranty of the Owner Participant in the first sentence of this Section 8(b)
proving to be untrue as of the Delivery Date; and (2) the Owner Participant
shall be liable to Lessee, any Sublessee and any Certificate Holder for any
damages which may be incurred by Lessee, any Sublessee or such Certificate
Holder as a result of the Owner Participant's failure
29
[First Amended and Restated
Participation Agreement (1993 747 A)]
to immediately comply with its obligations pursuant to the second sentence of
this Section 8(b) unless such failure is a result of such party's breach of its
obligations to cooperate set forth in the following sentence (including any
damages suffered by any such party (other than damages suffered by Lessee which
Lessee could have mitigated by taking reasonable steps (Lessee having no
obligation to restrict the use of the Aircraft to so mitigate)) at any time
after the fifth Business Day following the Owner Participant's having obtained
Actual Knowledge of such ineligibility or loss of citizenship). Each party
hereto agrees, upon the request and at the sole expense of the Owner
Participant, to reasonably cooperate with the Owner Participant in complying
with its obligations under the provisions of the second sentence of this Section
8(b) and such request shall not be subject to the indemnity contained in Section
7(c) hereof. State Street Bank and Trust Company in its individual capacity,
agrees that if at any time a responsible officer of State Street Bank and Trust
Company, shall obtain Actual Knowledge that State Street Bank and Trust Company
has ceased to be a Citizen of the United States, it will promptly resign as
Owner Trustee (if and so long as such citizenship is necessary under the Federal
Aviation Act as in effect at such time or, if it is not necessary, if and so
long as the Owner Trustee's citizenship would have any adverse effect on a
Certificate Holder, Lessee or the Owner Participant), effective upon the
appointment of a successor Owner Trustee in accordance with Section 9.01 of the
Trust Agreement. If the Owner Participant or State Street Bank and Trust
Company, in its individual capacity, does not comply with the requirements of
this Section 8(b), the Owner Trustee, the Indenture Trustee, the Owner
Participant and the Certificate Holders hereby agree that a Default or an Event
of Default shall not have occurred and be continuing under the Lease due to
noncompliance by Lessee with the registration requirements in the Lease.
(c) State Street Bank and Trust Company, in its individual capacity
represents and warrants that both the principal place of business of the Owner
Trustee and the place where the Owner Trustee's records concerning the Aircraft
and all of its interest in, to and under the Operative Documents to which it is
a party are or will be kept is Boston, Massachusetts (other than such as may be
maintained or held by the Indenture Trustee pursuant to the Trust Indenture) and
has its chief executive office (as such term is used in Article 9 of the Uniform
Commercial Code) in the Commonwealth of Massachusetts. State Street Bank and
Trust Company, in its individual capacity agrees that it will not change the
location of such office to a location outside of Boston, Massachusetts, without
prior written notice to Lessee, Indenture Trustee and the Owner Participant.
30
[First Amended and Restated
Participation Agreement (1993 747 A)]
(d) [Intentionally omitted.]
(e) The Owner Participant agrees that, if, at any time after the
Restricted Period and so long as no Default under Section 14(a), (b), (d)
(solely with respect to Lessee's obligations under Section 7(a) or (b)(vii) of
the Lease or Section 8 of the Lease), (f) or (g) of the Lease or Event of
Default under the Lease shall have occurred or be continuing, Lessee has
requested its consent to the registration of the Aircraft, in the name of the
Owner Trustee (or, if appropriate, in the name of Lessee or a Sublessee as a
"lessee" or a "sublessee"), at Lessee's expense, (i) upon 30 days' prior written
notice in a country listed on Exhibit G to the Lease, with which the United
States maintains diplomatic relations at the time of such request, provided that
with respect to any country listed on Exhibit G to the Lease as a "Restricted
Country" such country must at the time of such registration impose and enforce
aircraft maintenance standards not materially less stringent than those of the
FAA, or the central civil aviation authority of any of Canada, France, Germany,
Japan or the United Kingdom, or (ii) upon 30 days' prior written notice in any
other country with which the United States maintains diplomatic relations at the
time of such request and the Owner Participant has not determined, acting
reasonably, that such other country would not provide substantially equivalent
protection for the rights of owner participants, lessors or lenders in similar
transactions as provided under United States laws, the Owner Participant will
not, in the case of either (i) or (ii), unreasonably withhold its consent to
such change of registration. In addition, such change of registration to a
country listed on Exhibit G shall be permitted only if such change will not
result in the imposition of, or increase the amount of, any Tax for which Lessee
is not required to indemnify or is not then willing to enter into a binding
agreement to indemnify, in a manner satisfactory in form and substance to the
indemnified party, each party referred to in clause (E) of paragraph (i) below.
The Owner Participant further agrees that the inability of Lessee to deliver to
the Owner Participant and, so long as the Lien of the Trust Indenture has not
been released, the Indenture Trustee, an opinion (reasonably satisfactory in
form and substance to the Owner Participant) of counsel reasonably acceptable to
the Owner Participant in such country listed on Exhibit G to the Lease to the
effect that the courts of such country would give effect to the Owner Trustee's
title to the Aircraft, to the registry of the Aircraft in the name of the Owner
Trustee, and to the priority of the lien under the Trust Indenture substantially
to the same extent as provided under United States law, shall constitute the
sole reasonable grounds to withhold such consent in regard to a country listed
in Exhibit
31
[First Amended and Restated
Participation Agreement (1993 747 A)]
G, and if said opinion is delivered, the Owner Participant will instruct the
Owner Trustee, and the Indenture Trustee, subject only to compliance with the
provisions of Section 7.02 of the Indenture, shall cooperate, to make such
change of registration.
It is further agreed, however, that prior to any such change in the
country of registry of the Aircraft to a country not listed on Exhibit G to the
Lease, the Owner Participant, the Owner Trustee in its individual capacity and,
so long as the Lien of the Trust Indenture has not been released, the Indenture
Trustee shall have received:
(i) assurances reasonably satisfactory to the Owner Participant
and the Owner Trustee in its individual capacity (A) to the effect that the
insurance or self-insurance provisions of the Lease have been compiled with
after giving effect to such change of registry, (B) of the payment by
Lessee on an after-tax basis of any expenses of the Owner Participant, the
Owner Trustee and the Indenture Trustee in connection with such change of
registry, (C) to the effect that the original indemnities (and any
additional indemnities for which Lessee is then willing to enter into a
binding agreement to indemnify) in favor of the Owner Participant, the
Owner Trustee (in its individual capacity and as trustee under the Trust
Agreement) and the Indenture Trustee, under this Agreement, the Trust
Indenture and the Tax Indemnity Agreement, afford each such party
substantially the same protection as provided prior to such change of
registry, (D) as to the continuation of the Trust Indenture as a first
priority lien on the Aircraft, (E) that such change will not result in the
imposition of, or increase in the amount of, any Tax for which Lessee is
not required to indemnify, or is not then willing to enter into a binding
agreement to indemnify in a manner satisfactory in form and substance to
the indemnified party, the Owner Participant, the Indenture Trustee, the
Owner Trustee (in its individual capacity and as trustee under the Trust
Agreement), or any successor, assign or Affiliate of any thereof, or the
Trust Estate pursuant to Section 7(b) hereof; and (F) that such new country
of registry imposes and enforces aircraft maintenance standards not
materially less stringent than those of the FAA or the central civil
aviation authority of Canada, France, Germany, Japan or the United Kingdom;
and
(ii) a favorable opinion of counsel (reasonably satisfactory to
the Owner Trustee, in its individual capacity, and to the Owner
Participant) in the new jurisdiction of registry to the effect (A) that the
terms
32
[First Amended and Restated
Participation Agreement (1993 747 A)]
(including, without limitation, the governing-law, service-of-process and
jurisdictional-submission provisions thereof) of the Lease and the Trust
Indenture are legal, valid, binding and enforceable in such jurisdiction,
(B) that it is not necessary for the Owner Participant, the Owner Trustee
or the Indenture Trustee to register or qualify to do business in such
jurisdiction, (C) that there is no tort liability of the owner of an
aircraft not in possession thereof under the laws of such jurisdiction
other than tort liability which might have been imposed on such owner under
the laws of the United States or any state thereof (it being understood
that, in the event such latter opinion cannot be given in a form
satisfactory to the Owner Participant, such opinion shall be waived if
insurance reasonably satisfactory to Owner Participant and the Owner
Trustee, in its individual capacity, is provided, at Lessee's expense, to
cover such risk), (D) (unless Lessee shall have agreed to provide insurance
covering the risk of requisition of use or title of the Aircraft by the
government of such jurisdiction so long as the Aircraft is registered under
the laws of such jurisdiction) that the laws of such jurisdiction require
fair compensation by the government of such jurisdiction payable in
currency freely convertible into Dollars for the loss of use of the
Aircraft in the event of the requisition by such government of such use or
title, and (E) to such further effect with respect to such other matters as
the Owner Trustee, in its individual capacity, or the Owner Participant may
reasonably request.
Upon receipt by the Owner Participant and the Indenture Trustee
of an opinion of counsel meeting the foregoing requirements, Exhibit F and
Exhibit G to the Lease shall be amended to add such country.
If, at any time, the Owner Participant delivers an opinion (a
"Delisting Opinion") from a law firm (such opinion and counsel to be
reasonably satisfactory to Lessee) in a country then listed on Exhibit F or
G to the Lease to the effect that a reputable law firm located in such
jurisdiction would not as of the date of such opinion be able to deliver an
opinion of counsel as to the matters listed in subsections (A) through (D)
of subparagraph (ii) above (provided that in regard to (C) and (D), Lessee
is not willing at the time of registration to provide the insurance
required by such subsection (C) or (D)), then Exhibits F and G to the Lease
shall be amended to delete such country. Lessee shall pay the reasonable
costs of the Owner Participant in obtaining the Delisting Opinion provided
such opinion is in fact obtained in connection with Lessee's
33
[First Amended and Restated
Participation Agreement (1993 747 A)]
request to change the registry of the Aircraft to, or to sublease the
Aircraft in, a country listed on Exhibit F or G to the Lease.
Lessee shall pay all reasonable fees and expenses on an after-tax
basis of the Owner Participant, the Owner Trustee and the Indenture Trustee
in connection with any change of registry of the Aircraft.
(f) The Owner Participant represents and warrants as follows:
(i) the Owner Participant is a corporation duly organized and
validly existing in good standing under the laws of its jurisdiction of
organization, and has the corporate power and authority to carry on its
business as now conducted, to own or hold under lease its properties and to
enter into and perform its obligations under the Owner Participant
Documents;
(ii) the Owner Participant Documents have been duly authorized by
all necessary corporate action on the part of the Owner Participant, do not
require any approval not already obtained of stockholders of the Owner
Participant or any approval or consent not already obtained of any trustee
or holders of any indebtedness or obligations of the Owner Participant, and
have been duly executed and delivered by the Owner Participant, and neither
the execution and delivery thereof by the Owner Participant, nor the
consummation of the transactions contemplated thereby by the Owner
Participant, nor compliance by the Owner Participant with any of the terms
and provisions thereof will contravene any United States federal or state
law, judgment, governmental rule, regulation or order applicable to or
binding on the Owner Participant (it being understood that no
representation or warranty is made with respect to laws, rules or
regulations relating to aviation or to the nature of the equipment owned by
the Owner Trustee, other than such laws, rules or regulations relating to
the citizenship requirements of the Owner Participant under applicable
aviation law) or contravene or result in any breach of or constitute any
default under, or result in the creation of any Lien (other than Liens
provided for or otherwise permitted in the Operative Documents) upon the
Trust Estate under, any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, bank loan or credit agreement, corporate
charter, by-law or other agreement or instrument to which the Owner
Participant is a party or by which it or its properties may be bound or
34
[First Amended and Restated
Participation Agreement (1993 747 A)]
affected (it being understood that no representation or warranty is made in
this subsection (f)(ii) with respect to ERISA);
(iii) each of the Owner Participant Documents constitutes a legal,
valid and binding obligation of the Owner Participant enforceable against
the Owner Participant in accordance with the terms thereof, and the trust
intended to be formed by the Trust Agreement has been duly and validly
formed;
(iv) Neither the execution and delivery by the Owner Participant
of this Agreement or any other Owner Participant Document, nor the
consummation by it of any of the transactions contemplated hereby or
thereby, requires the consent or approval of, the giving of notice to, the
registration with, the recording or filing of any document with, or the
taking of any other action in respect of, any federal or other governmental
authority or agency, except those contemplated by the Operative Documents
(it being understood that no representation or warranty is made with
respect to the laws, rules or regulations relating to aviation or to the
nature of the equipment owned by the Owner Trustee, other than such laws,
rules or regulations relating to the citizenship requirements of the Owner
Participant under applicable aviation law);
(v) there are no pending or, to the knowledge of the Owner
Participant, threatened actions or proceedings against the Owner
Participant before any court or administrative agency which individually
(or in the aggregate in the case of any group of related lawsuits) purports
to affect the legality, validity or enforceability of, or which is
reasonably likely to materially adversely affect the ability of the Owner
Participant to perform its obligations under any of, the Owner Participant
Documents; and
(vi) on the Delivery Date, the Aircraft will be free of Lessor
Liens (including for this purpose Liens that would be Lessor Liens but for
the proviso to the definition of Lessor Liens) attributable to the Owner
Participant.
(g) Each of State Street Bank and Trust Company in its individual
capacity and the Owner Participant severally covenants and agrees (i) that it
shall not cause or permit to exist any Lessor Lien attributable to it with
respect to the Aircraft or any other portion of the Trust Estate, (ii) that it
will promptly, at its own expense, take such action as may be
35
[First Amended and Restated
Participation Agreement (1993 747 A)]
necessary duly to discharge such Lessor Lien attributable to it and (iii) to
make restitution to the Trust Estate for any actual diminution of the assets of
the Trust Estate resulting from such Lessor Liens attributable to it. The Owner
Participant agrees to make restitution to the Trust Estate for any actual
diminution of the assets of the Trust Estate resulting from any Taxes or
Expenses (as such terms are defined in Section 7 hereof) imposed on the Trust
Estate against which Lessee is not required to indemnify the Trust Estate
pursuant to Section 7 hereof, but excluding Taxes or Expenses referred to in
Section 7(b)(ii)(5) and 7(b)(ii)(7) and excluding any diminution of the Trust
Estate attributable to or caused by State Street Bank and Trust Company in its
individual capacity; provided that if the Owner Participant shall make
restitution to the Trust Estate on account of any diminution of the Trust Estate
attributable to or caused by State Street Bank and Trust Company in its
individual capacity, then State Street Bank and Trust Company, in its individual
capacity, shall reimburse the Owner Participant for such amount together with
interest thereon at the Past Due Rate.
(h) First Security Bank of Utah, National Association, in its
individual capacity, covenants and agrees that it shall not cause or permit to
exist any Lien, arising as a result of (i) claims against the Indenture Trustee
not related to its interest in the Aircraft or the administration of the Trust
Estate pursuant to the Trust Indenture, (ii) acts of the Indenture Trustee not
permitted by, or failure of the Indenture Trustee to take any action required
by, the Operative Documents to the extent such acts arise or such failure arises
from or constitutes gross negligence or willful misconduct, (iii) claims against
the Indenture Trustee relating to Taxes or Expenses which are excluded from the
indemnification provided by Section 7 pursuant to said Section 7, or (iv) claims
against the Indenture Trustee arising out of the transfer by the Indenture
Trustee of all or any portion of its interest in the Aircraft, the Trust Estate,
the Trust Indenture Estate or the Operative Documents other than (A) a transfer
of the Aircraft pursuant to Section 9, 10 or 19 of the Lease or Article 5 or 8
of the Trust Indenture, (B) any borrowing pursuant to Section 17 hereof or (C) a
transfer of the Aircraft pursuant to Section 15 of the Lease while an Event of
Default is continuing and prior to the time that the Indenture Trustee has
received all amounts due pursuant to the Trust Indenture.
(i) [Intentionally omitted.]
(j) The Indenture Trustee, and by the acceptance of a Loan Certificate
each Certificate Holder (and each Pass Through Trustee, so long as the relevant
Pass Through Trust Agreement is
36
[First Amended and Restated
Participation Agreement (1993 747 A)]
in effect), each hereby waives to the fullest extent permitted by law the
benefit of the provisions of Section 1111(b) of Title 11 of the United States
Code with respect to recourse against the Owner Trustee (in its individual
capacity) and the Owner Participant on account of any amount payable as
principal of, Premium, if any, and interest on the Loan Certificates. If (i)
all or any part of the Trust Estate becomes the property of, or the Owner
Participant becomes, a debtor subject to the reorganization provisions of the
Bankruptcy Code or any successor provision, (ii) pursuant to such reorganization
provisions the Owner Trustee (in its individual capacity) or the Owner
Participant is required, by reason of the Owner Trustee (in its individual
capacity) or the Owner Participant being held to have recourse liability to a
Certificate Holder, a Pass Through Trustee or the Indenture Trustee, directly or
indirectly (other than the recourse liability of the Owner Participant under
this Participation Agreement), to make payment on account of any amount payable
as principal, Premium, if any, or interest on the Loan Certificates and (iii)
such Certificate Holder, such Pass Through Trustee or the Indenture Trustee
actually receives any Excess Payment (as hereinafter defined) which reflects any
payment by the Owner Trustee (in its individual capacity) or the Owner
Participant on account of clause (ii) above, then such Certificate Holder, such
Pass Through Trustee or the Indenture Trustee, as the case may be, shall
promptly refund to the Owner Trustee or the Owner Participant (whichever shall
have made such payment) such Excess Payment. For purposes of this Section 8(j),
"Excess Payment" means the amount by which such payment exceeds the amount which
would have been received by such Certificate Holder, such Pass Through Trustee
or the Indenture Trustee if the Owner Trustee (in its individual capacity) or
the Owner Participant had not become subject to the recourse liability referred
to in clause (ii) above. Nothing contained in this Section 8(j) shall prevent
any Certificate Holder, any Pass Through Trustee or the Indenture Trustee from
enforcing any personal recourse obligation (and retaining the proceeds thereof)
of the Owner Trustee (in its individual capacity) or the Owner Participant under
this Participation Agreement or the Trust Indenture (and any exhibits or annexes
thereto).
(k) First Security Bank of Utah, National Association, in its
individual capacity ("FSBU") and as Indenture Trustee and Pass Through Trustee
as provided below, represents as follows:
(i) it is a Citizen of the United States, that it will notify
promptly all parties to this Agreement if in its reasonable opinion its
status as a Citizen of the United States is likely to change and that it
will resign as Indenture Trustee as provided in Section 9.07 of the Trust
37
[First Amended and Restated
Participation Agreement (1993 747 A)]
Indenture if it should cease to be a Citizen of the United States;
(ii) it is a national banking association and has the full
corporate power, authority and legal right under the laws of the United
States of America to enter into and perform its obligations under the Trust
Indenture, this Agreement, the Basic Agreement and each Pass Through Trust
Agreement and, in its capacity as Indenture Trustee and Pass Through
Trustee, respectively, to authenticate the Loan Certificates and the Pass
Through Certificates;
(iii) the Indenture Trustee Documents, and the authentication of
the Loan Certificates and the Pass Through Certificates have been duly
authorized by all necessary corporate action on the part of FSBU, the
Indenture Trustee and the relevant Pass Through Trustee, as it shall be a
party thereto in any such capacity, and neither the execution (or, in the
case of the Loan Certificates and the Pass Through Certificates, the
authentication) and delivery thereof in any such capacity nor the
performance by it in any such capacity of any of the terms and provisions
thereof will violate any federal or Utah law or regulation relating to the
banking or trust powers of FSBU or contravene or result in any breach of,
or constitute any default under its charter or by-laws or the provisions of
any indenture, mortgage, contract or other agreement to which FSBU, the
Indenture Trustee or the Pass Through Trustee is a party or by which it or
its properties may be bound or affected;
(iv) each of the Indenture Trustee Documents has been duly
executed (or, in the case of the Loan Certificates and the Pass Through
Certificates, authenticated) and delivered by FSBU, the Indenture Trustee
and the relevant Pass Through Trustee, as it shall be a party thereto in
any such capacity, and, assuming that each such agreement is the legal,
valid and binding obligation of each other party thereto (other than FSBU,
the Indenture Trustee and the relevant Pass Through Trustee), is the legal,
valid and binding obligation of FSBU, the Indenture Trustee and the
relevant Pass Through Trustee, as it shall be a party thereto in any such
capacity, enforceable against it in accordance with its terms;
(v) neither the execution (or, in the case of the Loan
Certificates and the Pass Through Certificates, the authentication) and
delivery by FSBU, the Indenture Trustee or any Pass Through Trustee, as it
is a party in any such capacity to any of the Indenture Trustee Documents,
nor the
38
[First Amended and Restated
Participation Agreement (1993 747 A)]
consummation by it in any such capacity of any of the transactions
contemplated hereby, by the Trust Indenture, by the Pass Through Trust
Agreements, by the Loan Certificates or by the Pass Through Certificates
requires the consent or approval of, the giving of notice to, or the
registration with, or the taking of any other action with respect to, any
Utah state or federal governmental authority or agency regulating the
banking, trust or fiduciary powers of FSBU;
(vi) there are no Taxes payable by FSBU, the Indenture Trustee or
any Pass Through Trustee imposed by the State of Utah or any political
subdivision or taxing authority thereof in connection with the execution
(or, in the case of the Loan Certificates and the Pass Through
Certificates, the authentication) and delivery by it as a party in any such
capacity to any Indenture Trustee Document or the performance by it as a
party in any such capacity of any Indenture Trustee Document (other than
franchise or other taxes based on or measured by any fees or compensation
received by FSBU, the Indenture Trustee or any Pass Through Trustee, as the
case may be, for services rendered in connection with the transactions
contemplated thereby), and there are no Taxes payable by FSBU, the
Indenture Trustee or any Pass Through Trustee imposed by the State of Utah
or any political subdivision thereof in connection with the acquisition,
possession or ownership by any Pass Through Trustee of any of the Loan
Certificates (other than franchise or other taxes based on or measured by
any fees or compensation received by a Pass Through Trustee for services
rendered in connection with the transactions contemplated by the respective
Pass Through Trust Agreement) and, assuming that the trust created by the
respective Pass Through Trust Agreement will not be taxable as a
corporation, but, rather, will be characterized as a grantor trust under
subpart E, Part I of Subchapter J of the Code, such trust will not be
subject to any Taxes imposed by the State of Utah or any political
subdivision thereof;
(vii) there are no pending or threatened actions or proceedings
against any of FSBU, the Indenture Trustee, or the Pass Through Trustees
before any court or administrative agency which individually (or in the
aggregate in the case of any group of related lawsuits) purports to affect
the legality, validity or enforceability of, or which is reasonably likely
to materially adversely affect the ability of FSBU, the Indenture Trustee,
or the Pass Through Trustees to perform its obligations as a party in any
such capacity under any Indenture Trustee Document; and
39
[First Amended and Restated
Participation Agreement (1993 747 A)]
(viii) except for the issuance and sale pursuant to the respective
Pass Through Trust Agreement of the Pass Through Certificates contemplated
hereby, neither FSBU nor any Pass Through Trustee has directly or
indirectly offered any Loan Certificate for sale to any Person, or
solicited any offer to acquire any Loan Certificate from any Person other
than the Owner Trustee and the Owner Participant, and neither FSBU nor any
Pass Through Trustee has authorized anyone to act on its behalf to offer
directly or indirectly any Loan Certificate for sale to any Person, or to
solicit any offer to acquire any Loan Certificate from any Person other
than the Owner Trustee and the Owner Participant, and no Pass Through
Trustee is in default under any respective Pass Through Trust Agreement.
(l) So long as the Aircraft shall be leased to Lessee under the Lease
and so long as the Loan Certificates are outstanding, the Owner Participant will
not sell, assign, convey or otherwise transfer any of its right, title or
interest in and to this Agreement, the Trust Estate or the Trust Agreement to
any person or entity, unless (i) the proposed transferee is a "Transferee" (as
defined below) and (ii) the Owner Participant and the Transferee shall have
delivered to the Owner Trustee, the Lessee and the Indenture Trustee opinions
substantially in the form of Exhibits A-1 and A-2, respectively, hereto (or
otherwise in form and substance reasonably satisfactory to Lessee and the
Indenture Trustee) of counsel reasonably satisfactory to the Indenture Trustee
and Lessee. A "Transferee" shall mean either (A) a bank or other financial
institution with a combined capital, surplus and undivided profits of at least
$75,000,000 or a corporation whose net worth is at least $75,000,000, (B) any
subsidiary of such a bank, financial institution or corporation, provided that
such bank, financial institution or corporation furnishes to the Owner Trustee,
the Indenture Trustee and Lessee a guaranty substantially in the form of Exhibit
C hereto with respect to the Owner Participant's obligations, in the case of the
Owner Trustee, under the Trust Agreement and, in the case of the Indenture
Trustee and Lessee, the Owner Participant's obligations hereunder, or (C) any
other entity, provided such obligations are guaranteed by the transferor Owner
Participant; provided, however, that unless otherwise consented to by Lessee no
Transferee shall be an airline, a commercial air carrier, an air freight
forwarder, an entity engaged in the business of parcel transport by air or other
similar person or a corporation or other entity controlling, controlled by or
under common control with such an airline, a commercial air carrier, an air
freight forwarder, an entity engaged in the business of parcel transport by air
or other similar person. Each such transfer to a Transferee shall be subject to
the conditions that (M) upon
40
[First Amended and Restated
Participation Agreement (1993 747 A)]
giving effect to such transfer, the Transferee is a Citizen of the United States
or the Transferee, at its sole cost and expense on an after-tax basis (including
any continuing costs of the voting trust), shall have entered into a voting
trust or similar arrangement which permits the registration of the Aircraft
under the Federal Aviation Act in the name of the Owner Trustee, (N) the
Transferee has the full power and authority to enter into and carry out the
transactions contemplated hereby, (O) the Transferee enters into an agreement
substantially in the form of Exhibit B hereto (or otherwise in form and
substance reasonably satisfactory to Lessee and the Indenture Trustee), (P) such
transfer does not violate any applicable law including, without limitation, the
Federal Aviation Act, or any rules or regulations promulgated thereunder, the
Securities Act of 1933 or the Trust Indenture Act of 1939 (but not including
ERISA), (Q) the transferor Owner Participant assumes the risk of any loss of
Interest Deductions, MACRS Deductions, FSC Benefits or any Inclusion Event (each
as defined in the Tax Indemnity Agreement) resulting from such transfer, (R)
after giving effect to such transfer, there shall be no more than three Owner
Participants of record at that time, (S) such transfer will not give rise to a
Default or Event of Default under the Trust Indenture and (T) if such transfer
will result in there being more than one Owner Participant, it shall be a
condition precedent to such transfer that all such Owner Participants shall have
agreed in a manner reasonably satisfactory to Lessee that if the provisions of
the Operative Documents require or contemplate the waiver, consent or direction
of Owner Participant, such provisions shall be deemed satisfied by the waiver,
direction or consent of Owner Participants holding a majority of the beneficial
interests in the Trust Estate. Upon any such transfer by the Owner Participant
as above provided, (i) the Transferee shall be deemed the Owner Participant for
all purposes hereof and of the other Operative Documents and each reference
herein to the transferor Owner Participant shall thereafter be deemed for all
purposes to be to the Transferee and the transferor Owner Participant shall be
relieved of all obligations of the transferring Owner Participant under the
Owner Participant Documents arising after the date of such transfer except to
the extent fairly attributable to acts or events occurring prior thereto and not
assumed by the transferee Owner Participant (in each case, to the extent of the
participation so transferred) and (ii) Lessee shall acknowledge its consent to
such transfer to the Transferee, shall represent to the Transferee that no Event
of Default or Event of Loss, or circumstance which with the passage of time or
the giving of notice or both would constitute an Event of Default or Event of
Loss, then exists and Lessee shall promptly obtain new insurance certificates
(consistent with the provisions of Section 11 of the Lease) that reflect the
interests of the Transferee in
41
[First Amended and Restated
Participation Agreement (1993 747 A)]
the Aircraft. If the Owner Participant intends to transfer any of its interests
hereunder, it shall give prior written notice thereof as soon as practicable,
but in no event less than 10 days prior thereto, to the Indenture Trustee, the
Owner Trustee and Lessee, specifying the name and address of the proposed
Transferee. The Owner Participant shall pay all of the reasonable costs of the
other parties hereto, on a net after-tax basis, of any such transfer. For
purposes of this paragraph, "net worth" shall mean the excess of total tangible
assets over total liabilities, each to be determined in accordance with
generally accepted accounting principles consistently applied. Notwithstanding
anything contained in this Section 8(l) to the contrary, each of Lessee, the
Owner Trustee, the Indenture Trustee, the Pass Through Trustees and, by its
acceptance of a Loan Certificate, each Certificate Holder agrees that the Owner
Participant may pledge its beneficial interest in the Trust Estate created
pursuant to the Trust Agreement to First Security Bank of Utah, National
Association, as indenture trustee (the "777A Indenture Trustee") pursuant to
that certain Trust Indenture and Mortgage (1995 777 A) dated as of May 1, 1995,
pursuant to a certain letter agreement to be entered into between _____________
_____________ and the 777A Indenture Trustee.
(m) Notwithstanding the provisions of Section 8(r) hereof, unless
waived by each Certificate Holder, Lessee shall not be entitled to terminate the
Lease or assume the Loan Certificates on a Purchase Option Date if on such
Purchase Option Date an Event of Default under the Lease shall have occurred and
be continuing.
(n) State Street Bank and Trust Company and First Security Bank of
Utah, National Association, each in its individual capacity, agrees for the
benefit of Lessee to comply with the terms of the Trust Indenture which it is
required to comply with in its individual capacity.
(o) The Owner Participant represents and warrants that no part of the
funds used by it to acquire its interest in the Trust Estate constitutes assets
of any "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or of any "plan"
within the meaning of Section 4975(e)(1) of the Code (such employee benefit
plans and plans hereinafter referred to as "ERISA Plans").
(p) State Street Bank and Trust Company in its individual capacity
("SSBTC") represents and warrants that:
42
[First Amended and Restated
Participation Agreement (1993 747 A)]
(i) the Trust Agreement and, assuming due authorization,
execution and delivery of the Trust Agreement by the Owner Participant,
each of the other Owner Trustee Documents has been duly executed and
delivered by one of its officers who is duly authorized to execute and
deliver such instruments on behalf of the Owner Trustee;
(ii) the Trust Estate is free and clear of Lessor Liens
attributable to SSBTC, and there are no Liens affecting the title of the
Owner Trustee to the Aircraft or resulting from any act or claim against
SSBTC arising out of any event or condition not related to the ownership,
leasing, use or operation of the Aircraft or to any other transaction
contemplated by this Agreement or any of the other Operative Documents,
including any Lien resulting from the nonpayment by SSBTC of any Taxes
imposed or measured by its net income;
(iii) there has not occurred any event which constitutes (or to
the best of its knowledge would, with the passage of time or the giving of
notice or both, constitute) an Event of Default as defined in the Trust
Indenture which has been caused by or relates to SSBTC and which is
presently continuing;
(iv) it is a Massachusetts trust company duly organized and
validly existing in good standing under the laws of the Commonwealth of
Massachusetts and (assuming due authorization, execution and delivery of
the Trust Agreement by the Owner Participant) has the corporate power and
authority to enter into and perform its obligations under the Trust
Agreement, and (assuming due authorization, execution and delivery of the
Trust Agreement by the Owner Participant) has full right, power and
authority to enter into and perform its obligations as Owner Trustee
pursuant to the Trust Agreement under each of the other Owner Trustee
Documents;
(v) each of the Owner Trustee Documents has been duly authorized
by all necessary corporate action on its part, and neither the execution
and delivery thereof nor its performance of any of the terms and provisions
thereof will violate any federal or Massachusetts Commonwealth law or
regulation relating to its banking or trust powers or contravene or result
in any breach of, or constitute any default under, its charter or by-laws
or the provisions of any indenture, mortgage, contract or other agreement
to which it is a party or by which it or its properties may be bound or
affected;
43
[First Amended and Restated
Participation Agreement (1993 747 A)]
(vi) assuming due authorization, execution and delivery of the
Trust Agreement by the Owner Participant, each of the Owner Trustee
Documents has been duly executed and delivered by it, and each of the Trust
Agreement and the Participation Agreement (to the extent executed by the
Owner Trustee in its individual capacity) is a legal, valid and binding
obligation of SSBTC and as Owner Trustee, as the case may be, enforceable
against such party in accordance with the terms thereof;
(vii) on the Delivery Date, the Owner Trustee shall have received
whatever title to the Aircraft as was conveyed to it by the Lessee;
(viii) it has not offered any interest in the Trust Estate or any
Loan Certificates or Pass Through Certificates or any similar securities
for sale to, or solicited any offer to acquire the same from, anyone other
than the Indenture Trustee, the Pass Through Trustees and the Owner
Participant, and no responsible officer or responsible employee of SSBTC
has knowledge of any such offer or solicitation, except as set forth in
Section 7(a)(xi) hereof;
(ix) assuming due authorization, execution and delivery of each of
the Owner Trustee Documents by each of the parties thereto (other than the
Owner Trustee), each of the Owner Trustee Documents is a legal, valid and
binding obligation of the Owner Trustee, enforceable against the Owner
Trustee in accordance with its respective terms;
(x) neither the due execution and delivery of the Owner Trustee
Documents by SSBTC, in its individual capacity or as Owner Trustee under
the Trust Agreement, as the case may be, nor the consummation by it of any
of the transactions contemplated thereby require the consent or approval
of, the giving of notice to, or the registration with, any federal or
Massachusetts Commonwealth governmental authority or agency pursuant to any
federal or Massachusetts Commonwealth law governing the banking or trust
powers of SSBTC;
(xi) no consent, approval, order or authorization of, giving of
notice to, or registration or filing with (including the filing of any
financing statement under Article 9 of the Uniform Commercial Code as in
effect in the Commonwealth of Massachusetts), or taking of any other action
in respect of, any Massachusetts Commonwealth or local governmental
authority or agency or any United States
44
[First Amended and Restated
Participation Agreement (1993 747 A)]
federal governmental authority or agency regulating the banking or trust
powers of SSBTC is required for the execution and delivery of, or the
carrying out by, SSBTC or the Owner Trustee, as the case may be, of any of
the transactions contemplated by the Owner Trustee Documents or of any of
the transactions contemplated by any other of the Operative Documents to
which SSBTC or the Owner Trustee is or is to be a party, other than any
such consent, approval, order, authorization, registration, notice or
action as has been duly obtained, given or taken (and other than the filing
of continuation statements required to be filed at periodic intervals under
Article 9 of the Uniform Commercial Code as in effect in the State of
Illinois and the Commonwealth of Massachusetts);
(xii) except for the filing of a financing statement in the
office of the Secretary of State of the Commonwealth of Massachusetts
naming the Owner Trustee as debtor and the Indenture Trustee as secured
party and describing the Trust Indenture Estate accurately and completely,
which financing statement has been duly filed, and the timely filing in the
future of continuation statements with respect to such financing statement,
no other filing is required in the Commonwealth of Massachusetts in order
to perfect the mortgage and security interests created by the Trust
Indenture; and
(xiii) there are no pending or threatened actions or proceedings
against SSBTC or the Owner Trustee before any court or administrative
agency which, if determined adversely to it, would materially adversely
affect the ability of SSBTC or the Owner Trustee, as the case may be, to
perform its obligations under any of the Owner Trustee Documents or any
other documents executed by the Owner Trustee or SSBTC in connection with
the transactions contemplated by the Operative Documents.
(q) The Owner Participant agrees, solely for the benefit of Lessee,
that it will comply with any obligation expressly required of it under Section
9(c) of the Lease. The Owner Participant further covenants and agrees to pay or
cause the Owner Trustee to pay those costs and expenses specified to be paid by
the Owner Participant pursuant to the Lease and all costs and expenses that are
for the account of the Lessor pursuant to Sections 5(a), 5(c), 5(d), 5(e) and
5(f), 12 and 19(c) of the Lease.
(r) Subject to compliance by Lessee with all of its obligations under
the Lessee Documents, each of the Owner
45
[First Amended and Restated
Participation Agreement (1993 747 A)]
Trustee, the Indenture Trustee, each Certificate Holder and the Owner
Participant covenants and agrees that, at Lessee's expense on a net after-tax
basis (including, without limitation, reasonable attorney's fees and expenses of
each of such parties), (i) Lessee may elect to terminate the Lease and to
purchase the Aircraft pursuant to Section 19(b) of the Lease and that each of
such parties will execute and deliver appropriate documentation transferring all
right, title and interest in the Aircraft to Lessee (without recourse or
warranty except as to Lessor Liens (including for this purpose Liens that would
be Lessor Liens but for the proviso to the definition of Lessor Liens) with
respect to the Owner Participant) (including without limitation, such bills of
sale and other instruments and documents as Lessee shall reasonably request to
evidence (on the public record or otherwise) such transfer and the vesting of
all right, title and interest in and to the Aircraft in Lessee), and (ii)
Lessee, in connection with such purchase and may assume (and receive a credit in
an amount equal to the principal amount of the debt assumed against the purchase
price payable by Lessee pursuant to Section 19(b) of the Lease) the obligations
of the Owner Trustee pursuant to Section 7.03 of the Trust Indenture and the
Loan Certificates (and the Lease, to the extent that the Owner Trustee's
obligations thereunder are incorporated into the Trust Indenture or the Loan
Certificates), and Lessee shall confirm that its obligations under the Lease
shall be direct obligations to the Indenture Trustee as if set forth in the
Trust Indenture, and that each of the parties shall execute and deliver
appropriate documentation in form and substance reasonably satisfactory to such
parties under which Lessee will assume such obligations on the basis of full
recourse to Lessee, maintaining the security interest in the Aircraft created by
the Trust Indenture, releasing the Owner Participant and the Owner Trustee from
all future obligations in respect of the Loan Certificates, the Trust Indenture
and all other Operative Documents and all such other actions (including the
furnishing of legal opinions reasonably requested by any party) as are
reasonably necessary to permit such assumption by Lessee.
(s) Lessee will not consolidate with or merge into any other
corporation or convey, transfer or lease substantially all of its assets to any
Person unless:
(i) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee as an entirety shall be a
Citizen of the United States and shall be a Certificated Air Carrier;
46
[First Amended and Restated
Participation Agreement (1993 747 A)]
(ii) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee as an entirety shall
execute and deliver to the Owner Trustee, the Indenture Trustee, the Owner
Participant and the Pass Through Trustees a duly authorized, valid, binding
and enforceable agreement in form and substance reasonably satisfactory to
the Owner Participant containing an assumption by such successor
corporation or Person of the due and punctual performance and observance of
each covenant and condition of the Operative Documents and the Pass Through
Trust Agreements to be performed or observed by Lessee;
(iii) immediately after giving effect to such transaction, no
Event of Default under the Lease shall have occurred and be continuing;
(iv) Lessee shall have delivered to the Owner Trustee, the
Indenture Trustee, the Pass Through Trustees and the Owner Participant a
certificate signed by the President or any Vice President and by the
Secretary or an Assistant Secretary of Lessee, and an opinion of counsel
(which may be Lessee's General Counsel) reasonably satisfactory to the
Owner Participant, each stating that such consolidation, merger,
conveyance, transfer or lease and the assumption agreement mentioned in
clause (ii) above comply with this Section 8(s) and that all conditions
precedent herein provided for relating to such transaction have been
complied with; and
(v) the corporation formed by such consolidation or into which
Lessee is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of Lessee, shall make such filings
and recordings with the FAA pursuant to the Federal Aviation Act, as shall
be necessary or desirable to evidence such consolidation, merger,
conveyance, transfer or lease with or to such entity.
Upon any consolidation or merger, or any conveyance, transfer or lease
of substantially all of the assets of Lessee as an entirety in accordance with
this Section 8(s), the successor corporation or Person formed by such
consolidation or into which Lessee is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, Lessee under this Agreement and under the
Pass Through Trust Agreements with the same effect as if such successor
corporation or Person had been named as
47
[First Amended and Restated
Participation Agreement (1993 747 A)]
Lessee herein and therein. No such conveyance, transfer or lease of
substantially all of the assets of Lessee as an entirety shall have the effect
of releasing Lessee or any successor corporation or Person which shall
theretofore have become such in the manner prescribed in this Section 8(s) from
its liability in respect of any Operative Document to which it is a party or any
Pass Through Trust Agreement. Nothing contained herein shall permit any lease,
sublease or other arrangement for the use, operation or possession of the
Aircraft except in compliance with the applicable provisions of the Lease.
(t) Lessee, at its expense, will, at the request of any party hereto,
take, or cause to be taken, such action with respect to the recording, filing,
rerecording and refiling of the Trust Agreement, the Lease, the Lease
Supplement, the Trust Indenture, the Trust Supplement and any financing
statements or other instruments as are necessary to maintain, so long as the
Trust Indenture or the Lease is in effect, the perfection of the security
interests created by the Trust Indenture and any security interest that may be
claimed to have been created by the Lease and the ownership interest of the
Owner Trustee in the Aircraft.
(u) Section 3 of the Lease contemplates that, under certain
circumstances, the Owner Participant will make certain recalculations of Basic
Rent, Excess Amount, Stipulated Loss Value percentages, Termination Value
percentages, Special Termination Value percentages and the EBO Percentage, and
the Owner Participant hereby agrees to make such recalculations as and when
contemplated by the Lease and subject to all the terms and conditions of the
Lease and promptly to take such further actions as may be necessary or desirable
to give effect to and to cause the Owner Trustee to give effect to the
provisions of Section 3 of the Lease.
(v) The Owner Participant hereby agrees not to revoke the Trust
Agreement or the trusts created thereunder without the prior written consent of
(i) the Lessee so long as the Lease shall remain in effect and no Event of
Default under the Lease shall have occurred and be continuing and (ii) the
Indenture Trustee so long as the Trust Indenture shall be in effect.
(w) Lessee covenants and agrees with the Owner Participant, the
Indenture Trustee and the Owner Trustee that at all times during the Term it
will be a Certificated Air Carrier
(x) (i) Each Pass Through Trustee hereby agrees that, except as
otherwise required by applicable law (including, without limitation, any law
which requires such Pass Through
48
[First Amended and Restated
Participation Agreement (1993 747 A)]
Trustee to act within its own discretion), it shall not, without the prior
written consent of the Owner Trustee, direct the Indenture Trustee to take or
refrain from taking any action under the Trust Indenture that requires the
approval, waiver, authorization, direction or consent of, or notice from, the
Certificate Holders holding a specified percentage in principal amount of
Outstanding (as defined in the Trust Indenture) Loan Certificates unless such
Pass Through Trustee receives a Direction (as defined in the relevant Pass
Through Trust Agreement) to so direct the Indenture Trustee from Certificate
Holders (as defined in the relevant Pass Through Trust Agreement) holding the
same percentage of Certificates (as defined in the relevant Pass Through Trust
Agreement) evidencing Fractional Undivided Interests (as defined in the relevant
Pass Through Trust Agreement) in the Trust (as defined in the relevant Pass
Through Trust Agreement) holding the Loan Certificates.
(ii) Lessee and each Pass Through Trustee hereby agree that
Article X of each Pass Through Trust Agreement (to the extent relating to
the Certificates) shall not be amended without the prior written consent of
the Owner Participant.
(iii) Each Pass Through Trustee hereby agrees that, except as
otherwise required by applicable law (including, without limitation, any
law which requires such Pass Through Trustee to act within its own
discretion), if requested to do so by the Owner Trustee or the Owner
Participant, such Pass Through Trustee shall request a Direction from the
relevant Certificate Holders to establish whether such Pass Through
Trustee, in its capacity as a Certificate Holder, may direct the Indenture
Trustee to take or refrain from taking any action under the Operative
Documents.
(y) The Owner Trustee agrees that any profit, income, interest,
dividend or gain realized upon the maturity, sale or other disposition of any
Permitted Investment made by the Indenture Trustee pursuant to Section 9.04 of
the Trust Indenture, and paid to Lessee on behalf of the Owner Trustee by the
Indenture Trustee in accordance with the terms of such Section 9.04, shall be
entirely for the account of, and the sole property of, Lessee who, for such
purposes, shall not be deemed to be acting as agent of the Owner Trustee, and
Lessee shall have no obligation to pay over such income, interest, dividend or
gain to the Owner Trustee, except to the extent the Owner Trustee or Owner
Participant are owed any amounts under the Operative Documents by Lessee and
such amounts are not paid when due, in which event the Owner Participant may
cause the Owner Trustee to distribute and apply such income, interest, dividend
or gain in satisfaction or partial satisfaction of the amounts so due.
49
[First Amended and Restated
Participation Agreement (1993 747 A)]
(z) The Owner Participant hereby agrees to instruct the Owner Trustee
to promptly distribute any money received by it pursuant to Section 7.01 or
10.04 of the Trust Indenture to Lessee to the extent such amounts were paid by
Lessee or on behalf of Lessee and the Owner Trustee or the Owner Participant is
not owed any amounts under any of the Operative Documents by Lessee (and if the
Owner Trustee or Owner Participant is owed any such amount, the monies received
under Section 7.01 or 10.04 of the Trust Indenture may be applied in
satisfaction or partial satisfaction thereof). Lessee agrees to hold any money
received by it pursuant to the foregoing sentence in trust for the benefit of
the Owner Participant and may, in its discretion, invest and reinvest all money
so held by it in such Permitted Investments as Lessee deems appropriate. Lessee
will apply such money to the payment of previously unclaimed payments with
respect to the Loan Certificates when and as claims for payment are made by the
Holders of such Loan Certificates. As compensation for its services pursuant to
this Section 8(z), Lessee shall be entitled to an annual fee from the Owner
Participant in an amount to be agreed to at the time by Lessee and the Owner
Participant but in no event shall such fee exceed at any time the amount of
earnings on the monies so held in trust distributable at such time to the Owner
Participant. Any net losses on such investment shall be for the account of
Lessee. Any net earnings on such investment shall be distributed from time to
time by Lessee to the Owner Participant after deducting therefrom any portion of
such fee then due and unpaid. Upon the date required by applicable law dealing
with unclaimed property, Lessee will distribute to the Owner Participant any
amount held by it pursuant to this Section 8(z) and not previously applied to
the payment of the Loan Certificates, after deducting therefrom any portion of
such fee then due and unpaid.
(aa) The Owner Participant agrees that, at Lessee's expense
(including, without limitation, reasonable attorneys fees and other out-of-
pocket expense of the Owner Trustee and Owner Participant), upon request of the
Lessee, the Owner Participant will negotiate promptly in good faith with respect
to any arrangements pursuant to which the Trust Indenture may be satisfied and
discharged in respect of the Loan Certificates in accordance with subsection
(a)(ii) or (a)(iii) of Section 10.01 of the Trust Indenture, provided, that
there shall be no material adverse impact upon the rights or interests of the
Owner Participant or Owner Trustee, and the Owner Trustee agrees to act upon the
instructions of the Owner participant in connection therewith. The Owner
Trustee agrees that it will not, and the Owner Participant agrees that during
such time as an Event of Default has not occurred under the Lease it will not
cause the Owner Trustee to take any action to effect such satisfaction and
50
[First Amended and Restated
Participation Agreement (1993 747 A)]
discharge except upon the request of the Lessee made pursuant to this Section
8(aa).
SECTION 9. [Intentionally Omitted].
SECTION 10. Other Documents; Amendment. Each of the Owner
Participant and the Owner Trustee hereby (A) agrees with Lessee, the Certificate
Holders and the Indenture Trustee to comply with all of the terms of the Trust
Agreement (as the same may hereafter be amended or supplemented from time to
time in accordance with the terms thereof) applicable to it, to the extent such
non-compliance would be adverse to such party; and (B) agrees with Lessee, the
Certificate Holders and the Indenture Trustee not to amend, supplement or
otherwise modify any provision of the Trust Agreement in a manner adversely
affecting such party without the prior written consent of such party.
Notwithstanding the foregoing, unless an Event of Default shall have occurred
and be continuing and so long as the Lease has not been terminated, the
Indenture Trustee and the Owner Participant hereby agree for the benefit of
Lessee that without the consent of Lessee they will not (and the Owner
Participant agrees that it will not cause the Owner Trustee to) amend,
supplement or otherwise modify any provision of the Trust Indenture in a manner
adversely affecting Lessee. The Indenture Trustee and the Owner Trustee agree
to promptly furnish to Lessee copies of any supplement, amendment, waiver or
modification of any of the Operative Documents to which Lessee is not a party.
Each Certificate Holder agrees that it will not take any action in respect of
the Trust Indenture Estate except through the Indenture Trustee pursuant to the
Trust Indenture or as otherwise permitted by the Trust Indenture.
SECTION 11. Certain Covenants of Lessee. Lessee covenants and agrees
with the Participants, the Indenture Trustee and the Owner Trustee, in its
capacity as such and in its individual capacity as follows:
(a) Lessee will cause to be done, executed, acknowledged and delivered
all and every such further acts, conveyances and assurances as the Owner
Trustee, the Indenture Trustee or the Owner Participant shall reasonably
require for accomplishing the purposes of this Agreement and the other
Operative Documents; provided that any instrument or other document so
executed by Lessee will not expand any obligations or limit any rights of
Lessee in respect of the transactions contemplated by any Operative
Documents. Lessee, forthwith upon delivery of the Aircraft under the Lease
shall cause the Aircraft to be duly registered, and at all times thereafter
to remain duly registered, in the name
51
[First Amended and Restated
Participation Agreement (1993 747 A)]
of the Owner Trustee, except as otherwise required or permitted hereunder
or under the Lease, under the Federal Aviation Act or under the applicable
law of another permitted government of registry, or shall furnish to the
Owner Trustee such information as may be required to enable the Owner
Trustee to make application for such registration (at the expense of
Lessee, including, without limitation, reasonable attorney's fees and
expenses), and shall promptly furnish to the Owner Trustee such information
as may be required to enable the Owner Trustee to timely file any reports
required to be filed by it as the lessor under the Lease or as the owner of
the Aircraft with any governmental authority (including tax authorities).
(b) Lessee, at its expense, will cause the Trust Agreement, the Lease,
all Lease Supplements, all amendments to the Lease, the Trust Indenture,
and all supplements and amendments to the Trust Indenture to be promptly
filed and recorded, or filed for recording, to the extent permitted under
the Federal Aviation Act, or required under any other applicable law. Upon
the execution and delivery of the Owner Trustee's FAA Bill of Sale, the
Lease Supplement covering the Aircraft and the Trust Supplement, the Lease
and the Trust Indenture shall be filed for recording with the Federal
Aviation Administration in the following order of priority; first, the
Owner Trustee's FAA Bill of Sale, second, the FAA registration application,
third, the Trust Indenture, with the Trust Agreement and the Trust
Supplement attached, and fourth, the Lease, with the Lease Supplement
covering the Aircraft, the Trust Indenture and the Trust Supplement
attached. Lessee agrees to furnish the Owner Participant, the Owner
Trustee and the Indenture Trustee with copies of the foregoing documents
with recording data as promptly as practicable following the issuance of
same by the FAA.
SECTION 12. Owner for Income Tax Purposes. It is hereby agreed among
Lessee, the Owner Participant and the Owner Trustee that for income tax purposes
the Owner Participant will be the owner of the Aircraft to be delivered under
the Lease and Lessee will be the lessee thereof, and each party hereto agrees to
characterize the Lease as a lease for income tax purposes.
SECTION 13. Notices; Consent to Jurisdiction. (a) All notices,
demands, instructions and other communications required or permitted to be given
to or made upon any party hereto shall be in writing and shall be personally
delivered or sent by registered or certified mail, postage prepaid, or by
telecopier (with a copy of such notice to follow by registered or
52
[First Amended and Restated
Participation Agreement (1993 747 A)]
certified mail), or by prepaid courier service, and shall be deemed to be given
for purposes of this Agreement on the day that such writing is delivered or
received or if given by certified mail, three Business Days after being
deposited in the mails, in accordance with the provisions of this Section 13(a).
Unless otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section 13(a), notices, demands, instructions and
other communications in writing shall be given to or made upon the respective
parties hereto at their respective addresses (or to their respective telecopier
numbers) as follows: (A) if to Lessee, the Owner Trustee, the Indenture
Trustee, the Pass Through Trustees or the Owner Participant, to the respective
addresses set forth on Schedule I hereto (and in the case of Owner Trustee a
copy shall be sent to the Owner Participant) or (B) if to a subsequent Owner
Participant, addressed to such subsequent Owner Participant at such address as
such subsequent Owner Participant shall have furnished by notice to the parties
hereto or (C) if to any subsequent Certificate Holder, addressed to such
Certificate Holder at its address set forth in the Loan Certificate Register
maintained pursuant to Section 2.03 of the Trust Indenture.
(b) Each party to this Agreement including each Certificate Holder
(individually a "Party" and collectively "Parties") irrevocably agrees that any
legal suit, action or proceeding brought by any other Party, which arises solely
out of or relates solely to the Operative Documents or any of the transactions
contemplated hereby or thereby or any document referred to herein or therein,
may be instituted in the Circuit Court of the State of Illinois, Cook County or
the United States District Court for the Northern District of Illinois and that
they hereby waive the right to trial by jury in any such proceeding; provided,
however, that the foregoing provisions shall not apply to third party tort
claims (but shall apply to an indemnity claim with respect to such tort claim)
and that the foregoing shall not apply to any right a Party may have to seek
removal of such legal suit, action or proceeding to federal court or to seek
consolidation of any separate legal suits, actions or proceedings brought by any
one or more of the other Parties in the same or different jurisdictions. The
agreement set forth in this Section 13(b) is given solely for the benefit of the
Parties and such agreement is not intended to and shall not inure to the benefit
of any other person.
SECTION 14. Change of Situs of Owner Trust. The Owner Participant
agrees that if, at any time, the Trust Estate becomes subject to any Taxes for
which it is indemnified pursuant to Section 7(b) hereof and if, as a consequence
thereof, Lessee shall request that the situs of the trust be moved to another
53
[First Amended and Restated
Participation Agreement (1993 747 A)]
state in the United States from the state in which it is then located, the situs
of the trust may be moved with the written consent of the Owner Participant
(which consent shall not be unreasonably withheld) and the Owner Participant
will take whatever action may be reasonably necessary to accomplish such
removal; provided that (A) Lessee shall provide such additional tax
indemnification, as the Owner Participant may reasonably request, (B) the rights
and obligations under the Operative Documents of the Owner Participant shall not
be altered as a result of the taking of such action, (C) the lien of the Trust
Indenture on the Trust Indenture Estate shall not be adversely affected by such
action, and the Lessee shall execute and deliver such documents as may be
requested by the Indenture Trustee to continue the perfection of the lien on the
Trust Indenture Estate and (D) the Owner Participant and the Indenture Trustee
shall have received an opinion or opinions of counsel (reasonably satisfactory
to the Owner Participant) in scope, form and substance reasonably satisfactory
to the Owner Participant to the effect that (I) the trust, as thus removed,
shall remain a validly established trust, (II) any amendments to the Trust
Agreement necessitated by such removal shall have been duly authorized, executed
and delivered by the parties thereto and shall constitute the valid and binding
obligations of such parties, enforceable in accordance with their terms, (III)
such removal will not result in the imposition of, or increase in the amount of,
any Tax for which Lessee is not required to indemnify the Owner Participant, the
Owner Trustee or the Trust Estate pursuant to Section 7(b) hereof (taking into
account any additional indemnification provided by Lessee pursuant to clause (A)
of this sentence), (IV) such removal will not, in the Owner Participant's
judgment, result in any Loss of MACRS Deductions, FSC Benefits, Interest
Deductions or an Inclusion Event (as defined in the Tax Indemnity Agreement)
with respect to which Lessee is not required to indemnify the Owner Participant
pursuant to Section 5 of the Tax Indemnity Agreement (taking into account any
additional indemnification provided by Lessee pursuant to clause (A) of this
sentence), and (V) covering such other matters as the Owner Participant may
reasonably request, (E) if such removal involves the replacement of the Owner
Trustee, the Owner Participant shall have received an opinion of counsel to such
successor Owner Trustee in form and substance reasonably satisfactory to the
Owner Participant covering the matters set forth in the opinion provided
pursuant to Section 4(a)(xiii) hereof and (F) Lessee shall indemnify and hold
harmless the Owner Participant on a net after-tax basis against any and all
reasonable and actual costs and expenses including attorneys' fees and
disbursements, registration, recording or filing fees and Taxes incurred by the
Owner Trustee or Owner Participant, in connection with such change of situs.
54
[First Amended and Restated
Participation Agreement (1993 747 A)]
SECTION 15. Miscellaneous. (a) Each of the Participants and the
Certificate Holders covenants and agrees that it shall not unreasonably withhold
its consent to any consent requested of the Owner Trustee, as Lessor, or the
Indenture Trustee under the terms of the Lease, which by its terms is not to be
unreasonably withheld by the Owner Trustee, as Lessor, or by the Indenture
Trustee.
(b) The representations, warranties, indemnities and agreements of
Lessee, the Owner Trustee, the Indenture Trustee, the Participants and the
Certificate Holders provided for in this Agreement, and Lessee's, the Owner
Trustee's, Indenture Trustee's, the Participants' and the Certificate Holders'
obligations under any and all thereof, shall survive the making available of the
respective Commitments by the Participants, the delivery or return of the
Aircraft, the transfer of any interest of the Owner Participant in the Trust
Estate or the Aircraft or any Engine or the transfer of any interest by any
Certificate Holder in any Loan Certificate or the Trust Indenture Estate and the
expiration or other termination of this Agreement or any other Operative
Document or any of the Pass Through Trust Agreements.
(c) This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument. Neither this Agreement nor any of the terms hereof may be
terminated, amended, supplemented, waived or modified, except by an instrument
in writing signed by the party against which the enforcement of the termination,
amendment, supplement, waiver or modification is sought; and no such
termination, amendment, supplement, waiver or modification shall be effective
unless a signed copy thereof shall have been delivered to the Lessee, the
Indenture Trustee and the Owner Trustee. The terms of this Agreement shall be
binding upon, and inure to the benefit of and shall be enforceable by, Lessee,
the Participants, the Indenture Trustee, the Certificate Holders and the Owner
Trustee. This Agreement shall in all respects be governed by, and construed in
accordance with, the internal laws of the State of Illinois, including all
matters of construction, validity and performance. This Agreement is being
delivered in the State of Illinois.
(d) The parties hereto agree that all of the statements,
representations, covenants and agreements made by the Owner Trustee (when made
in such capacity) contained in this Agreement and any agreement referred to
herein other than the Trust Agreement, unless expressly otherwise stated, are
made and intended only for the purpose of binding the Trust Estate and
55
[First Amended and Restated
Participation Agreement (1993 747 A)]
establishing the existence of rights and remedies which can be exercised and
enforced against the Trust Estate. Therefore, anything contained in this
Agreement or such other agreements to the contrary notwithstanding (except for
any express provisions that the Owner Trustee is responsible for or is acting in
or making representations or agreements in its individual capacity), no recourse
shall be had with respect to this Agreement or such other agreements against the
Owner Trustee in its individual capacity or against any institution or person
which becomes a successor trustee or co-trustee or any officer, director,
trustee, servant or direct or indirect parent or controlling person or persons
of any of them; provided, however, that this Section 15(d) shall not be
construed to prohibit any action or proceeding against any party hereto for its
own willful misconduct or grossly negligent conduct; and provided, further, that
nothing contained in this Section 15(d) shall be construed to limit the exercise
and enforcement in accordance with the terms of this Agreement or such other
agreements of rights and remedies against the Trust Estate. The foregoing
provisions of this Section 15(d) shall survive the termination of this
Agreement, the other Operative Documents and the Pass Through Trust Agreements.
(e) No Participant shall have any obligation or duty to the Lessee, to
any other Participant or to others with respect to the transactions contemplated
hereby except those obligations or duties of such Participant expressly set
forth in this Agreement and the other Operative Documents and no Participant
shall be liable for performance by any other party hereto of such other party's
obligations or duties hereunder. Without limitation of the generality of the
foregoing, under no circumstances whatsoever shall any Participant be liable to
Lessee, nor shall any Participant be liable to any other Participant, for any
action or inaction on the part of the Indenture Trustee or the Owner Trustee in
connection with the transactions contemplated herein, whether or not such action
or inaction is caused by the willful misconduct or gross negligence of the
Indenture Trustee or the Owner Trustee.
(f) This Agreement shall be binding upon and shall inure to the
benefit of and shall be enforceable against, the parties hereto and their
respective successors and permitted assigns including each successive holder of
the Owner Participant's interest and each successive holder of any Loan
Certificate issued and delivered pursuant to this Agreement or the Trust
Indenture whether or not an express assignment to such holder of rights and
obligations under this Agreement has been made.
56
[First Amended and Restated
Participation Agreement (1993 747 A)]
(g) The Owner Participant hereby consents to the Owner Trustee's
appointment of Lessee as its exclusive agent pursuant to the terms of Section
7(a)(4) of the Lease.
SECTION 16. Invoices and Payment of Expenses. Each of the Owner
Trustee, the Indenture Trustee, Lessee and the Participants shall promptly
submit to the Owner Participant and the Lessee for their joint prompt approval
(except in the case of Transactions Expenses referred to in clauses (i)(6), (v)
and (viii) of the definition thereof which shall be approved solely by the Owner
Participant) copies of invoices of the Transaction Expenses as they are
received. The Owner Participant agrees to transfer to the Owner Trustee from
time to time promptly upon receipt of invoices of Transaction Expenses such
amount as shall be necessary in order to enable the Owner Trustee to pay such
Transaction Expenses or to pay such amounts directly. To the extent of funds
received by it, the Owner Trustee agrees to pay all invoices of Transaction
Expenses that have been so approved promptly upon receipt thereof.
Notwithstanding the foregoing, in the event that the transactions contemplated
hereby shall not be consummated, Lessee shall pay all Transaction Expenses,
except that the fees, expenses and disbursements of the Owner Participant
(including those relating to its counsel) shall be borne by the Owner
Participant if such failure to consummate the transactions results from the
failure of the Owner Participant to adhere to the terms and conditions set forth
in the term sheet relating to the transactions contemplated hereby agreed to by
Lessee and the Owner Participant or the terms and conditions set forth in the
letter dated January 14, 1993, as amended as of April 14, 1993, from the Owner
Participant (and, in the case of the amendment dated as of April 14, 1993, from
NCC FSC IV, Inc.) to Capstar Partners and agreed to by Lessee or to close after
all conditions precedent to the Owner Participant's funding of its Commitment
set forth herein have been satisfied. To the extent Transaction Expenses exceed
[_____%] of Lessor's Cost, the Lessee may, in lieu of electing an optimization
pursuant to Section 18 hereof, promptly reimburse the Owner Trustee or Owner
Participant, as appropriate, for all or a portion of the Transaction Expenses
described in clause (i)(5) and/or clause (vi) (excluding any debt placement fees
included in said clause (vi)) of the definition of Transaction Expenses.
SECTION 17. Optional Redemption of Certificates. (a) Subject to the
terms of this Section 17, in the event that at any time Lessee shall have given
written notice to the Owner Trustee, the Indenture Trustee and the Owner
Participant that there be effected a voluntary redemption of all of the
outstanding Loan Certificates by the Owner Trustee as part of a refunding or
refinancing transaction, the Owner Participant
57
[First Amended and Restated
Participation Agreement (1993 747 A)]
agrees to negotiate promptly in a commercially reasonable manner to conclude an
agreement with Lessee as to the terms of such refunding or refinancing
transaction (including the terms of any debt to be issued in connection with
such refunding or refinancing transaction and the documentation to be executed
in connection therewith), and if after such negotiation Lessee and the Owner
Participant shall have concluded an agreement with respect to such terms:
(1) within ten Business Days after the reaching of such
agreement, the Owner Participant will deliver to Lessee a certificate of an
authorized representative of the Owner Participant (the "Refinancing
Certificate") setting forth (i) the proposed date on which the outstanding
Loan Certificates will be redeemed, describing the new debt to be issued
and the other aspects of such refunding or refinancing transaction to be
consummated (such date, the "Refinancing Date") and (ii) the following
information: (A) the principal amount of debt to be issued by the Owner
Trustee on the Refinancing Date, and (B) the proposed revised schedules of
Basic Rent, Excess Amount, debt amortization, Stipulated Loss Value
percentages, Termination Value percentages, Special Termination Value
percentages and EBO Percentage. Within ten Business Days of its receipt of
the Refinancing Certificate, Lessee may demand a verification pursuant to
Exhibit E to the Lease of the information set forth in the Refinancing
Certificate. Upon the acceptance by Lessee of the accuracy of the
information set forth in the Refinancing Certificate or the determination
pursuant to such verification procedures of the revised Basic Rent, Excess
Amount, debt amortization, Stipulated Loss Value percentages, Termination
Value percentages, Special Termination Value percentages and EBO Percentage
and the Debt/Equity Ratio (such information, the "Refinancing Information")
the appropriate parties will take the actions specified in paragraphs (2)
through (6) below;
(2) the appropriate parties will enter into a financing or loan
agreement in form and substance reasonably satisfactory to the Owner
Participant, the Owner Trustee and the Lessee (which may involve an
underwriting agreement in connection with a public offering of such debt or
the purchase of such debt by a publicly funded entity (or entities) or the
sale of the Owner Trustee's interest in the Trust Estate and/or the
Aircraft and its resale to the Owner Trustee) with the institution or
institutions to be named therein (A) providing for (i) the issuance and
sale by the Owner Trustee to such institution or institutions on the
Refinancing Date of debt securities in an aggregate
58
[First Amended and Restated
Participation Agreement (1993 747 A)]
principal amount specified in the Refinancing Information, which amount
shall be at least equal to the aggregate principal amount of all Loan
Certificates outstanding on the Refinancing Date (such debt securities, the
"New Debt") and (ii) the application of the proceeds of the sale of the New
Debt to the redemption of all such Loan Certificates on the Refinancing
Date and (B) pursuant to which the parties to the refinancing transaction
(including the Owner Participant and Lessee but excluding any public
holders of debt) make such representations, warranties and covenants as the
Owner Participant or Lessee may reasonably require;
(3) Lessee and the Owner Trustee will amend the Lease to provide
that (i) Basic Rent, Excess Amount and the EBO Percentage in respect of the
period from and after the Refinancing Date shall be as provided in the
Refinancing Information and (ii) amounts payable in respect of Stipulated
Loss Value percentages, Special Termination Value Percentages and
Termination Value from and after the Refinancing Date shall be as provided
in the Refinancing Information;
(4) the Owner Trustee will enter into an agreement to provide for
the securing thereunder of the New Debt in like manner as the Loan
Certificates and will enter into such amendments and supplements to the
Trust Indenture (or such new indenture or other security agreement) as may
be necessary to effect such refunding or refinancing (which agreements,
amendments and supplements shall be reasonably satisfactory to the Owner
Participant);
(5) unless otherwise agreed or required by the Owner Participant,
and whether or not such refunding or refinancing transaction is
consummated, Lessee, on behalf of Lessor, shall pay on an after-tax basis
all of the reasonable Expenses of all parties to such refunding or
refinancing, including without limitation, the reasonable fees and expenses
of such parties' counsel and any related loan or commitment fees; and
(6) subject to compliance by the Owner Trustee with all
applicable terms and conditions for voluntary prepayment under the Trust
Indenture and this Agreement, each Certificate Holder of a Loan Certificate
being refinanced or refunded will transfer to the Owner Trustee the Loan
Certificates held by it immediately prior to such refunding or refinancing
for cancellation (and the Owner Trustee shall cancel the same), against
receipt by such Certificate Holder of the then outstanding principal amount
59
[First Amended and Restated
Participation Agreement (1993 747 A)]
of such Loan Certificates, accrued and unpaid interest thereon, plus
Premium, if any, together with payment in full of all other amounts then
payable to such Certificate Holder and the Indenture Trustee hereunder or
under the Trust Indenture.
(b) In the case of a refunding or refinancing involving a public
offering of the New Debt, the Owner Participant shall have the right (but not
the obligation) to review and approve (which approval shall not be unreasonably
withheld) all offering materials to be employed in connection therewith. It is
expressly understood that the Owner Participant shall have no obligation
hereunder to consent thereto if, in its good faith judgment, such refunding or
refinancing (A) increases its, any of its Affiliates (other than any Affiliate
which is acting as an underwriter) or the Owner Trustee's exposure to (i)
liabilities under federal or state securities laws, (ii) regulation under state
or federal securities laws, (iii) the need to publicly disclose information that
is not generally available to the public, or (iv) being adversely affected in
its respective ability to engage in any other financing transaction, in each
case to a level unacceptable to it in its reasonable, good faith, judgment, or
(B) requires the identity of the Owner Participant to be disclosed in any
offering materials. Lessee shall have the right to purchase such debt
securities and apply such securities as a credit against its obligations to pay
Rent, provided that (x) in connection with such refunding or refinancing Lessee
shall have agreed to indemnify the Owner Participant with respect to such right
in a manner satisfactory to the Owner Participant, and (y) Lessee may not, at
any one time hold in the aggregate any such debt securities having a face value
in excess of that portion of the two next succeeding installments of Basic Rent
which is required to be paid to the holders of such debt securities on account
of principal and interest. Any trustee of public debt shall be a bank or trust
company having its principal place of business in the Borough of Manhattan, City
and State of New York, Chicago, Illinois, Hartford, Connecticut or Boston,
Massachusetts and having, or having a parent willing to guarantee the
obligations of such bank or trust company and having, a combined capital and
surplus of at least $100,000,000, if there be such an institution willing, able
and legally qualified to perform the duties of trustee upon reasonable or
customary terms.
(c) Lessee shall give the Indenture Trustee at least twenty-five (25)
days irrevocable written notice of the proposed date of the optional redemption.
(d) Notwithstanding the foregoing, the Owner Participant shall have no
obligation to proceed with any
60
[First Amended and Restated
Participation Agreement (1993 747 A)]
refunding or refinancing transaction as contemplated by this Section 17:
(i) if in the Owner Participant's good faith judgment, such
transaction would have an adverse impact (including, without limitation the
risk of adverse tax consequences) on it;
(ii) unless a third party or parties, unaffiliated with Lessee and
Owner Participant, shall have committed to (and shall) provide the entire
financing needed to consummate the proposed refunding or refinancing
transaction, it being understood that Owner Participant shall have no
obligation to locate any such party or parties;
(iii) unless Lessee indemnifies Owner Trustee and Owner
Participant by agreement in form and substance reasonably satisfactory to
each of them, for any liability, obligation (other than the obligation to
pay principal and interest and related payments in respect of the New
Debt), cost or expense (including, without limitation, reasonable
attorneys' fees) related to or arising out of any such refunding or
refinancing transaction;
(iv) unless the New Debt is denominated in Dollars; or
(v) if the refinancing would increase or decrease the Owner
Participant's Commitment.
(e) There shall be no more than one redemption permitted under this
Section 17.
(f) No voluntary redemption shall occur pursuant to this Section 17
prior to May 15, 2000.
SECTION 18. Optimization. (a) In the event that: (i) the Delivery
Date occurs other than on April 20, 1993 or (ii) Transaction Expenses paid by
Lessor are determined to be other than [____%] of Lessor's Cost (it being
understood that Transaction Expenses equal to 1.00% of Lessor's Cost will be
deemed to have been paid on the Delivery Date with the remainder of such
Transaction Expenses not paid on the Delivery Date will be deemed to have been
paid on May 15, 1995), the Lessee may, pursuant to this Section 18 and in
accordance with the requirements of Section 3(c) of the Lease, optimize the
Basic Rent, Excess Amount, Stipulated Loss Value percentages, Termination Value
percentages, Special Termination Value
61
[First Amended and Restated
Participation Agreement (1993 747 A)]
percentages and EBO Percentage subject to the proviso set forth in Section
3(c)(i) of the Lease. The Owner Participant shall deliver to Lessee and the
Indenture Trustee a certificate of an authorized representative of the Owner
Participant (the "Optimization Certificate") setting forth the proposed revised
schedules of Basic Rent, Excess Amount, Stipulated Loss Value percentages,
Termination Value percentages, Special Termination Value percentages and EBO
Percentage. Within fifteen days of its receipt of the Optimization Certificate,
Lessee may demand a verification, pursuant to Exhibit E of the Lease, of the
information set forth in the Optimization Certificate. Upon the acceptance by
Lessee of the accuracy of the information set forth in the Optimization
Certificate or the determination pursuant to such verification procedures of
such information, the Owner Participant will cause the Lessor (A) to execute an
amendment to the Lease setting forth the optimized Basic Rent, Excess Amount,
Stipulated Loss Value percentages, Termination Value percentages, Special
Termination Value percentages and EBO Percentage, and (B) the Lessee will
execute such amended Lease necessary to effectuate the foregoing.
(b) In connection with optimization adjustments of Basic Rent, Excess
Amount, Stipulated Loss Value percentages, Termination Value percentages,
Special Termination Value percentages and EBO Percentage pursuant to this
Section 18 and Section 3(c) of the Lease, none of the principal amount,
amortization schedules or interest rate of the Loan Certificates shall be
altered.
(c) Lessee shall pay on an after-tax basis all of the reasonable
Expenses of all parties to such optimization, including, without limitation, the
reasonable fees and expenses of such parties' counsel.
SECTION 19. Nondisclosure. Each party hereto (other than the Owner
Participant) agrees that it will use its best efforts not to disclose the
identity of the Owner Participant and the terms of the Operative Documents in
connection with the issuance or release for external publication of any article
or advertising or publicity matter relating to the terms or conditions of any of
the Operative Documents or the transactions contemplated thereby without the
prior written consent of the Owner Participant (except as expressly permitted by
the Operative Documents or (t) with respect to the terms of the Operative
Documents to the extent required in connection with a public placement of the
debt pursuant to Section 17 hereof or (u) to the extent required in connection
with a private placement of the debt pursuant to Section 17 hereof or (v) to the
extent required to appropriate regulatory authorities or in response to subpoena
62
[First Amended and Restated
Participation Agreement (1993 747 A)]
or other legal process or as otherwise required by law or (w) to such party's
insurance agents, auditors and counsel or other agents or (x) in the case of any
Pass Through Trustee, the Indenture Trustee, the Owner Participant or the Owner
Trustee (as the case may be), to prospective transferees or to any successor
Owner Trustee (as the case may be), who in turn agree to use their best efforts
not to make such disclosure in breach of this Section 19 or (y) as may be
necessary or desirable in connection with the enforcement by such party of any
Operative Document).
* * *
63
[First Amended and Restated
Participation Agreement (1993 747 A)]
IN WITNESS WHEREOF, the parties hereto have caused this First Amended
and Restated Participation Agreement to be duly executed by their respective
officers thereunto duly authorized as of the day and year first above written.
UNITED AIR LINES, INC.,
Lessee
By: _______________________________
Vice President and Treasurer
______________________,
Owner Participant
By: _______________________________
Title: ____________________________
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
Indenture Trustee
By: _______________________________
Title: ____________________________
STATE STREET BANK AND TRUST COMPANY, not in its
individual capacity, except as expressly provided
herein, but solely as Owner Trustee,
Owner Trustee
By: _______________________________
Title: ____________________________
FIRST SECURITY BANK OF UTAH, NATIONAL ASSOCIATION,
in its capacity as Pass Through Trustee under each
of the Pass Through Trust Agreements
By: _______________________________
Title: ____________________________
64
[First Amended and Restated
Participation Agreement (1993 747 A)]
SCHEDULE I
Names and Addresses
Lessee:
- ------
U.S. Mail Overnight Delivery Service
- --------- --------------------------
United Air Lines, Inc. United Air Lines, Inc.
P.O. Box 66100 1200 East Algonquin Road
Chicago, Illinois 60666 Elk Grove Township, IL 60007
Attn: Vice President and Treasurer Attn: Vice President and Treasurer
Telecopy: (708) 952-7117
Payment Address
---------------
Owner Participant:
- ----------------- The Chase Manhattan Bank, N.A.
New York, N.Y.
____________________ ABA #: 021000021
____________________
____________________ Account #: 910-2-499093
____________________ Account Name:
Reference: UAL/1993 747 A
Attn: __________________
Telecopy: ______________
Pass Through Trustee:
- --------------------
First Security Bank of Utah,
National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Department
Telecopy: (801) 246-5053
[First Amended and Restated
Participation Agreement (1993 747 A)]
Indenture Trustee:
- -----------------
First Security Bank of Utah, National Association
79 South Main Street
Salt Lake City, Utah 84111
Attn: Corporate Trust Department
Telecopy: (801) 246-5053
Owner Trustee:
- --------------
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(or, if given by overnight delivery service)
Two International Place
Boston, Massachusetts 02110
Attn: _________________________
Telecopy: (617) 664-5367
I-2
[First Amended and Restated
Participation Agreement (1993 747 A)]
SCHEDULE II
Commitments
-----------
Percentage of
Certificate Holder Lessor's Cost Dollar Amount
- ------------------ ------------- -------------
First Security Bank of Utah, National
Association, in its capacity as Pass
Through Trustee under Pass Through
Trust Agreement 1995-A1
First Security Bank of Utah, National
Association, in its capacity as Pass
Through Trustee under Pass Through
Trust Agreement 1995-A2
Owner Participant:
- -----------------
____________________ $
Total Commitments: 100.00% $
================= ======= =