LOAN AGREEMENT

EXHIBIT 10.41

CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE OMITTED CONFIDENTIAL INFORMATION APPEARS ON EIGHT (8) PAGES OF THIS EXHIBIT.

 

LOAN AGREEMENT

dated as of February      , 2006

between

A IR T RAN A IRWAYS , I NC ., as Borrower,

T HE P ARTIES I DENTIFIED IN S CHEDULE 1 HERETO AS L ENDERS , as Lenders,

and

W ELLS F ARGO B ANK N ORTHWEST , N ATIONAL A SSOCIATION ,

in its individual capacity

 

Two (2) Boeing model 737-7BD aircraft

each equipped with

Two (2) CFM International model CFM56-7B20 engines

 

TABLE OF CONTENTS

 

 

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ANNEX A – D EFINITIONS

EXHIBIT A – F ORM OF M ORTGAGE

EXHIBIT B – F ORM OF D RAWDOWN N OTICE

EXHIBIT C – F ORM OF T RANSFER C ERTIFICATE

SCHEDULE 1 - A CCOUNTS A DDRESSES

SCHEDULE 2 - C OMMITMENTS ; T RANSACTION E XPENSES L IMIT

SCHEDULE 3 - P ERMITTED C OUNTRIES

 

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LOAN AGREEMENT

T HIS L OAN A GREEMENT (this “Agreement”) is entered into as of February      , 2006 among (a) A IR T RAN A IRWAYS , I NC . (“Borrower”), a Delaware corporation, (b) T HE P ARTIES I DENTIFIED IN S CHEDULE 1 HERETO AS L ENDERS (the “Lenders”) and (c) W ELLS F ARGO B ANK N ORTHWEST , N ATIONAL A SSOCIATION , a national banking association, in its individual capacity (“WFB”).

RECITALS

A. Borrower and Airframe Manufacturer have entered into the Purchase Agreement, pursuant to which Airframe Manufacturer agreed to manufacture and sell to Borrower, and Borrower agreed to purchase and take delivery of, among other things, two (2) Boeing model 737-7BD aircraft, each equipped with two (2) CFM International model CFM56-7B20 engines, to be delivered in the Scheduled Delivery Months (the “Aircraft”).

B. To enable Borrower to purchase and take delivery of each of the Aircraft on the applicable Delivery Dates, Borrower desires to borrow from Lenders, and Lenders desire to lend to Borrower, a portion of the purchase price of each of the Aircraft.

C. The parties to this Agreement wish to set forth in this Agreement the terms and conditions upon and subject to which the foregoing transactions shall be effected.

The parties hereto agree as follows:

1. D EFINITIONS A ND C ONSTRUCTION

The terms defined in Annex A, when capitalized as in Annex A, have the same meanings when used in this Agreement. Annex A also contains rules of usage that control construction in this Agreement.

2. S ECURED L OANS ; C LOSING

2.1 Making of Loans; Creation of Mortgages; Issuance of Equipment Notes .

In respect of each Aircraft and subject to the terms and conditions of this Agreement, on the applicable Delivery Date of each Aircraft (each such date a “Closing Date”):

(a) each Lender agrees to make a secured loan to Borrower in the amount of such Lender’s Commitment;

(b) WFB, in its individual capacity and as a mortgagee, and Borrower shall enter into the Mortgage in respect of such Aircraft; and

(c) pursuant to Section 2 of the Mortgage, Borrower shall issue an Equipment Note to each Lender, dated the Applicable Closing Date, for an aggregate principal amount equal to the amount of the secured loan made by such Lender on such date.

No Closing Date for any Aircraft shall occur after the Commitment Termination Date.

 

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2.2 Procedure for Funding of Secured Loans .

(a) Notice of Scheduled Delivery Date . In the case of each Aircraft, Borrower agrees to give each Lender written notice or telephonic notice (to be confirmed promptly in writing) of the date such Aircraft is scheduled to be delivered (the “Scheduled Delivery Date”) so that such notice is received by each Lender not later than 4:30 p.m., New York City time, on the tenth (10 ^th ) day prior to the Scheduled Delivery Date. Borrower undertakes to promptly notify each Lender of any amendment or change in the Scheduled Delivery Date.

(b) Drawdown Notice. No later than 4:30 p.m., New York City time, on the third (3rd) Business Day prior to the Scheduled Delivery Date for any Aircraft, each Lender shall receive the Drawdown Notice from Borrower in respect of such Aircraft, receipt of which shall, subject to the conditions contained in this Agreement, oblige Borrower to borrow an amount equal to the Commitment for such Aircraft (or such lesser amount specified in such Drawdown Notice) on the date stated and on the terms herein contained.

(c) Amortization Schedule. No later than 10:00 a.m., New York City time, on the Business Day prior to the Scheduled Delivery Date, Calyon New York Branch, on behalf of the Lenders, shall deliver the amortization schedule for the Applicable Aircraft to the Borrower and the Borrower shall no later than 4:00 p.m., New York City time, on such day deliver written confirmation of such amortization schedule to the Lenders. In the event notice of any postponement of the Scheduled Delivery Date is delivered pursuant to Section 2.2(e) involving a postponement of more than three (3) Business Days, Calyon New York Branch, on behalf of the Lenders, shall deliver to Borrower by 10:00 a.m., New York City time, on the Business Day prior to the date to which the Scheduled Delivery Date is so postponed or as promptly as practicable thereafter, an amortization schedule reflecting the postponed Scheduled Delivery Date for the Applicable Aircraft and Borrower shall deliver by 4:00 p.m., New York City time, on such day or as promptly as practicable thereafter, written confirmation of such schedule to the Lenders.

(d) Disbursement of Funds . In the case of each Aircraft, each Lender agrees, subject to the terms and conditions of this Agreement, to make its Commitment for such Aircraft available for disbursement to or on behalf of the Borrower, in each case in immediately available funds by 11:00 a.m., New York City time, on the Scheduled Delivery Date for such Aircraft in the amount set out in the Drawdown Notice. In order to facilitate the timely closing of the transactions contemplated hereby, for any Aircraft, the Borrower, by delivery of the Drawdown Notice to the Lenders, irrevocably instructs, subject to its rights to postpone under Section 2.2(e) below, such Lenders to wire transfer (for receipt by no later than 11:00 a.m. New York City time) on the Scheduled Delivery Date for such Aircraft its Commitment for such Aircraft by the wiring of immediately available funds (reference: AirTran/Calyon N__AT) to the account of WFB specified in Schedule 1 hereto (the “Account”). The funds so paid by each Lender (the “Deposit”) into the Account for any Aircraft are to be held by WFB for the account of such Lender. Upon the fulfillment (as determined by each Lender acting reasonably) (or waiver) of the

 

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conditions precedent set forth in Section 3 hereof in respect of the Applicable Aircraft, such Lender shall instruct WFB to disburse the Deposit for application of its Commitment for such Aircraft.

(e) Postponement of Scheduled Delivery Date .

(1) Borrower may in the case of each Aircraft change or postpone (indefinitely, or to a specified date not later than the Commitment Termination Date) the Scheduled Delivery Date for an Aircraft by telephonic notice (to be confirmed promptly in writing) to each Lender, provided such notice (specifying the new Delivery Date, if any) is received by the Lenders not later than 4:30 p.m. on such Scheduled Delivery Date being postponed (the “Postponement Notice”). If the revised Scheduled Delivery Date specified in the Postponement Notice is a date after a date specified in clause (x) or (z) of the definition of “Cutoff Date” set forth in Section 2.2(e)(4) hereof, then such revised Scheduled Delivery Date shall be deemed the “Scheduled Delivery Date” for such Aircraft for all purposes of the Applicable Operative Agreements.

(2) If the Scheduled Delivery Date for an Aircraft is postponed and the Deposit has been paid by the Lenders into the Account, then the Deposit for such Aircraft will, pending any return contemplated by Section 2.2(e)(4) below, be invested, together with earnings thereon, and reinvested by WFB at the sole direction, for the account, and at the risk of the Borrower in an overnight investment selected by the Borrower and acceptable to WFB (acting reasonably and in good faith). Upon the Borrower’s oral (to be confirmed in writing) instructions, earnings on any such investments shall be applied to the Borrower’s payment obligations to each Lender under Section 2.2(e)(3) to the extent of such earnings.

(3) If the Scheduled Delivery Date for an Aircraft is postponed and the Deposit has been paid by the Lenders into the Account, then the Borrower shall pay interest hereunder to each Lender on the amount of its Deposit for the period from and including the original Scheduled Delivery Date for such Aircraft to but excluding the earlier of (i) the actual Delivery Date for such Aircraft, (ii) the Cutoff Date (as defined below) or (iii) the date of return of the Deposit to such Lender pursuant to clause (4) below if such amounts are received by such Lender before 11:00 a.m. on such date (and if such amounts are received by such Lender after 11:00 a.m., the next succeeding Business Day). For each Lender, such interest shall accrue on the amount of such Lender’s Deposit at the applicable Debt Rate. Interest on the Deposit accrued pursuant to the preceding sentence shall (i) if accrued to the Delivery Date for such Aircraft, be paid on the first Payment Date following such delivery and (ii) if accrued to the Cutoff Date, be due and payable to each Lender on such date.

(4) If for any reason, other than the failure of any Lender to comply with the terms hereof, the Scheduled Delivery Date for an Aircraft is postponed beyond the earliest of (x) three Business Days after the Scheduled Delivery Date

 

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for such Aircraft, (y) the Commitment Termination Date or (z) such earlier date as the Borrower shall specify (the “Cutoff Date”), then each such Lender shall cancel, terminate or otherwise unwind its funding arrangements made in the London interbank market or otherwise to fund its Commitment on the Scheduled Delivery Date for such Aircraft, and such Lender shall notify WFB thereof, and WFB shall return its Commitment for such Aircraft to it, subject, however, to such Lender’s continuing commitment to fund as provided herein.

(5) In the event of the occurrence of the events described in Section 2.2(d) or clause (4) above, the Borrower agrees to pay each Lender promptly (but in any event within three (3) Business Days of the relevant Cutoff Date) (i) as compensation for the cancellation or termination of its Commitment for any Aircraft, an amount of liquidated damages equal to any loss incurred in connection with the unwinding or liquidating of any deposits or funding or financing arrangement with its funding source and (ii) without duplication of the amounts covered by the preceding clause (i) or to be paid pursuant to Section 4.1 hereof, the reasonable out-of-pocket costs and expenses of such Lender (including, without limitation, reasonable legal costs and expenses) incurred by such Lender in respect of such cancellation or termination to the extent described in the definition of Transaction Expenses.

2.3 Terms of Repayment .

(1) On each Payment Date, Borrower shall make payments to the Applicable Mortgagee on each Applicable Equipment Note of principal scheduled to be paid thereon on such date in accordance with the amortization schedule attached thereto and accrued interest due and payable on such Equipment Note on such date. The amortization schedules in the aggregate determined for all Applicable Equipment Notes issued in respect of any Aircraft shall be calculated as follows: using the initial Debt Rate (calculated on the basis of a year consisting of 360 days and actual number of days elapsed) for such Equipment Notes, mortgage-style (level pay) payments payable on each of the first twenty-three (23) Payment Dates for such Equipment Notes sufficient to amortize such Equipment Notes to an aggregate outstanding principal balance balloon payment due on the twenty-fourth (24 ^th ) such Payment Date (i.e., the Maturity Date) of $7,500,000. In respect of the amortization schedule for any particular Equipment Note issued in respect of any Aircraft, the payments due on any Payment Date set forth on such amortization schedule shall be pro rated based on the ratio by which the Original Amount of such Equipment Note bears to the aggregate Original Amount of all of the Applicable Equipment Notes. For the avoidance of doubt, the aggregate principal amount payable at any time under all Equipment Notes issued in respect of a single Aircraft shall be equal to the amount which would be required to be paid had a single Equipment Note complying with the requirements of this Section 2.3(1) been issued.

Interest on each Applicable Equipment Note will accrue at the Debt Rate for such Equipment Note (calculated on the basis of a year of 360 days and actual

 

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number of days elapsed), and be payable on each Payment Date. The interest payable on each Payment Date for any Applicable Equipment Note shall include interest accrued during the Interest Period ending on such Payment Date.

(2) Except as otherwise provided in the Applicable Mortgage, each payment of principal and interest received by the Applicable Mortgagee in respect of an Applicable Equipment Note shall be applied: first, to pay amounts due hereunder or under the Applicable Mortgage other than as specified in the following clauses, second, to pay accrued interest on such Applicable Equipment Note (as well as any interest on any overdue amount) to the date of such payment, third, to pay the principal of such Applicable Equipment Note then due, and fourth, the balance, if any, remaining thereafter, to pay installments of the principal of such Applicable Equipment Note remaining unpaid in the inverse order of their maturity.

2.4 Closing; Funds; No Set-Off .

(a) Location. Each closing of the Transactions shall take place on the Applicable Closing Date at the offices of Smith, Gambrell & Russell, LLP, Promenade II, Suite 3100, 1230 Peachtree Street, N.E., Atlanta, Georgia 30309 (the “Closing”), with a set of Operative Agreements relating to such Closing also being delivered in New York City, New York.

(b) Funds; No Set-Off. All payments by Borrower pursuant to this Section 2 and on any Equipment Note whether on account of principal, interest, LIBOR Breakage Amount, fees or otherwise shall be made in immediately available funds without set-off, counterclaim or defense to the account of the Applicable Mortgagee as set forth in Schedule 1 hereto.

2.5 Events of Default .

If an Event of Default as defined in any Mortgage (or, prior to the date of execution and delivery of any Mortgage, the form of Mortgage attached hereto as Exhibit A) shall have occurred and be continuing, Lenders holding a majority of the Commitments in respect of any Aircraft may, by written notice to the Borrower, cancel such Commitments, and upon such notice, such Commitments shall be cancelled and of no further effect. If an Event of Default under Section 5.1(e), (f) or (g) under any Mortgage (or form of Mortgage) shall have occurred and be continuing, the Commitments shall automatically, without any action or notice, be cancelled and of no further effect.

3. C LOSING C ONDITIONS

3.1 Conditions to each Lender’s Obligations .

Each Lender’s obligation to make the secured loan described in Section 2.1(a) and to participate in the Transactions with respect to an Aircraft to which it is a Lender, is subject to the fulfillment (or such Lender’s waiver) before or on the Applicable Closing Date, of the following conditions:

(a) Equipment Notes. Borrower tenders to such Lender the Applicable Equipment Notes duly completed, executed, authenticated and delivered.

 

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(b) Delivery of Documents. Such Lender receives executed counterparts of the following documents in respect of the Applicable Aircraft and such counterparts (x) have been duly authorized, executed, and delivered by the parties thereto, (y) are in full force and effect and (z) are in form and substance reasonably satisfactory to such Lender:

(1) the Mortgage, duly completed;

(2) the broker’s report and insurance certificates required by Section 4.6 of the Mortgage;

(3) the Consent and Agreement, the Engine Consent and Agreement and the GEES Acknowledgment and Agreement;

(4) the Bills of Sale;

(5) (aa) (x) a copy of Borrower’s certificate of incorporation, by-laws, and resolutions, in each case certified by the Secretary or an Assistant Secretary of Borrower, duly authorizing Borrower’s execution, delivery, and performance of the Applicable Operative Agreements to which it is party required to be executed and delivered by Borrower on or before the Applicable Closing Date in accordance with the provisions hereof and thereof; (y) incumbency certificate of Borrower as to the person(s) authorized to execute and deliver the Applicable Operative Agreements on its behalf; and (z) good-standing certificate for Borrower for Delaware and Florida; and

(bb) an incumbency certificate of WFB as to the person(s) authorized to execute and deliver the Applicable Operative Agreements on behalf of WFB (in its individual capacity and as the Applicable Mortgagee), and (2) a copy of WFB’s certificate of incorporation, by-laws, and general authorizing resolution of the board of directors (or executive committee) or other satisfactory evidence of authorization, certified as of the Applicable Closing Date by the Secretary or Assistant or Attesting Secretary of WFB, which authorize WFB’s execution, delivery, and performance of the Applicable Operative Agreements to which it is a party (in its individual capacity and as the Applicable Mortgagee);

(6) Officer’s Certificate of WFB, dated as of the Applicable Closing Date, stating that its representations and warranties in its individual capacity and as the Applicable Mortgagee in the Applicable Operative Agreements are true and correct as of the Applicable Closing Date (or, to the extent that any such representation and warranty expressly relates to an earlier date, true and correct as of such earlier date);

(7) Officer’s Certificate of Borrower, dated as of the Applicable Closing Date, stating that its representations and warranties in this Agreement are true and correct as of the Applicable Closing Date (or, to the extent that any such representation and warranty expressly relates to an earlier date, true and correct as of such earlier date);

 

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(8) Copies of the applicable warranty provisions of the Purchase Agreement and the GTA assigned to the Applicable Mortgagee pursuant to Granting Clause (2) of the Applicable Mortgage, certified by an Officer of Borrower;

(9) the Financing Statements;

(10) the following opinions of counsel, in each case in form and substance reasonably acceptable to the Lenders and dated the Closing Date: (aa) an opinion of Smith, Gambrell & Russell, LLP, special counsel to Borrower; (bb) an opinion of Borrower’s Legal Department; and (cc) an opinion of FAA Counsel;

(11) a copy of a duly-executed application for registration of the Aircraft with the FAA in Borrower’s name;

(12) a copy of the certificate of airworthiness issued in respect of the Aircraft; and

(13) such other documents as a Lender may reasonably request.

(c) Perfected Security Interest. After giving effect to the filing of the FAA-Filed Documents and the Financing Statements related to the Applicable Aircraft, the Applicable Mortgagee shall have a duly-perfected first-priority security interest in all of Borrower’s right, title, and interest in the Applicable Aircraft and all other then-existing Collateral (as defined in the Applicable Mortgage), subject only to Permitted Liens not of record.

(d) Violation of Law. No change occurs after the date of this Agreement in any applicable Law that makes it a violation of Law for (a) Borrower, any Lender or WFB (in its individual capacity and/or as the Applicable Mortgagee) to execute, deliver, and perform the Applicable Operative Agreements to which any of them is a party or (b) any Lender to make the loan contemplated to be made by it pursuant to Section 2.1 or to realize the benefits of the security afforded by the Applicable Mortgage.

(e) Representations, Warranties and Covenants. The representations and warranties of each other party to this Agreement and the Applicable Mortgage made, in each case, in any Applicable Operative Agreement to which it is a party, are true and accurate in all material respects as of the Applicable Closing Date (unless any such representation and warranty was made with reference to a specified date, in which case such representation and warranty was true and accurate as of such specified date), and each other party to this Agreement and the Applicable Mortgage has performed and observed, in all material respects, all of its covenants, obligations, and agreements in each Applicable Operative Agreement to which it is a party to be observed or performed by it as of the Applicable Closing Date.

 

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(f) No Event of Default. On the Applicable Closing Date, no Special Default or Event of Default with respect to any Aircraft exists or would result from the mortgaging of the Applicable Aircraft.

(g) No Event of Loss. No Event of Loss with respect to the Airframe or any Engine related to the Applicable Aircraft has occurred, and no circumstance, condition, act, or event has occurred that, with the giving of notice or lapse of time, would give rise to or constitute an Event of Loss with respect to the Airframe or any Engine related to the Applicable Aircraft.

(h) Title. Borrower has good and valid title (subject to filing and recordation of the FAA Bill of Sale with the FAA) to the Applicable Aircraft, free and clear of all Liens, except Permitted Liens not of record.

(i) Certification. The Applicable Aircraft has been duly certificated by the FAA as to type and has (or, upon registration in Borrower’s name, will be eligible for) an FAA airworthiness certificate.

(j) Section 1110. The Applicable Mortgagee is entitled to the benefits of Section 1110 (as currently in effect) with respect to the right to take possession of the Airframe and Engines related to the Applicable Aircraft as provided in the Applicable Mortgage in the event of a case under Chapter 11 of the Bankruptcy Code in which Borrower is a debtor.

(k) Filing. The FAA-Filed Documents related to the Applicable Aircraft are in the process of being duly filed for recordation with the FAA in accordance with the Transportation Code, and the Financing Statements related to the Applicable Aircraft have been duly filed or are in the process of being duly filed in the appropriate jurisdiction.

(l) No Proceedings. No action or proceeding has been instituted, nor is any action threatened in writing, before any Government Entity, nor has any order, judgment, or decree been issued or proposed to be issued by any Government Entity, to set aside, restrain, enjoin, or prevent the completion and consummation of any Applicable Operative Agreement or the Transactions related to the Applicable Aircraft.

(m) Governmental Actions. All appropriate action required to have been taken before the Applicable Closing Date by the FAA, or any other Government Entity of the United States, in connection with the Transactions related to the Applicable Aircraft has been taken, and all orders, permits, waivers, authorizations, exemptions, and approvals of such entities required to be in effect on the Applicable Closing Date in connection with the Transactions related to the Applicable Aircraft have been issued.

(n) No Materially Adverse Change. Since the date of Holdings’ balance sheet referred to in Section 5.1(g), there has been no materially adverse change in Borrower’s financial condition, operations or business.

 

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(o) Fees. The Applicable Mortgagee shall have received, on behalf of the Lenders, the Upfront Fee related to the Applicable Aircraft and, if applicable, the accrued Commitment Fee.

3.2 Conditions To Borrower’s Obligations .

For each Aircraft, it is hereby agreed that Borrower’s obligation to participate in the Transactions with respect to such Aircraft is subject to the satisfaction (or Borrower’s waiver), on or before the Applicable Closing Date, of the conditions in this Section 3.2.

(a) Documents. Borrower receives (or has waived receipt of) (aa) executed originals of the documents related to the Applicable Aircraft as described in Section 3.1(b) and such documents are reasonably satisfactory to Borrower and (bb) such other documents as Borrower may reasonably request from WFB or any Lender, unless the failure to receive any such document is the result of any action or inaction by Borrower.

(b) Other Conditions. Each of the conditions in Subsections (d), (e), (g), (h), (i), (j), (k), (l) and (m) of Section 3.1 are satisfied or have been waived by Borrower unless the failure of any such condition to be satisfied is the result of any action or inaction by Borrower.

3.3 Post-Registration Opinion .

Promptly after the registration of an Aircraft and the recordation of the FAA-Filed Documents related to such Aircraft, Borrower will cause FAA Counsel to deliver to Borrower, each Lender with respect to such Aircraft and to the Applicable Mortgagee a favorable opinion or opinions addressed to each of them with respect to such registration and recordation.

4. F EES AND C OSTS

4.1 Transaction Expenses .

As to each Aircraft, if the Transactions in respect of such Aircraft are consummated, or do not close for any reason other than any Lender’s breach of its obligations under Section 2 hereof, Borrower agrees to the pay the Transaction Expenses related to such Aircraft subject to the limits set forth in Section 2 of Schedule 2.

4.2 Upfront Fee .

In respect of each Aircraft on or before the Applicable Closing Date, Borrower shall pay to the Applicable Mortgagee an amount equal to the Upfront Fee in immediately available funds. The Applicable Mortgagee shall distribute such fee to the Lenders in such amounts as the Initial Lender shall direct.

4.3 Commitment Fee .

In respect of any Aircraft having a Closing Date that is more than thirty (30) days after the date of this Agreement, Borrower agrees to pay a Commitment Fee on account of the

 

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unutilized Commitment for such Aircraft to the Applicable Mortgagee in arrears on the last Business Day of each calendar quarter following the date of this Agreement, on the Closing Date for such Aircraft and, if not theretofore utilized, on the Commitment Termination Date. Such Commitment Fee shall be calculated on the basis of a year of 360 days and actual number of days elapsed and shall accrue from the date of this Agreement until the earlier of, for any such Aircraft, its Closing Date and the Commitment Termination Date. The Commitment Fee shall be payable by the Borrower to the Applicable Mortgagee on the due date thereof in immediately available funds no later than 11:00 a.m., New York City time, on such date to the account of the Applicable Mortgagee on Schedule 1. The Applicable Mortgagee shall promptly distribute such fee to the Lenders in such amounts as the Initial Lender shall direct. The Commitment Fee in respect of an Aircraft shall abate for any day that interest is accruing pursuant to Section 2.2(e)(3) on the Deposit funded in respect of such Aircraft.

4.4 Increased Costs/Capital Adequacy

(a) The Borrower shall pay directly to each Lender from time to time such amounts as such Lender may determine to be necessary to compensate such Lender for any increase in costs that such Lender determines are attributable to its making or maintaining of its Commitment or the loans evidenced by its Equipment Notes or funding arrangements utilized in connection with such loans, or any reduction in any amount receivable by such Lender hereunder in respect of any of Commitments, such loans or such arrangements (such increases in costs and reductions in amounts receivable being herein called “Additional Costs”), in either case applicable to the period commencing sixty (60) days prior to Lender’s notification thereof pursuant to Section 4.4(c) and resulting from any Regulatory Change that:

(1) imposes any tax that is the functional equivalent of any reserve, special deposit or similar requirement of the sort covered by clause (2) below; or

(2) imposes or modifies any reserve, special deposit or similar requirements (including any Reserve Requirement) relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Lender, or any such obligations; or

(3) imposes any other condition affecting this Agreement or its Equipment Notes (or any of such extensions of credit or liabilities) or any such obligation.

(b) Without limiting the effect of the foregoing provisions of this Section 4.4 (but without duplication), the Borrower shall pay directly to each Lender from time to time on request such amounts as such Lender shall determine to be necessary to compensate such Lender (or, without duplication, the holding company of which such Lender is a subsidiary) for any increase in costs that are attributable to the maintenance by such Lender (or any lending office or such holding company), pursuant to any law or regulation or any interpretation, directive or request (whether or not having the force of law and whether or not failure to comply therewith would be unlawful so long as compliance therewith is standard banking practice in the relevant jurisdiction) of any

 

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court or governmental or monetary authority following (i) any Regulatory Change or (ii) implementing any risk-based capital guideline or other similar requirement issued by any government or governmental or supervisory authority at the national level (including the implementation of the capital guidelines commonly known as Basle II), of capital in respect of its Commitments or Equipment Notes or funding arrangements utilized in connection with the Equipment Notes. Such compensation shall include, without limitation, an amount equal to any reduction of the rate of return on assets or equity of such Lender (or any lending office or such bank holding company) would have achieved but for such law, regulation, interpretation, directive or request, but shall be limited to any such increase in costs or reductions attributable for the period commencing sixty (60) days prior to Lender’s notification thereof pursuant to Section 4.4(c).

(c) Each Lender shall notify the Borrower of any event occurring after the date of this Agreement entitling such Lender to compensation under paragraph (a) or (b) of this Section 4.4 as promptly as practicable following its actual knowledge thereof. Each Lender will use commercially reasonable efforts (at the Borrower’s expense) to attempt to mitigate the amount of the Additional Costs associated with such event, including designating a different lending office for the Equipment Notes of such Lender affected by such event if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the opinion of such Lender, result in any economic, legal or regulatory disadvantage to such Lender (other than economic disadvantages for which the Borrower agrees to indemnify such Lender and which indemnity is acceptable to such Lender in its discretion acting reasonably and in good faith based on its credit assessment of the Borrower). If after using commercially reasonably efforts as aforesaid such Lender is not able to mitigate the amount of or the need for such compensation to the reasonable satisfaction of Borrower within thirty (30) days of such Lender’s notice described in Section 4.4(c) hereof, Borrower may prepay in accordance with Section 2.10 of the Applicable Mortgage the unpaid Original Amount of the affected Equipment Notes plus interest accrued thereon and any LIBOR Breakage Amount. Each Lender will furnish to the Borrower an officer’s certificate setting forth in reasonable detail (i) the events giving rise to such Additional Costs, (ii) the basis for determining and allocating such Additional Costs and (iii) the amount of each request by such Lender for compensation under paragraph (a) or (b) of this Section 4.4 (subject, however, to any limitations such Lender may require in respect of disclosure of confidential information relating to its capital structure), together with a statement that the determinations and allocations made in respect of the Additional Costs comply with the provisions of this Section 4.4, including as provided in the last sentence of this paragraph (c). Determinations and allocations by any Lender for purposes of this Section 4.4 of the effect of any Regulatory Change pursuant to paragraph (a) of this Section 4.4, or of the effect of capital maintained pursuant to paragraph (b) of this Section 4.4, on its costs or rate of return of maintaining Equipment Notes or its funding, or on amounts receivable by it in respect of Equipment Notes, and of the amounts required to compensate such Lender under this Section 4.4, shall be conclusive, absent manifest error; provided, that such determinations and allocations are made on a reasonable basis and, in the case of allocations, are made fairly.

 

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(d) The Borrower shall not be required to make payments under this Section to any Lender if (i) a claim hereunder arises through circumstances peculiar to such Lender and which do not affect commercial banks in the same jurisdiction generally or (ii) the claim arises out of a relocation by such Lender of its lending office (except any such relocation effected pursuant to Section 4.4(c)), or (iii) such Lender is not seeking similar compensation for such costs from its borrowers generally in commercial equipment loans, or (iv) the claim arises as the result of any law or regulation or any interpretation, directive or request of any court or governmental or monetary authority in any jurisdiction other than an Accepted Jurisdiction, unless, in the case of Section 4.4(d)(iv), such claim is made by a Lender that is a United States branch of a foreign commercial bank that has its principal place of business in a country that is a member of the Organization for Economic Co-operation and Development as of the date of this Agreement.

4.5 Past Due Interest .

Any amounts not paid under this Agreement by the Borrower when due shall bear interest at the Past-Due Rate (calculated on the basis of a year of 360 days and actual number of days elapsed), and shall be payable on demand.

5. R EPRESENTATIONS AND W ARRANTIES

5.1 Borrower’s Representations and Warranties .

Borrower represents and warrants to each Lender and WFB that:

(a) Organization; Qualification. Borrower is a corporation validly existing and in good standing under the Laws of Delaware, and has the corporate power and authority to conduct the business in which it is currently engaged and to own or hold under lease its properties and to enter into and perform its obligations under each of the Applicable Operative Agreements to which Borrower is or will be a party. Borrower is duly qualified to do business as a foreign corporation in good standing in each jurisdiction in which the nature and extent of the business conducted by it, or the ownership of its properties, requires such qualification, except where the failure to be so qualified does not constitute or would not give rise to a Materially Adverse Change to Borrower.

(b) Corporate Authorization. The execution and delivery by Borrower of, and performance by Borrower of its obligations under, this Agreement has been, and on the Applicable Closing Date, each of the other Applicable Operative Agreements to which Borrower is a party will have been, duly authorized by all necessary corporate action on the part of Borrower.

(c) No Violation. Borrower’s execution and delivery of, and performance of its obligations under, this Agreement do not, and on the Applicable Closing Date, each of the other Applicable Operative Agreements to which Borrower is a party will not, (1) violate any provision of Borrower’s articles of incorporation or by-laws, (2) violate any Law applicable to or binding on Borrower, or (3) violate or constitute any default under,

 

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or result in the creation of any Lien (other than as permitted under the Mortgage) upon the Applicable Aircraft or the other Collateral (as defined in the Applicable Mortgage) under any lease, loan or other agreement to which Borrower is a party or by which Borrower or any of its properties is bound.

(d) Approvals. Borrower’s execution and delivery of, and performance of its obligations under, this Agreement do not, and on the Applicable Closing Date, each of the other Applicable Operative Agreements to which Borrower is a party will not, require the consent or approval of, the giving of notice to, the registration with, the recording or filing of any documents with, or the taking of any other action in respect of (1) any trustee or other holder of any debt of Borrower, or (2) any Government Entity, other than (x) the FAA-Filed Documents and the Financing Statements (and continuation statements periodically related to the Applicable Aircraft), and (y) filings, recordings, notices, or other ministerial actions pursuant to any routine recording, contractual, or regulatory requirements.

(e) Valid and Binding Agreements. This Agreement has been, and on the Applicable Closing Date, each of the other Applicable Operative Agreements to which Borrower is a party will have been at the time delivered by Borrower, duly authorized, executed, and delivered by Borrower and this Agreement constitutes, and on the Applicable Closing Date, each of the other Applicable Operative Agreements to which Borrower is a party will constitute, legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency, and other similar Laws affecting the rights of creditors generally or by general principles of equity.

(f) Litigation. Except as set forth in Holdings’ Annual Report on Form 10-K, Quarterly Report on Form 10-Q or Current Report on Form 8-K filed with the SEC on or prior to December 31, 2005, no action, claim or proceeding is now pending or, to Borrower’s Actual Knowledge, threatened, against Borrower before any Government Entity, that is reasonably likely to be determined adversely to Borrower and if determined adversely to Borrower would result in a Materially Adverse Change.

(g) Financial Condition . Holdings’ audited consolidated balance sheet for its fiscal year ended December 31, 2004, included in Holdings’ most-recent Annual Report on Form 10-K filed by Holdings with the SEC, and the related consolidated statements of operations and cash flows for the period then ended, have been prepared in accordance with GAAP and fairly present in all material respects in accordance with GAAP the financial condition of Holdings and its consolidated subsidiaries as of such date and the results of its operations and cash flows for such period and Holdings’ unaudited consolidated balance sheet for its fiscal quarter ended September 30, 2005, included in Holdings’ most-recent Quarterly Report on Form 10-Q filed by Holdings with the SEC, and the related consolidated statements of operations and cash flows for the period then ended, have been prepared in accordance with GAAP and fairly present (subject to year-end audit adjustments) in all material respects in accordance with GAAP the financial condition of Holdings and its consolidated subsidiaries as of such date and the results of its operations and cash flows for such period, and since the date of such December 31,

 

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2004 balance sheet, there has been no Materially Adverse Change in such financial condition or operations, except for matters disclosed in (1) the financial statements referred to above, or (2) any subsequent report filed with the SEC on or prior to December 31, 2005.

(h) Registration and Recordation . On each Applicable Closing Date, except for (1) registering the Applicable Aircraft with the FAA in Borrower’s name, (2) filing for recordation (and recording) the FAA-Filed Documents related to the Applicable Aircraft, (3) filing the Financing Statements (and continuation statements relating thereto at periodic intervals related to the Applicable Aircraft), and (4) affixing the nameplates referred to in Section 4.2(f) of the Applicable Mortgage, no further action, including filing or recording any document (including any financing statement under UCC Article 9) is necessary in order to establish and perfect the Applicable Mortgagee’s Lien on the Applicable Aircraft, as against Borrower and any other Person, in any applicable jurisdictions in the United States.

(i) Securities Law. Neither Borrower nor any Person authorized to act on its behalf has directly or indirectly offered any beneficial interest or Security relating to the ownership of the Applicable Aircraft or any interest in such Collateral (as defined in the Applicable Mortgage), or any of the Applicable Equipment Notes or any other interest in or security under the Applicable Mortgage or any other interest in or security under such Collateral, for sale to, or solicited any offer to acquire any such interest or security from, or has sold any such interest or security to, any Person in violation of the Securities Act.

(j) Section 1110 . The Applicable Mortgagee will be entitled to the benefits of Section 1110 (as currently in effect) with respect to the right to take possession of the Airframe and Engines related to the Applicable Aircraft, as provided in the Applicable Mortgage, in the event of a case under Chapter 11 of the Bankruptcy Code in which Borrower is a debtor.

(k) Title . On the Applicable Closing Date, Borrower will have good and valid title to the Applicable Aircraft, free and clear of all Liens except Permitted Liens not of record.

(l) Insurance . The insurance required by the Applicable Mortgage will be in full force and effect, and all premiums which have become due or are due with respect to the insurance required to be provided by Borrower in respect of the Applicable Aircraft or required under Section 4.6 of the Applicable Mortgage will have been paid and no notice of cancellation has been given by any insurer with respect to such insurances.

(m) Citizenship. Borrower is a Citizen of the United States and a U.S. Air Carrier.

(n) Compliance with Laws. Borrower holds all licenses, permits, and franchises from the appropriate Government Entities necessary to authorize Borrower to engage in air transportation and to carry on scheduled commercial passenger service as currently conducted, except where the failure to hold any such license, permit, or franchise would not give rise to a Materially Adverse Change to Borrower.

 

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(o) Investment Company. Borrower is not an “investment company” or a company controlled by an “investment company” within the meaning of the Investment Company Act of 1940.

(p) Broker’s Fees. No Person acting on behalf of Borrower is or will be entitled to any broker’s fee, commission, or finder’s fee in connection with the Transactions related to the Applicable Aircraft, other than Borrower’s Advisor.

(q) Margin Requirements. Borrower will not directly or indirectly use any of the proceeds from the issuance of the Applicable Equipment Notes so as to result in a violation of Regulation T, U, or X of the Board of Governors of the Federal Reserve System.

5.2 WFB’s Representations and Warranties .

WFB represents and warrants to Borrower and each Lender that:

(a) Organization. WFB is a validly existing national banking association in good standing under the Laws of the United States, with banking and trust authority to execute and deliver, and perform its obligations under, each of the Applicable Operative Agreements to which WFB (in its individual capacity and/or as the Applicable Mortgagee) is or will be a party.

(b) Corporation Authorization. The execution and delivery by WFB (in its individual capacity and/or as the Applicable Mortgagee) of, and the performance by WFB (in its individual capacity and/or as the Applicable Mortgagee) of its obligations under, this Agreement have been, and on the Applicable Closing Date, each of the other Applicable Operative Agreements to which WFB (in its individual capacity and/or as the Applicable Mortgagee) is a party will have been, duly authorized by all necessary corporate action.

(c) No Violation. The execution and delivery by WFB (in its individual capacity and/or as the Applicable Mortgagee) of, and performance by WFB (in its individual capacity and/or as the Applicable Mortgagee) of its obligations under, this Agreement do not, and on the Applicable Closing Date, each of the other Applicable Operative Agreements to which WFB (in its individual capacity and/or as the Applicable Mortgagee) is a party will, not (a) violate any provision of WFB’s articles of association or by-laws, (b) violate any Utah or federal Law applicable to or binding on WFB governing WFB’s banking or trust powers or (c) violate or constitute any default under, or result in the creation of any Lien (other than the Lien of any Mortgage) upon any property of WFB, or any of WFB’s subsidiaries under any lease, loan, or other agreement to which WFB is a party or by which WFB or any of its properties is bound.

(d) Approvals. The execution and delivery by WFB (in its individual capacity and/or as the Applicable Mortgagee) of, and performance by WFB (in its individual

 

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capacity and/or as the Applicable Mortgagee) of its obligations under, this Agreement do not, and on the Applicable Closing Date, each of the other Applicable Operative Agreements to which WFB (in its individual capacity and/or as the Applicable Mortgagee) is a party will not, require the consent, approval, or authorization of, the giving of notice to, the registration with, the recording or filing of any documents with, or the taking of any other action in respect of (a) any trustee or other holder of any Debt of WFB, or (b) any federal or Utah Government Entity governing the banking or trust powers of WFB.

(e) Valid and Binding Agreements. This Agreement has been, and on the Applicable Closing Date, each of the other Applicable Operative Agreements to which WFB (in its individual capacity and/or as the Applicable Mortgagee) is a party will have been at the time delivered by WFB, duly authorized, executed, and delivered by WFB and this Agreement constitutes, and on the Applicable Closing Date each of the other Applicable Operative Agreements to which WFB (in its individual capacity and/or as the Applicable Mortgagee) is a party will constitute, legal, valid, and binding obligations of WFB, enforceable against WFB in accordance with their terms, except as such enforceability may be limited by bankruptcy, insolvency, or other similar Laws affecting the rights of creditors generally or by general principles of equity.

(f) No Liens . On the Applicable Closing Date, no Liens will be attributable to WFB (in its individual capacity) in respect of all or any part of the Collateral (other than Liens created by the Applicable Operative Agreements).

(g) Securities Laws . Neither WFB (in its individual capacity or as the Applicable Mortgagee) nor any Person authorized to act on its behalf has directly or indirectly offered any beneficial interest or Security relating to the ownership of the Applicable Aircraft or any interest in such Collateral (as defined in the Applicable Mortgage) or any of the Applicable Equipment Notes or any other interest in or security under such Collateral for sale to, or solicited any offer to acquire any such interest or security from, or has sold any such interest or security to, any Person.

(h) Taxes . There are in connection with WFB’s (in its individual capacity and/or as the Applicable Mortgagee) execution, delivery, and performance of this Agreement, and, on the Applicable Closing Date, will be, in connection with WFB’s (in its individual capacity and/or as the Applicable Mortgagee) execution, delivery and performance of the other Applicable Operative Agreements to which WFB (in its individual capacity and/or as the Applicable Mortgagee) is a party, no Taxes payable by WFB (in its individual capacity or as the Applicable Mortgagee) imposed by Utah or any political subdivision or taxing authority of such state (other than franchise or other taxes based on or measured by any fees or compensation received by WFB (in its individual capacity and as the Applicable Mortgagee) for services rendered in connection with the transactions contemplated by any of the Applicable Operative Agreements to which it is a party), and there will be no Taxes payable by WFB (in its individual capacity or as the Applicable Mortgagee) imposed by Utah or any political subdivision or taxing authority of such state in connection with the acquisition, possession, or ownership by the Lenders of any of the Applicable Equipment Notes (other than franchise or other taxes based on

 

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or measured by any fees or compensation to be received by WFB (in its individual capacity or as the Applicable Mortgagee) for services rendered in connection with the transactions contemplated by any of the Applicable Operative Agreements to which it is a party), and, assuming that the trust created by the Applicable Mortgage will not be taxable as corporations, but, rather, that each will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Code or as a partnership under Subchapter K of the Code, such trusts will not be subject to any Taxes imposed by Utah or any political subdivision of such state.

(i) Citizenship. WFB is a Citizen of the United States.

(j) Litigation. There are no pending or, to WFB’s Actual Knowledge, threatened actions or proceedings against WFB (in its individual capacity or as the Applicable Mortgagee), before any Government Entity that, if determined adversely to WFB, would materially adversely affect the ability of WFB (in its individual capacity and/or as the Applicable Mortgagee) to perform its obligations under the Applicable Operative Agreements to which WFB (in its individual capacity and/or as the Applicable Mortgagee) is or will be a party.

(k) Broker’s Fees. No Person acting on behalf of WFB (in its individual capacity or as the Applicable Mortgagee) is or will be entitled to any broker’s fee, commission, or finder’s fee in connection with the Transactions related to the Applicable Aircraft.

5.3 Lender’s Representations and Warranties .

Each Lender represents and warrants to Borrower on the date hereof and on each Applicable Closing Date that:

(a) Valid and Binding Agreements . This Agreement has been duly authorized, executed, and delivered by it and this Agreement constitutes its legal, valid, and binding obligation enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, and other similar Laws affecting the rights of creditors generally or general principles of equity.

(b) Broker’s Fees . No Person acting on behalf of it is or will be entitled to any broker’s fee, commission, or finder’s fee in connection with the Transactions related to the Applicable Aircraft.

(c) ERISA . No portion of the funds it uses to purchase, acquire and hold the Applicable Equipment Notes or interest directly or indirectly constitutes, or may be deemed under the Code or ERISA or any rulings, regulations, or court decisions thereunder to constitute, the assets of any Plan.

 

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6. L ENDER C OVENANTS .

In respect of each Aircraft to which it is a Lender and the transactions contemplated hereby with respect thereto, each Lender agrees for the benefit of Borrower as follows:

6.1 Withholding Taxes .

If it is a Non-U.S. Person, to reimburse (on an After-Tax Basis) to Borrower or the Applicable Mortgagee, as applicable for any amounts paid (including pursuant to obligations under any of the Operative Agreements) with respect to any United States withholding taxes (and related interest, penalties, and additions to tax) as a result of any false, inaccurate, or untrue statement in any certificate or form provided by it to Borrower or such Applicable Mortgagee pursuant to Section 2.3 of the Mortgage in connection with such withholding taxes. Any amount payable under this Section 6.1 shall be paid within 30 days after it receives a written demand therefor (which shall state in reasonable detail the basis for and calculation of such claim).

6.2 Compliance .

It agrees that it will perform and comply with the obligations specified to be imposed on it in respect of the Applicable Equipment Notes and the Mortgage(s) to which such Equipment Notes are subject.

6.3 Recognition of Rights in Certain Engines .

It agrees, for the benefit of each lessor, conditional seller, or secured party of any airframe or engine (other than an Engine) leased to, purchased by, or owned by Borrower or any Permitted Lessee subject to a lease, conditional sale, or other security agreement that it will not acquire or claim, as against such lessor, conditional seller, or secured party, any right, title, or interest in any engine (other than an Engine) as the result of the installation of such engine on any such Aircraft at any time while such engine (other than an Engine) is subject to such lease, conditional sale, or other security agreement and owned by such lessor or conditional seller or subject to a security interest in favor of such secured party; provided, Borrower or any Permitted Lessee has received from any such lessor, secured party, or conditional seller in respect of any airframe leased to, purchased by or owned by Borrower or any Permitted Lessee, a written agreement (which may be a copy of the lease, security agreement, conditional sale agreement, or other agreement covering such airframe), whereby such Person agrees that it will not acquire or claim any right, title, or interest in any Engine by reason of the installation of such Engine on any such airframe at any time while such Engine is subject to the Lien of the Applicable Mortgage.

6.4 Quiet Enjoyment .

It agrees that so long as no Event of Default exists, it shall not, and shall not permit any Affiliate or other Person (including an Applicable Mortgagee) claiming by, through or under it to, take any action in violation of Borrower’s rights, including by interfering with Borrower’s or any Permitted Lessee’s right to quiet enjoyment of and the continuing possession, use and operation of any Aircraft.

 

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7. A SSIGNMENT OR T RANSFER OF I NTEREST ; J UNIOR L OANS ; S ALE -L EASEBACKS ; T ERMINATION OF C ROSS - C OLLATERALIZATION AND C ROSS -D EFAULT

7.1 Lenders .

(a) Transfer. Subject to Section 7.1(b) and (c) below and Section 2.6 of the Mortgage, any Lender may, at any time, Transfer or grant participations in all or any portion of its Commitment and/or Equipment Notes or all or any portion of its beneficial interest in its Equipment Notes to a Transferee; provided, that any participant in any such participations shall not have any direct rights under the Applicable Operative Agreements or any Lien on all or any part of any of the Applicable Aircraft or the Collateral (as defined in the Applicable Mortgage); and further provided, no such Transfer or participation shall diminish Borrower’s rights or increase Borrower’s liability or obligations or the amounts thereof (including with respect to withholding Taxes) above that which would result or would have been incurred had any such Transfer or participation not occurred. In the case of any Transfer, the Transferee, by acceptance of such Commitments and/or such Equipment Notes in connection with such Transfer, shall be bound by all of the covenants of the transferring Lender in the Applicable Operative Agreements. Notwithstanding any Operative Agreement to the contrary, no Lender shall be entitled to Transfer all or any portion of its Equipment Notes or all or any portion of its beneficial interest in its Commitments and/or Equipment Notes to any Person (i) if, after giving effect to any such Transfer, there shall be more than four (4) Lenders with respect to any Aircraft and (ii) unless such Transfer is in respect of a Commitment or an Original Amount that is greater than or equal to Five Million Dollars ($5,000,000).

(b) Securities Law. Each Lender agrees that it will not Transfer any Equipment Note which it holds or any interest in, or represented by, any Equipment Note which it holds in violation of the Securities Act or any applicable state or federal securities Law.

(c) ERISA . Each Lender agrees that it will not Transfer any Equipment Note which it holds or any interest in, or represented by, any Equipment Note which it holds unless the proposed Transferee thereof first provides Borrower with the following:

(1) a written representation and covenant that no portion of the funds it uses to purchase, acquire and hold such Equipment Note or interest directly or indirectly constitutes, or may be deemed under the Code or ERISA or any rulings, regulations, or court decisions thereunder to constitute, the assets of any Plan; and

(2) a written covenant that it will not Transfer any Equipment Note or any interest in, or represented by, any Equipment Note unless the subsequent Transferee also makes the representation described in clause (1) of this Section 7.1(c) and agrees to comply with this clause (2).

(d) Transfer at Request of Borrower . In the event that Indemnified Withholding Taxes become payable by Borrower pursuant to Section 9.3(a) hereof with respect to payments by Borrower to a Lender under an Equipment Note or pursuant to any Operative Agreement and the elimination or sufficient reduction of such Indemnified Withholding Taxes pursuant to a transfer described in the last sentence of such Section 9.3(a) is not accomplished, such Lender shall, upon the written request of Borrower, sell the affected Equipment Notes to a Person to which payments under the Equipment Notes would not be subject to U.S. withholding Taxes under then applicable Law for an amount

 

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which, together with any supplemental payment by Borrower in connection with such sale, shall be equal to the par value of such affected Equipment Notes plus accrued but unpaid interest thereon plus any LIBOR Breakage Amount. Out-of-pocket costs and expenses, if any, (including reasonable fees and disbursements of counsel) reasonably incurred by any Lender, WFB or any Mortgagee in connection with any such transfer shall be for the account of the Borrower.

7.2 Effect of Transfer; Costs .

Upon any Transfer in accordance with Section 7.1 (other than any Transfer by any Lender to the extent it only grants participations in Equipment Notes it holds or in its beneficial interest therein), the Transferee shall be deemed a “Lender” for all purposes of the Applicable Operative Agreements, and the transferring Lender shall be released from all of its liabilities and obligations under the Applicable Operative Agreements to the extent such liabilities and obligations arise after such Transfer and, in each case, to the extent such liabilities and obligations are assumed by the Transferee; provided, that such transferring Lender (and its Affiliates, successors, assigns, agents, representatives, directors, and officers) will continue to have the benefit of any rights or indemnities under any Applicable Operative Agreement vested or relating to circumstances, conditions, acts, or events before such Transfer. The transferring Lender agrees that it shall reimburse, or shall cause the Transferee to reimburse, the Borrower and the Applicable Mortgagee for all of their reasonable out-of-pocket costs and expenses (including reasonable fees and disbursements of counsel) incurred in connection with any such Transfer.

7.3 Junior Loans .

Notwithstanding anything to the contrary in any Operative Agreement upon not less than 30 days’ prior written notice to the parties hereto, Borrower shall have the right to issue, at any time prior to March 1, 2009, additional debt secured by a Lien on any Aircraft junior to the Lien of the Applicable Mortgage (a “Junior Loan”); provided, that Borrower shall be entitled at any time following the Applicable Closing Date of any Aircraft, to obtain a Junior Loan which finances the acquisition and installation of winglets to be installed on such Aircraft, provided, such winglets are owned by Borrower and, following installation thereof, are subject to the Lien of the Applicable Mortgage. In connection with any such Junior Loan, each of the parties hereto (or their successors) and the lender(s) providing such Junior Loan (and the related mortgagee) will execute and deliver an intercreditor agreement in form and substance reasonably satisfactory to the parties hereto (or their successors) and the lender(s) providing such Junior Loan, which agreement shall, among other things, ensure there is no diminution of the Applicable Mortgagee’s priority and perfected Lien in such Aircraft and all other then-existing Collateral (as defined in the Applicable Mortgage). In connection with any such Junior Loan, in no event will the Lenders be required to agree to:

(a) payment cure rights that would forestall their ability to take action for more than one year;

(b) convey control over remedies following an Event of Default to the lender(s) providing such Junior Loan (or to the related mortgagee); and

 

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(c) any buyout right that would not cover outstanding principal, accrued interest, any LIBOR Breakage Amount and all other amounts due and owing to the applicable Lenders under the Applicable Operative Agreements (the “Applicable Senior Debt”).

In addition the holders of the Junior Loan will (i) fully subordinate the entirety of their claims to the Applicable Senior Debt as it relates to the Collateral and (ii) not be entitled to exercise any remedies against the Applicable Aircraft and related Collateral so long as the Applicable Senior Debt is outstanding. Borrower shall reimburse the Applicable Mortgagee and the Lenders for all of their reasonable out-of-pocket fees and expenses (including reasonable fees and disbursements of counsel) incurred in connection with documenting any such Junior Loan and intercreditor agreement and shall pay to the Applicable Mortgagee the Working Fee to be distributed by the Applicable Mortgagee to the relevant Lenders as directed by the Initial Lender.

7.4 Sale-Leaseback Transaction .

Notwithstanding anything to the contrary in any Operative Agreement, upon not less than thirty (30) days’ prior written notice to the parties hereto (the “Sale-Leaseback Notice”), Borrower shall, so long as no Event of Default is then in existence, have the right to sell, at any time prior to March 1, 2009, an Aircraft and transfer title to such Aircraft to an owner trustee for the benefit of an owner participant in a transaction in which such owner trustee assumes all of Borrower’s obligations under the Applicable Equipment Notes and the Applicable Mortgage on a non-recourse basis (with Borrower being released from such obligations, except to the extent accrued before the assumption), leases such Aircraft to Borrower, and assigns such lease to the Applicable Mortgagee pursuant to an amended and restated mortgage (a “Sale-Leaseback”). In connection with such Sale-Leaseback, each of the relevant parties hereto (or their successors) will execute and deliver appropriate documentation permitting the owner trustee to assume Borrower’s obligations under the Applicable Equipment Notes and the Applicable Mortgage on a non-recourse basis, releasing Borrower from all obligations in respect of such Equipment Notes and Mortgage (except to the extent accrued before the assumption), and take all other actions as are reasonably necessary to permit such assumption by the owner trustee. Such Sale-Leaseback shall be subject to the satisfaction of the following terms and conditions:

(a) the Sale-Leaseback Notice shall identify the owner participant and the owner trustee;

(b) the identified owner participant shall have a tangible net worth of at least $50,000,000 per Aircraft subject to the Sale-Leaseback (or have its obligations guaranteed by a Person with such a tangible net worth level) and the owner participant shall be an entity regularly participating in the leasing and financing of equipment or shall otherwise be reasonably acceptable to the relevant Lenders; and

(c) documentation for such transaction shall be in form and substance reasonably satisfactory to the relevant Lenders, Borrower, the owner participant and the owner trustee and shall:

(1) other than variations necessary to effect the Sale-Leaseback, contain terms and conditions concerning the Borrower and the Applicable Aircraft no less favorable to the relevant Lenders than those binding on the Borrower and such Aircraft contained in the Applicable Operative Agreements;

 

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(2) the applicable lease shall be a “hell-or-highwater” triple net lease, with a minimum rents clause that will provide that basic rent shall always be sufficient to pay debt service on the Applicable Equipment Notes, and that the termination/stipulated loss value shall always be sufficient to pay the aggregate outstanding principal amount of, and accrued interest on, the Applicable Equipment Notes;

(3) contain debt/equity provisions as are consistent with market practice and reasonably satisfactory to the relevant Lenders, but shall not, without the consent of the relevant Lenders, contain any breakage cap or other limitation relating to any funding transaction (whether relating to the distribution-of-proceeds waterfall following an “event of default” or the owner participant’s buy-out right following an “event of default”) or otherwise adversely affect the ability of the relevant Lenders to recover any LIBOR Breakage Amounts ahead of recoveries by the owner participant of its investment; the relevant Lenders agree to negotiate such debt/equity provisions in good faith, provided that, in no event will the relevant Lenders be required to agree to (A) payment cure rights that would forestall their ability to take action for more than one year; or (B) equity squeeze provisions that would prohibit the relevant Lenders from squeezing out the equity following the 60-day Section 1110 period; and

(4) the economic substance (e.g., loan amount, interest rate, payment periodicity, payment conventions, maturity date, amortization profile, Debt Rate, etc.) of the Sale-Leaseback debt funded by the relevant Lenders shall be the same as that evidenced by the Applicable Equipment Notes.

Borrower shall reimburse the Applicable Mortgagee and the relevant Lenders for all of their reasonable out-of-pocket fees and expenses (including reasonable fees and disbursements of counsel) incurred in connection with any such Sale-Leaseback and shall pay to the Applicable Mortgagee the Working Fee to be distributed by the Applicable Mortgagee to the relevant Lenders as directed by the Initial Lender.

7.5 Termination of Cross-Collateralization and Cross-Defaults .

(a) Majority . If at any time a majority of the aggregate unpaid Original Amount of all Applicable Equipment Notes in respect of an Aircraft (for purposes of this Section 7.5(a) only, a “Relevant Aircraft”) ceases to be held by the same Lender or Lenders as the Lender or Lenders holding a majority (or more) of the aggregate unpaid Original Amount of all Applicable Equipment Notes in respect of the other Aircraft, then, (x) for purposes of the Mortgage entered into in respect of such Relevant Aircraft, the Equipment Notes issued, and the Mortgage entered into, in respect of the other Aircraft shall, without further action of the parties hereto or thereto, not be deemed to be “Related

 

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Equipment Notes” or a “Related Mortgage” (as the case may be) and (y) the Equipment Notes issued, and the Mortgage entered into, in respect of such Relevant Aircraft shall, without further act of the parties hereto or thereto, not be deemed to be “Related Equipment Notes” or a “Related Mortgage” (as the case may be) under the Mortgage in respect of the other Aircraft.

(b) Sale-Leaseback . If an Aircraft is subjected to a Sale-Leaseback pursuant to Section 7.4 (for purposes of this Section 7.5(b) only, the “Relevant Aircraft”) then (x) for purposes of the Mortgage entered into in respect of such Relevant Aircraft, the Equipment Notes issued, and the Mortgage entered into, in respect of the Aircraft not subjected to a Sale-Leaseback with the same (or affiliated) owner participants (for purposes of this Section 7.5(b) only, the “No-Cross Aircraft”) shall, without further act of the parties hereto or thereto, no longer be deemed to be “Related Equipment Notes” or a “Related Mortgage” (as the case may be) and (y) the Equipment Notes issued, and the Mortgage entered into, in respect of such Relevant Aircraft shall, without further act of the parties hereto or thereto, no longer be deemed to be “Related Equipment Notes” or a “Related Mortgage” (as the case may be) for purposes the Mortgage in respect of the No-Cross Aircraft.

(c) Payment . If the unpaid Original Amount of (plus the unpaid and accrued interest thereon and all other amounts due under the Applicable Operative Agreements with respect to) all Equipment Notes in respect of an Aircraft (for purposes of this Section 7.5(c) only, the “Relevant Aircraft”) are paid in full and the Lien of the Applicable Mortgage is discharged and terminated in accordance with the terms thereof, then (x) for purposes of the Mortgage entered into in respect of such Relevant Aircraft, the Equipment Notes issued, and the Mortgage entered into, in respect of the other Aircraft shall, without further act of the parties hereto or thereto, no longer be deemed to be “Related Equipment Notes” or a “Related Mortgage” (as the case may be) and (y) the Equipment Notes issued, and the Mortgage entered into, in respect of such Relevant Aircraft shall, without further act of the parties hereto or thereto, no longer be deemed to be “Related Equipment Notes” or a “Related Mortgage” (as the case may be) for purposes of the Mortgage in respect of such other Aircraft.

8. C ONFIDENTIALITY

Each Lender, Borrower and WFB (in its individual capacity and as a Mortgagee) shall keep confidential the terms of Annex B to each Mortgage and all information furnished to them from time to time hereunder or under the Mortgage (which is marked confidential) and shall not disclose, or cause to be disclosed, the same to any Person, except (a) to prospective and permitted transferees of the interests of any Lender, WFB (in its individual capacity or as a Mortgagee) or their counsel, independent insurance brokers, auditors, or other agents who are under an obligation of confidentiality with respect to such information or who otherwise agree to hold such information confidential, (b) to any Lender’s, Borrower’s or WFB’s counsel, independent insurance brokers, auditors, or other agents, Affiliates, or investors who agree to hold such information confidential, (c) as may be required by any statute, court, or administrative order or decree, legal process, or governmental ruling or regulation, including those of any applicable regulatory authority, federal or state banking examiners, taxing authorities, or any

 

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stock exchange, or (d) to such other Persons as are reasonably deemed necessary by the disclosing party in order to protect the interests of such party or for the purposes of enforcing such documents by such party; provided, that any and all disclosures permitted by clauses (c) and (d) above shall be made only to the extent reasonably deemed necessary to meet the specific requirements or needs of the Persons making such disclosures.

9. I NDEMNIFICATION A ND E XPENSES

9.1 General Indemnity .

(a) Indemnity . Whether or not any of the Transactions are consummated, Borrower shall indemnify, protect, defend, and hold harmless each Indemnitee from, against, and in respect of, and shall pay on an After-Tax Basis, any and all Expenses of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against any Indemnitee, relating to, resulting from, or arising out of or in connection with any one or more of the following:

 

(1)

the Operative Agreements or the enforcement of any of the terms of any of the Operative Agreements;

 

(2)

the Aircraft, the Airframe, any Engine, or any Part, including, with respect thereto, (aa) the manufacture, design, purchase, acceptance, nonacceptance, rejection, ownership, registration, reregistration, deregistration, delivery, nondelivery, lease, sublease, assignment, possession, use, non-use, operation, maintenance, testing, repair, overhaul, condition, alteration, modification, addition, improvement, storage, airworthiness, replacement, repair, sale, substitution, return, abandonment, redelivery, transfer of title or other disposition of the Aircraft, any Engine, or any Part, (bb) any claim or penalty arising out of violations of applicable Laws by Borrower (or any Permitted Lessee), (cc) tort liability, whether or not arising out of the negligence of any Indemnitee (whether active, passive, or imputed), (dd) death or property damage of passengers, shippers, or others, (ee) environmental control, noise, or pollution, and (ff) any Liens in respect of the Aircraft, any Engine, or any Part; and

 

(3)

any breach of or failure to perform or observe, or any other noncompliance with, any covenant, agreement, or other obligation to be performed by Borrower under any Operative Agreement to which it is party or the falsity of any representation or warranty of Borrower in any Operative Agreement to which it is party.

(b) Exceptions . Notwithstanding anything in Section 9.1(a), Borrower shall not be required to indemnify, protect, defend or hold harmless any Indemnitee pursuant to Section 9.1(a) against any Expense of such Indemnitee:

 

(1)

for any Taxes or a loss of Tax benefit, whether or not Borrower is required to indemnify therefor pursuant to Section 9.3;

 

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(2)

to the extent attributable to any Transfer (voluntary or involuntary) by or on behalf of such Indemnitee of any Equipment Note or interest therein, except for out-of-pocket costs and expenses incurred as a result of any such Transfer requested in writing by Borrower or made or effected pursuant to the exercise of remedies under any Operative Agreement;

 

(3)

to the extent attributable to the gross negligence or willful misconduct of such Indemnitee or any “Related Indemnitee” (as defined at the end of this Section 9.1(b)) (other than gross negligence or willful misconduct imputed to such Person solely by reason of its interest in the Aircraft or any Operative Agreement);

 

(4)

to the extent attributable to the incorrectness or breach of any representation or warranty, of such Indemnitee or any Related Indemnitee, contained in or made pursuant to any Operative Agreement;

 

(5)

to the extent attributable to the failure, by such Indemnitee or any Related Indemnitee, to perform or observe any agreement, covenant, or condition on its part to be performed or observed in any Operative Agreement;

 

(6)

to the extent attributable to the offer or sale, by such Indemnitee or any Related Indemnitee, of any interest in the Equipment Notes, or any similar interest, in violation of the Securities Act or other applicable federal, state, or foreign securities Laws (other than any thereof caused by acts or omissions of Borrower);

 

(7)

(aa) with respect to any Indemnitee other than the Mortgagee, to the extent attributable to such Mortgagee’s failure to distribute funds received and distributable by it in accordance with the relevant Mortgage and (bb) with respect to the Mortgagee, to the extent attributable to its negligence or willful misconduct in the distribution of funds received and distributable by it in accordance with the relevant Mortgage;

 

(8)

other than during the existence of an Event of Default, to the extent attributable to the authorization or giving or withholding of any future amendments, supplements, waivers, or consents with respect to any Operative Agreement, other than any requested by Borrower or required by or made pursuant to the terms of the Operative Agreements (unless such requirement results from the actions of an Indemnitee not required by or made pursuant to the Operative Agreements);

 

(9)

to the extent attributable to any amount which any Indemnitee expressly agrees to pay (other than amounts required to be paid by such Indemnitee in connection with the enforcement of its rights and remedies hereunder and under any Operative Agreement) or such Indemnitee expressly agrees shall not be paid by or be reimbursed by Borrower;

 

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(10)

to the extent that it is an ordinary and usual operating or overhead expense;

 

(11)

for any Lien attributable to such Indemnitee or any Related Indemnitee that Borrower is not obligated to discharge under the Operative Agreements;

 

(12)

if another provision of an Operative Agreement specifies the extent of Borrower’s responsibility or obligation with respect to such Expense, to the extent arising from a cause other than Borrower’s failure to comply with such specified responsibility or obligation; or

 

(13)

to the extent incurred by or asserted against an Indemnitee as a result of any “prohibited transaction” caused by it, within the meaning of ERISA § 406 or Code § 4975(c)(1).

For purposes of this Section 9.1, a Person shall be considered a “Related Indemnitee” of an Indemnitee if that Person is an Affiliate or employer of such Indemnitee, a director, officer, employee, agent, or servant of such Indemnitee or any such Affiliate, or a successor or permitted assign of any of the foregoing (other than pursuant to a Transfer). For the avoidance of doubt, no Transferee of an Equipment Note shall be entitled under this Section 9.1 to be indemnified, protected, defended or held harmless against any Expense to the extent that any prior holder of such Equipment Note would not have been entitled to such rights and protections at the time of its transfer.

(c) Separate Agreement . The provisions of this Section 9.1 constitute a separate agreement with respect to each Indemnitee and is enforceable directly by each such Indemnitee.

(d) Notice . If an Indemnitee makes a claim for any Expense indemnifiable under this Section 9.1, such Indemnitee shall give prompt written notice thereof to Borrower. Notwithstanding the foregoing, any Indemnitee’s failure to notify Borrower as provided in this Section 9.1(d), or in Section 9.1(e), shall not release Borrower from any of its obligations to indemnify such Indemnitee hereunder, except to the extent that such failure results in an additional Expense to Borrower (in which event Borrower shall not be responsible for such additional Expense) or materially impairs Borrower’s ability to contest such claim.

(e) Notice of Proceedings; Defense of Claims; Limitations .

(1) If any action, suit, or proceeding for which Borrower is responsible under this Section 9.1 is brought against any Indemnitee, such Indemnitee shall notify Borrower of the commencement thereof, and Borrower may, at its expense, participate in and, to the extent that it so desires (subject to the provisions of the following paragraph), assume and control the defense thereof and, subject to Section 9.1(e)(3), settle or compromise it.

 

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(2) Borrower or its insurer(s) shall have the right, at its or their expense, to investigate and control the defense of, any action, suit, or proceeding, relating to any Expense for which indemnification is sought pursuant to this Section 9.1, and each Indemnitee shall cooperate reasonably and in good faith with Borrower or its insurer(s) with respect thereto; provided, that Borrower shall not be entitled to control the defense of any such action, suit, or proceeding, or to compromise any such Expense, while (a) any Event of Default exists, (b) if such proceedings will involve a material risk of the sale, forfeiture, or loss of, or the creation of any Lien (other than Permitted Lien) on the Aircraft, or the Collateral, unless Borrower shall have posted a bond or other security or collateral reasonably satisfactory to such Indemnitee in respect to such risk, or (c) if such proceedings entail any material risk of criminal liability or material civil liability. In connection with any such Borrower-controlled action, suit, or proceeding, such Indemnitee shall have the right to participate therein, at its sole cost and expense, with counsel reasonably satisfactory to Borrower, provided that such Indemnitee’s participation does not, in the reasonable opinion of the independent counsel appointed by Borrower or its insurers to conduct such proceedings, interfere with the defense of such case. In connection with any Indemnitee-controlled action, suit, or proceeding, Borrower or its insurers shall have the right to participate therein, at its or their sole cost and expense, with counsel reasonably satisfactory to any such Indemnitee, provided that Borrower’s or its insurers’ participation does not, in the reasonable opinion of the independent counsel appointed by any such Indemnitee to conduct such suit or proceedings, materially interfere with the defense of such case.

(3) In no event shall any Indemnitee enter into a settlement or other compromise with respect to any Expense without Borrower’s prior written consent (which shall not be unreasonably withheld or delayed), unless such Indemnitee waives its right to be indemnified with respect to such Expense under this Section 9.1.

(4) To the extent that any Expense indemnified by Borrower hereunder may be covered by insurance maintained by Borrower, at Borrower’s expense, each Indemnitee agrees to cooperate with the insurers in the exercise of their rights to investigate, defend, or compromise such Expense as may be required to retain the benefits of such insurance with respect to such Expense.

(5) If an Indemnitee is not a party to this Agreement, Borrower may require such Indemnitee to agree in writing to the terms of this Section 9.1 and Section 11.8 before making any payment to such Indemnitee under this Section 9.

(6) Nothing in this Section 9.1(e) shall require an Indemnitee to contest any Expense or to assume responsibility for or control of any judicial proceeding with respect thereto.

(f) Information. Borrower will provide the relevant Indemnitee with such information not within the control of such Indemnitee (but in Borrower’s control or

 

27

reasonably available to Borrower) which such Indemnitee reasonably requests, and will otherwise cooperate with such Indemnitee so as to enable such Indemnitee to fulfill its obligations under Section 9.1(e). The Indemnitee shall supply Borrower with such information not within the control of Borrower (but in such Indemnitee’s control or reasonably available to such Indemnitee) which Borrower reasonably requests to control or participate in any proceeding to the extent permitted by Section 9.1(e) .

(g) Effect of Other Indemnities. Upon payment in full by or on behalf of Borrower of any indemnity provided for under this Agreement, Borrower, without any further action and to the full extent permitted by Law, will be subrogated to all rights and remedies of the Person indemnified (other than with respect to any of such Indemnitee’s insurance policies or in connection with any indemnity claim of such Indemnitee under Section 6.3 of the applicable Mortgage) in respect of the matter as to which such indemnity was paid. Each Indemnitee will give such further assurances or agreements and cooperate with Borrower to permit Borrower to pursue such claims, to the extent reasonably requested by Borrower and at Borrower’s expense.

(h) Refunds. If an Indemnitee receives any refund, in whole or in part, with respect to any Expense paid by Borrower hereunder, that Indemnitee will promptly pay the amount refunded (but not an amount in excess of the amount Borrower or any of its insurers has paid in respect of such Expense) over to Borrower unless a Special Default or Event of Default exists, in which case such amount shall be paid over to the relevant Mortgagee to hold as security for Borrower’s obligations under the relevant Operative Agreements or, if requested by Borrower, applied to satisfy those obligations.

9.2 Expenses .

Borrower shall pay (a) the ongoing fees and expenses of the Mortgagees, and (b) all reasonable out-of-pocket costs and expenses (including the reasonable fees and disbursements of counsel) incurred by the Mortgagees or Lenders attributable to an Event of Default or any waiver, amendment, or modification of any Operative Agreement to the extent requested by Borrower.

9.3 General Tax Indemnity .

(a) Withholding Taxes. Except as provided in Section 9.3(c), Borrower agrees that each payment paid by Borrower or the Mortgagee under the Equipment Notes, and any other payment or indemnity paid by Borrower or the Mortgagee to or for the benefit of a Lender under any Operative Agreement, shall be free of all withholdings or deductions with respect to Taxes of any nature unless the withholding or deduction is required by applicable Law, and if Borrower or the Mortgagee is required by applicable Law to make any such withholding or deduction for any such payment, (1) Borrower shall (or cause Mortgagee on its behalf to) make all such withholdings or deductions, (2) if and to the extent that all or any portion of the required withholdings or deductions constitutes Indemnified Withholding Taxes, the amount payable by Borrower shall be increased by Borrower so that, after the Mortgagee makes all required withholdings or deductions, such Lender receives the same amount that it would have received had no

 

28

such withholdings or deductions with respect to such Indemnified Withholding Taxes been made, with the amount payable by Borrower with respect to such Indemnified Withholding Taxes being calculated on an After-Tax Basis and (3) Borrower shall (or cause Mortgagee on its behalf to) pay the full amount withheld or deducted to the relevant Taxing Authority in accordance with applicable Law. The term “Indemnified Withholding Taxes” shall mean, with respect to any Equipment Note or other payment or indemnity paid by Borrower or the Mortgagee to or for the benefit of a Lender under any Operative Agreement, withholding taxes imposed by the U.S. Government, but only to the extent that, as the result of a change in law or regulation or the interpretation thereof or a change in a tax treaty to which the United States is a party, in each case that occurs after the Closing Date applicable to such Equipment Notes or other payment or indemnity paid by Borrower or the Mortgagee to or for the benefit of a Lender under any Operative Agreement, such withholding taxes become applicable with respect to a payment by Borrower or the Mortgagee to or for the benefit of the Lender (if none had previously been imposed or required) or the rate applicable to a previously imposed or required withholding tax is increased; provided that, if the particular Lender is based in a jurisdiction other than an Accepted Jurisdiction, the amount of Indemnified Withholding Taxes shall not exceed the amount of Indemnified Withholding Taxes that would be applicable if the Lender were based in an Accepted Jurisdiction or other jurisdiction to which such Equipment Notes have been transferred solely pursuant to this Section 9.3(a). In the event that Indemnified Withholding Taxes become payable by Borrower as provided above, the Lender will, if possible and without any adverse consequences, transfer the Equipment Notes to another jurisdiction that is mutually acceptable to Borrower and such Lender so that either (1) no such Indemnified Withholding Taxes would be applicable to subsequent payments to or for the benefit of such Lender following such transfer (taking into account the provisions of Treas. Reg. § 1.881-3 and the limitation on benefits provisions of any applicable tax treaty) or (2) the rate of the Indemnified Withholding Taxes applicable to subsequent payments to such Lender following such transfer (taking into account the provisions of Treas. Reg. § 1.881-3 and the limitation on benefits provisions of any applicable tax treaty) would not exceed the rate of the Indemnified Withholding Taxes applicable to payments to such Lender prior to such transfer and the applicable change in law or regulation or the interpretation thereof or change in tax treaty.

(b) General Tax Indemnity . Except as provided in Section 9.3(c) and whether or not any of the transactions contemplated hereby are consummated, Borrower shall pay, indemnify, protect, defend, and hold harmless each Tax Indemnitee from all Taxes imposed by any Taxing Authority imposed on or asserted against any Tax Indemnitee or the Aircraft, the Airframe, any Engine, or any Part, or any interest in any of the foregoing (whether or not indemnified against by any other Person), upon or with respect to the Operative Agreements or the transactions or payments contemplated thereby, including any Tax imposed upon or with respect to (x) the Aircraft, the Airframe, any Engine, any Part, any Operative Agreement (including any Equipment Notes), any data, or any other thing delivered or to be delivered under an Operative Agreement, (y) the purchase, manufacture, acceptance, rejection, sale, transfer of title, return, ownership, mortgaging, delivery, transport, charter, rental, lease, re-lease, sublease, assignment, possession, repossession, presence, use, condition, storage, preparation, maintenance, modification,

 

29

alteration, improvement, operation, registration, transfer or change of registration, reregistration, repair, replacement, overhaul, location, control, imposition of any Lien, financing, refinancing requested by Borrower, abandonment, or other disposition of the Aircraft, the Airframe, any Engine, any Part, any data, or any other thing delivered or to be delivered under an Operative Agreement or (z) interest, fees, or other income, proceeds, receipts, or earnings, whether actual or deemed, arising upon, in connection with, or in respect of any of the Operative Agreements (including the property or income or other proceeds with respect to property held as part of the Collateral) or the transactions contemplated thereby.

(c) Certain Exceptions. The provisions of Section 9.3(a) and Section 9.3(b) shall not apply to, and Borrower shall have no liability hereunder for, Taxes:

(1) imposed on a Tax Indemnitee by the federal government of the United States or any Taxing Authority or governmental subdivision of the United States or therein (including any state or local Taxing Authority) (aa) on, based on, or measured by gross or net income or gross or net receipts, including capital gains taxes, excess profits taxes, minimum taxes from tax preferences, alternative minimum taxes, branch profits taxes, accumulated earnings taxes, personal holding company taxes, succession taxes and estate taxes, and any withholding taxes on, based on, or measured by gross or net income or receipts, or (bb) on, or with respect to, or measured by capital or net worth or in the nature of a franchise tax or a tax for the privilege of doing business (other than Indemnified Withholding Taxes, sales, use, rental, stamp, documentary, license, or property Taxes and value added Taxes (that are not imposed in direct substitution for an income Tax);

(2) imposed on a Tax Indemnitee by any Taxing Authority or governmental subdivision thereof or therein outside of the United States (including any Taxing Authority in or of a territory, possession or commonwealth of the United States) (aa) on, based on, or measured by gross or net income or gross or net receipts, including capital gains taxes, excess profits taxes, minimum taxes from tax preferences, alternative minimum taxes, branch profits taxes, accumulated earnings taxes, personal holding company taxes, succession taxes and estate taxes, and any withholding taxes on, based on, or measured by gross or net income or receipts, or (bb) on, or with respect to, or measured by capital or net worth or in the nature of a franchise tax or a tax for the privilege of doing business (other than, in the case of clause (aa) or (bb), (y) sales, use, rental, stamp, documentary, license, or property Taxes and value added Taxes (that are not imposed in direct substitution for an income Tax), or (z) any Taxes imposed by any Taxing Authority (other than a Taxing Authority within whose jurisdiction such Tax Indemnitee is incorporated or organized or maintains its principal place of business) if such Tax Indemnitee would not have been subject to Taxes of such type by such jurisdiction but for (i) the location, use, or operation of the Aircraft, the Airframe, any Engine, or any Part thereof by any Borrower Person within the jurisdiction of the Taxing Authority imposing such Tax, or (ii) the activities of any Borrower Person in such jurisdiction, including use of any other aircraft by

 

30

any Borrower Person in such jurisdiction, (iii) the status of any Borrower Person as a foreign entity or as an entity owned in whole or in part by foreign persons, (iv) any Borrower Person having made (or having been deemed to have made) payments to or for the benefit of such Tax Indemnitee from the relevant jurisdiction, or (v) any Borrower Person being incorporated or organized or maintaining a place of business or conducting activities in such jurisdiction);

(3) on, with respect to, or measured by any trustee fees, commissions, or compensation received by Mortgagee or WFB;

(4) that are being contested as provided in Section 9.3(e) below;

(5) imposed on any Tax Indemnitee to the extent that such Taxes result from the gross negligence or willful misconduct of such Tax Indemnitee or any Affiliate thereof;

(6) imposed on or with respect to a Tax Indemnitee (including a transferee thereof in those cases in which the Tax on transfer is imposed on, or is collected from, the transferee) as a result of a transfer or other disposition (including a deemed transfer or disposition) by such Tax Indemnitee or any of its Related Tax Indemnitees of any or all of its interest in the Aircraft, the Airframe, any Engine, or any Part, any interest arising under the Operative Agreements, or any Equipment Note, or as a result of a transfer or disposition (including a deemed transfer or disposition) of any interest in a Tax Indemnitee (other than (1) a substitution or replacement of the Aircraft, the Airframe, any Engine, or any Part by a Borrower Person that is treated for Tax purposes as a transfer or disposition, or (2) a transfer requested by Borrower or required by the Operative Agreements or pursuant to an exercise of remedies upon a then-existing Event of Default);

(7) in excess of those that would have been imposed had there not been a transfer or other disposition excluded from indemnification by clause (6) of this Section 9.3(c) by or to such Tax Indemnitee or any of its Related Tax Indemnitees;

(8) consisting of any interest, penalties, or additions to Tax imposed on a Tax Indemnitee as a result (in whole or in part) of a failure of such Tax Indemnitee or any of its Related Tax Indemnitees to properly and timely file any Tax return that it is required to file, unless such failure is caused by Borrower’s failure to fulfill its obligations (if any) under Section 9.3(g) with respect to such Tax return;

(9) resulting from, or that would not have been imposed but for, any Liens arising as a result of claims against, or acts or omissions of, or otherwise attributable to such Tax Indemnitee or any of its Related Tax Indemnitees that Borrower is not obligated to discharge under the Operative Agreements;

 

31

(10) imposed on a Tax Indemnitee as a result of the breach by such Tax Indemnitee or any of its Related Tax Indemnitees of any covenant of such Tax Indemnitee or any Affiliate thereof contained in any Operative Agreement or the inaccuracy of any representation or warranty by such Tax Indemnitee or any Affiliate thereof in any Operative Agreement;

(11) in the nature of an intangible or similar Tax imposed upon or with respect to the value or principal amount of the interest of a Lender in any Equipment Note or the loan evidenced thereby, but only if such Taxes are in the nature of franchise Taxes or result from the conduct of business by such Tax Indemnitee in the taxing jurisdiction and, in each case, are imposed because of the place of incorporation or the activities unrelated to the Transactions in the taxing jurisdiction of such Tax Indemnitee;

(12) imposed on a Tax Indemnitee by a Taxing Authority of a jurisdiction outside the United States, to the extent that such Taxes result from a connection between the Tax Indemnitee or any of its Related Tax Indemnitees and such jurisdiction imposing such Tax unrelated to the Transactions; or

(13) relating to ERISA or to Code § 4975.

For purposes of this Section 9.3, a Person shall be considered a “Related Tax Indemnitee” of a Tax Indemnitee if that Person is an Affiliate or employer of such Tax Indemnitee, a director, officer, employee, agent, or servant of such Tax Indemnitee or any such Affiliate, or a successor or permitted assign of any of the foregoing (other than pursuant to a Transfer).

(d) Payment.

(1) Borrower’s indemnity obligation to a Tax Indemnitee under this Section 9.3 shall equal the amount which, after taking into account any Tax currently payable upon the receipt or accrual of the amounts payable under this Section 9.3 and any current tax benefits realized by such Tax Indemnitee as a result of the indemnifiable Tax (including any benefits realized as a result of such Tax Indemnitee’s use of an indemnifiable Tax as a credit against Taxes not indemnifiable under this Section 9.3), shall equal the amount of the Tax indemnifiable under this Section 9.3.

(2) At Borrower’s written request, the computation of the amount of any indemnity payment owed by Borrower or any amount owed by a Tax Indemnitee to Borrower pursuant to this Section 9.3 shall be verified and certified by an independent public accounting firm selected by such Tax Indemnitee and reasonably satisfactory to Borrower. Each Tax Indemnitee shall upon written request provide to such accounting firm such information in such Tax Indemnitee’s possession or control as is reasonably necessary, for the performance of such verification (subject to the accounting firm’s execution and delivery of a confidentiality agreement in form and substance reasonably acceptable to the Tax Indemnitee. Such verification shall be binding on Borrower

 

32

and the Tax Indemnitee. The costs of such verification (including the fee of such public accounting firm) shall be borne by Borrower unless such verification results in an adjustment in Borrower’s favor of 5% or more of the net present value of the payment as computed by such Tax Indemnitee, in which case the costs shall be paid by such Tax Indemnitee.

(3) Each Tax Indemnitee shall provide Borrower with such certifications, and such information and documentation in such Tax Indemnitee’s possession or control, as Borrower reasonably requests in writing that are necessary to minimize any indemnity payment pursuant to this Section 9.3 and which such Tax Indemnitee can provide without incurring material adverse consequences under applicable Law, and Borrower shall, on written request from such Tax Indemnitee, reimburse such Tax Indemnitee for its reasonable out-of-pocket expenses incurred in providing such certifications, information and documentation to Borrower. If the Tax Indemnitee believes that providing to Borrower the certifications, information and documentation requested by Borrower would result in the incurrence of material adverse consequences under applicable Law, the Tax Indemnitee shall notify Borrower of the bases of that belief and the Tax Indemnitee and Borrower shall promptly meet to discuss the matter and, if the Borrower and the Tax Indemnitee are unable to agree whether such material adverse consequences would result, shall appoint an independent accounting firm to resolve the issue on terms similar to those set forth in Section 9.3(d)(2) hereof (except that the Borrower and the Tax Indemnitee shall share equally the costs of such accounting firm).

(4) Each Tax Indemnitee shall promptly forward to Borrower any written notice, bill, or advice that such Tax Indemnitee receives from any Taxing Authority concerning any Tax for which it seeks indemnification under this Section 9.3. Borrower shall pay any amount for which it is liable pursuant to this Section 9.3 directly to the appropriate Taxing Authority if legally permissible, or, upon written demand of a Tax Indemnitee, to such Tax Indemnitee within 30 days of such demand (or, if a contest occurs in accordance with Section 9.3(d), within 30 days after a Final Determination (as defined below)), but in no event more than three Business Days before the related Tax is due. If requested by a Tax Indemnitee in writing, Borrower shall furnish at its expense to the appropriate Tax Indemnitee the original or a certified copy of a receipt for Borrower’s payment of any Tax paid by Borrower (if such a receipt is reasonably obtainable from the applicable Taxing Authority), or such other evidence of payment of such Tax as is reasonably acceptable to such Tax Indemnitee. Borrower shall also furnish at its expense promptly upon written request such data as any Tax Indemnitee reasonably requires to enable such Tax Indemnitee to comply with the requirements of any taxing jurisdiction; provided that Borrower shall not be required to furnish such data if (x) such data are not within the possession or control of Borrower (unless Borrower is required to maintain such data pursuant to applicable Law) or (y) such data are not customarily furnished by U.S. domestic air carriers under similar circumstances (unless such data are specifically requested by a Taxing Authority). For purposes of this Section 9.3, a

 

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“Final Determination” is (1) a decision, judgment, decree, or other order by any court of competent jurisdiction that occurs pursuant to the provisions of Section 9.3(e), which decision, judgment, decree, or other order has become final and unappealable, (2) a closing agreement or settlement agreement entered into in accordance with Section 9.3(e) that has become binding and is not subject to further review or appeal (absent fraud, misrepresentation, etc.), or (3) the termination of administrative proceedings and the expiration of the time for instituting a claim in a court proceeding; provided that, notwithstanding the foregoing, the positions taken by such Tax Indemnitee on its Tax returns and filings, dealing with Tax authorities and, subject to the provisions of Section 9.3(e) hereof, in any Tax proceedings shall be in the sole, good-faith discretion of such Tax Indemnitee and, subject to the provisions of Section 9.3(d)(2) hereof, no Person shall have the right to require disclosure of the Tax returns or filings of such Tax Indemnitee, provided further that, in the case of any Tax credit or other Tax benefit that is limited in its availability, in the aggregate, to such Tax Indemnitee (and is not directly and fully traceable to the Tax paid or indemnified by Borrower without such limitations), the allocation of such Tax credit or other Tax benefit shall be made in a manner consistent with the requirements of applicable Law, and if and to the extent such allocation is not addressed by applicable Law, in proportion to other Tax credits or Tax benefits claimed by such Tax Indemnitee (taking into account any requirement of applicable Law concerning segregation or basketing of similar Tax credits or Tax benefits), by multiplying the amount of such Tax credit or Tax benefit by the ratio of the Tax credit or Tax benefit realized by the Tax Indemnitee by reason of any Tax paid or indemnified by Borrower over the total of such available Tax credits or Tax benefits for the Tax year at issue (taking into account any requirement of applicable Law concerning segregation or basketing of similar Tax credits or Tax benefits).

(5) If any Tax Indemnitee actually realizes a net tax savings by reason of any Tax paid or indemnified by Borrower pursuant to this Section 9.3 (whether such tax savings arise by means of a foreign tax credit, depreciation or cost recovery deduction, or otherwise), and such net savings is not otherwise taken into account in computing such payment or indemnity, such Tax Indemnitee shall pay to Borrower an amount equal to the lesser of (1) the amount of such net tax savings, plus any additional net tax savings recognized as the result of any payment made pursuant to this sentence, and (2) the amount of all payments pursuant to this Section 9.3 by Borrower to such Tax Indemnitee (less any payments previously made by such Tax Indemnitee to Borrower pursuant to this Section 9.3(d)(5)) (and the excess, if any, of the amount described in clause (1) over the amount described in clause (2) shall be carried forward and applied to reduce pro tanto any subsequent obligations of Borrower to make payments to such Tax Indemnitee pursuant to this Section 9.3); provided, that such Tax Indemnitee shall not be required to make any payment pursuant to this sentence so long as a Special Default or an Event of Default exists. If a tax benefit is later disallowed or denied, the disallowance or denial shall be treated as a Tax indemnifiable under Section 9.3(b) without regard to the provisions of Section

 

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9.3(c) (other than Section 9.3(c)(5), (8) or (10)). Each such Tax Indemnitee shall in good faith use reasonable efforts in filing its tax returns and in dealing with Taxing Authorities to seek and claim any such tax benefit.

(e) Contest.

(1) If a written claim is made against a Tax Indemnitee for Taxes with respect to which Borrower could be liable for payment or indemnity hereunder, or if a Tax Indemnitee determines that a Tax is due for which Borrower could have an indemnity obligation hereunder, such Tax Indemnitee shall promptly notify Borrower in writing of such claim (provided, that failure so to notify Borrower shall not relieve Borrower of its indemnity obligations hereunder except to the extent that such failure has a material adverse effect on Borrower’s indemnification obligations hereunder or on Borrower’s rights to successfully contest such claim), and shall take no action with respect to such claim without Borrower’s prior written consent for 30 days following Borrower’s receipt of such notice; provided, that, if applicable Law requires such Tax Indemnitee to take action before the end of such 30-day period, such Tax Indemnitee shall, in such notice to Borrower, so inform Borrower, and such Tax Indemnitee shall take no action for as long as it is legally able to avoid taking action. Such Tax Indemnitee shall (provided that Borrower shall have agreed to keep such information confidential other than to the extent necessary in order to contest the claim, such agreement to be delivered to the Tax Indemnitee and in form and substance reasonably acceptable to it) furnish Borrower with copies of the relevant portions of any requests for information from any Taxing Authority relating to such Taxes with respect to which Borrower may be required to indemnify hereunder. If requested by Borrower in writing within 30 days after its receipt of such notice, such Tax Indemnitee shall, at Borrower’s expense (including all reasonable out-of-pocket costs and expenses, including reasonable attorneys’ and accountants’ fees and disbursements incurred in connection with, and reasonably allocable to, the contest of such Tax), in good faith contest (or, if permitted by applicable Law, allow Borrower to contest) through appropriate administrative and judicial proceedings the validity, applicability, or amount of such Taxes by (x) resisting payment thereof, (y) not paying the Taxes except under protest if protest is necessary and proper, or (z) if the payment is made, using reasonable efforts to obtain a refund thereof in an appropriate administrative or judicial proceeding. If requested to do so by Borrower in writing, the Tax Indemnitee shall appeal any adverse administrative or judicial decision, except that the Tax Indemnitee shall not be required to pursue any appeals to the United States Supreme Court. If and to the extent that the Tax Indemnitee is able, using reasonable efforts, to separate the contested issue or issues from other issues arising in the same administrative or judicial proceeding that are unrelated to the Transactions without (in such Tax Indemnitee’s good faith judgment) adversely affecting such Tax Indemnitee, such Tax Indemnitee shall permit Borrower to control the conduct of any such proceeding and shall provide to Borrower (at Borrower’s cost and expense) such information or data in such Tax Indemnitee’s control or possession and reasonably necessary to conduct such contest. If the

 

35

contest is being controlled by a Tax Indemnitee, such Tax Indemnitee shall consult with Borrower in good faith regarding the manner of contesting such claim, and shall keep Borrower reasonably informed regarding the progress of such contest. If the contest is being controlled by Borrower, Borrower shall consult with the applicable Tax Indemnitee in good faith regarding the manner of contesting such claim, and shall keep such Tax Indemnitee reasonably informed regarding the progress of such contest. A Tax Indemnitee shall not fail to take any action expressly required by this Section 9.3(e) (including any action regarding any appeal of an adverse determination with respect to any claim) or settle or compromise any claim without Borrower’s prior written consent (except as contemplated by Sections 9.3(e)(2) or (3)).

(2) Notwithstanding the foregoing, in no event shall a Tax Indemnitee be required to pursue any contest (or to permit Borrower to pursue any contest) unless (1) Borrower agrees to pay such Tax Indemnitee on demand all reasonable out-of-pocket costs and expenses that such Tax Indemnitee incurs in connection with contesting such Taxes, including all reasonable out-of-pocket costs and expenses and reasonable attorneys’ and accountants’ fees and disbursements, in each case, to the extent reasonably allocable to the contest of such Taxes), (2) if such contest involves the payment of the claim, Borrower advances the amount thereof (to the extent indemnified hereunder) that are required to be paid before commencing the contest on an interest-free after-tax basis to such Tax Indemnitee (and such Tax Indemnitee shall promptly pay to Borrower any net realized tax benefits resulting from such advance, including any tax benefits resulting from making such payment), (3) the action to be taken will not result in any material risk of forfeiture, sale, or loss of, or the creation of a Lien (other than a Permitted Lien) on, the Aircraft or the Collateral (unless Borrower makes provisions to protect the interests of any such Tax Indemnitee in a manner reasonably satisfactory to such Tax Indemnitee) or any material risk of criminal liability or material civil liability (provided, that such Tax Indemnitee shall notify Borrower in writing promptly after it becomes aware of any such risks), (4) no Event of Default exists (unless Borrower has provided security reasonably acceptable to the Tax Indemnitee for its obligations hereunder or has advanced to such Tax Indemnitee, before proceeding or continuing with such contest, the amount of the Tax being contested, plus any interest and penalties and an amount estimated in good faith by such Tax Indemnitee for expenses) and (5) before commencing any judicial action controlled by Borrower, such Tax Indemnitee shall have received written confirmation from Borrower that the Taxes that are the subject of such Tax claim are indemnified by Borrower hereunder, provided, that Borrower shall not be bound by such confirmation to the extent that the Final Determination of the contest articulates conclusions of law and fact that demonstrate the Borrower is not liable hereunder for the Taxes that are the subject of such Tax claim. . Notwithstanding the foregoing, if any Tax Indemnitee releases, waives, compromises, or settles any claim that may be indemnifiable by Borrower pursuant to this Section 9.3 without Borrower’s written permission, Borrower’s obligation to indemnify such Tax Indemnitee with respect to such claim (and all directly-related claims, and claims based on the

 

36

outcome of such claim) shall terminate, and such Tax Indemnitee shall repay to Borrower any amount previously paid or advanced to such Tax Indemnitee with respect to such claim (other than previously incurred costs and expenses of contest described in clause (1) of this paragraph), plus interest at the rate that would have been payable by the relevant Taxing Authority on a refund of such Tax.

(3) Notwithstanding anything contained in this Section 9.3, a Tax Indemnitee will not be required to contest the imposition of any Tax, and shall be permitted to settle or compromise any claim without Borrower’s consent, if such Tax Indemnitee (1) waives its right to indemnity under this Section 9.3 with respect to such Tax (and any directly-related claim, and any claim the outcome of which is determined based upon the outcome of such claim), (2) pays to Borrower any amount previously paid or advanced by Borrower pursuant to this Section 9.3 with respect to such Tax (other than previously incurred costs and expenses of contest described in clause (1) of this paragraph), plus interest at the rate that would have been payable by the relevant Taxing Authority on a refund of such Tax, and (3) agrees to discuss with Borrower the views or positions of any relevant Taxing Authority with respect to the imposition of such Tax.

(f) Refund. If any Tax Indemnitee receives a refund of, or is entitled to a credit against other liability for, all or any part of any Taxes paid, reimbursed, or advanced by Borrower, such Tax Indemnitee shall pay to Borrower within 30 days of such receipt an amount equal to the lesser of (a) the amount of such refund or credit plus any net tax benefit (taking into account any Taxes incurred by such Tax Indemnitee by reason of the receipt of such refund or realization of such credit) actually realized by such Tax Indemnitee as a result of any payment by such Tax Indemnitee made pursuant to this sentence (including this clause (a)), and (b) such tax payment, reimbursement, or advance by Borrower to such Tax Indemnitee theretofore made pursuant to this Section 9.3 (and the excess, if any, of the amount described in clause (a) over the amount described in clause (b) shall be carried forward and applied to reduce pro tanto any subsequent obligation of Borrower to make payments to such Tax Indemnitee pursuant to this Section 9.3). If, in addition to such refund or credit, such Tax Indemnitee receives (or is credited with) an amount representing interest on the amount of such refund or credit, such Tax Indemnitee shall pay to Borrower within 30 days after receiving or realizing such credit that proportion of such interest fairly attributable to Taxes paid, reimbursed, or advanced by Borrower before the receipt of such refund or realization of such credit. Anything herein to the contrary notwithstanding, a Tax Indemnitee shall not be required to make any payment pursuant to this subsection 9.3(e) so long as a Special Default or an Event of Default exists.

(g) Tax Filing. Borrower shall, at its expense, timely file any report, return, or statement that is required to be filed with respect to any Tax which is subject to indemnification under this Section 9.3 (except for any such report, return, or statement which a Tax Indemnitee has timely notified Borrower in writing that such Tax Indemnitee intends to file, or for which such Tax Indemnitee is required by law to file, in its own name); provided, that the relevant Tax Indemnitee shall furnish Borrower with

 

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any information in such Tax Indemnitee’s possession or control that is reasonably necessary to file any such return, report, or statement and that Borrower reasonably requests in writing. Borrower shall either file such report, return, or statement and send a copy to such Tax Indemnitee, or, if Borrower is not permitted to file such report, return, or statement, it shall notify such Tax Indemnitee of such requirement and prepare and deliver such report, return, or statement to such Tax Indemnitee in a manner reasonably satisfactory to such Tax Indemnitee within a reasonable time before the time such report, return, or statement is to be filed; provided, that the relevant Tax Indemnitee shall either furnish Borrower with any information in such Tax Indemnitee’s possession or control that is reasonably necessary to file any such return, report, or statement and that Borrower reasonably requests in writing or such Tax Indemnitee shall itself be responsible for completing and filing such report, return or statement if it fails to, or elects not to, provide Borrower with the requested information.

(h) Forms. Each Tax Indemnitee agrees to furnish from time to time to Borrower, the relevant Mortgagee, or such other Person as Borrower or such Mortgagee shall designate, at Borrower’s or Mortgagee’s request, such duly-executed and properly-completed forms as may be necessary or appropriate in order to claim any reduction of or exemption from any withholding or other Tax imposed by any Taxing Authority, if (i) such reduction or exemption is available to such Tax Indemnitee without such Tax Indemnitee’s incurring material adverse consequences under applicable Law, and (ii) Borrower has provided such Tax Indemnitee with any information necessary to complete such form not otherwise reasonably available to such Tax Indemnitee. If the Tax Indemnitee believes that claiming such reduction or exemption would result in its incurring material adverse consequences under applicable Law, the Tax Indemnitee shall notify Borrower of the basis of that belief, and the Tax Indemnitee and Borrower shall promptly meet to discuss the matter and, if the Tax Indemnitee and the Borrower are unable to agree whether such material adverse consequences would result, shall appoint an independent accounting firm to resolve the issue on terms similar to those set forth in Section 9.3(d)(2) hereof (except that the Tax Indemnitee and Borrower shall share equally the costs of such accounting firm).

(i) Non-Parties. If a Tax Indemnitee is not a party to this Agreement, Borrower may require the Tax Indemnitee to agree in writing, in a form reasonably acceptable to Borrower, to the terms of this Section 9.3 and Section 11.8 before any payment shall be due to such Tax Indemnitee under this Section 9.3.

9.4 Payments .

Except as otherwise provided herein, any payments which Borrower or an Indemnitee or Tax Indemnitee is obligated to make pursuant to Section 9.1 or Section 9.3 shall be paid on the 30th day after demand, but not before five (5) days before the date such Expense or Tax is due or payable by such Indemnitee or Tax Indemnitee, as applicable. If Borrower shall have requested to contest a Tax or Expense as provided in this Section 9 and shall have duly complied with all the terms of this Section 9, Borrower’s liability for indemnification under this Section 9 shall, at Borrower’s election, be deferred until a final determination is made with respect to such contest. At such time, Borrower shall become obligated for the payment of any indemnification

 

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hereunder resulting from the outcome of such contest, and within fifteen (15) days following such final determination, any amounts so due hereunder shall be paid by Borrower to the Indemnitee or Tax Indemnitee, as applicable. Such payments shall be made directly to the relevant Indemnitee or Tax Indemnitee or to Borrower, in immediately available funds at such bank or to such account as specified by such Indemnitee or Tax Indemnitee or Borrower (as applicable) in written directives to the payor, or, if no such direction has been given, by check of the payor payable to the order of, and mailed to, such Indemnitee or Tax Indemnitee or Borrower (as applicable) by certified mail, postage prepaid, at its address as set forth in this Agreement.

9.5 Interest .

If any amount, payable by Borrower, any Indemnitee, or any Tax Indemnitee under Section 9.1 or Section 9.3 is not paid when due, the Person obligated to make such payment shall pay on demand, to the extent permitted by Law, to the Person entitled thereto, interest on any such amount for the period from and including the due date for such amount to but excluding the date the amount is paid, at the Past-Due Rate. Such interest shall be paid in the same manner as the unpaid amount in respect of which such interest is due.

9.6 Benefit of Indemnities .

Borrower’s obligations for indemnities, obligations, adjustments, and payments in Section 9.1 or Section 9.3 are expressly made for the benefit of, and shall be enforceable by, the Indemnitee or Tax Indemnitee entitled thereto as and to the extent provided herein, notwithstanding any provision of the Mortgage.

10. I NTENTIONALLY O MITTED .

11. M ISCELLANEOUS

11.1 Amendments .

No provision of this Agreement may be amended, supplemented, waived, modified, discharged, terminated, or otherwise varied orally, but only by an instrument in writing that specifically identifies the provision of this Agreement that it purports to amend, supplement, waive, modify, discharge, terminate, or otherwise vary and is signed by the party against whom the enforcement of the amendment, supplement, waiver, modification, discharge, termination, or variance is sought. Each such amendment, supplement, waiver, modification, discharge, termination, or variance shall be effective only in the specific instance and for the specific purpose for which it is given. No provision of this Agreement shall be varied or contradicted by oral communication, course of dealing or performance, or other manner not set forth in writing and signed by the party against whom enforcement of the same is sought.

11.2 Severability .

If any provision of this Agreement is held invalid, illegal, or unenforceable in any respect in any jurisdiction, then, to the extent permitted by Law, (a) the remainder of any affected provision (to the extent not invalid, illegal or unenforceable) and all other provisions hereof shall remain in full force and effect in such jurisdiction, and (b) such invalidity, illegality, or

 

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unenforceability shall not affect the validity, legality, or enforceability of such provision in any other jurisdiction. If, however, any Law pursuant to which any provision is held invalid, illegal, or unenforceable may be waived, the parties hereto hereby waive that Law to the full extent permitted, to the end that this Agreement shall be a valid and binding agreement in all respects, enforceable in accordance with its terms.

11.3 Survival .

The indemnities and representations and warranties (as and when made) in this Agreement shall survive the delivery of the Aircraft, the Transfer of any interest by any Lender in an Equipment Note it holds, and the expiration or other termination of any Operative Agreement, except to the extent otherwise provided therein.

11.4 Reproduction of Documents .

This Agreement (including all schedules and exhibits hereto) and all documents relating hereto, including (a) future consents, waivers, and modifications, and (b) past and future financial statements, certificates, and other information furnished to any party hereto, may be reproduced by any party by any photographic, photostatic, microfilm, micro-card, miniature photographic, or other similar process, and such party may destroy any original documents so reproduced. Any such reproduction shall be as admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original exists and whether or not such party made the reproduction in the regular course of business), and any enlargement, facsimile, or further reproduction of such reproduction also shall be so admissible in evidence.

11.5 Counterparts .

This Agreement and any amendments, waivers, consents, or supplements hereto may be executed in any number of counterparts (or upon separate signature pages bound together into one or more counterparts), each fully-executed set of which shall be an original.

11.6 No Waiver .

No failure on the part of any party hereto to exercise, and no delay by any party hereto in exercising, any of its rights, powers, remedies, or privileges under this Agreement or otherwise available to it shall impair, prejudice, or waive any such right, power, remedy, or privilege or be construed as a waiver of any breach hereof or default hereunder or as an acquiescence therein, nor shall any single or partial exercise of any such right, power, remedy, or privilege preclude any other or further exercise thereof by it or the exercise of any other right, power, remedy, or privilege by it. No notice to or demand on any party hereto in any case shall, unless otherwise required under this Agreement, entitle such party to any other or further notice or demand in similar or other circumstances, or waive the rights of any party hereto to any other or further action in any circumstances without notice or demand.

11.7 Notices .

Unless otherwise expressly permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers, and other communications required or permitted to

 

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be made, given, furnished, or filed hereunder shall be in writing (and the specification of a writing in certain instances and not in others does not imply an intention that a writing is not required as to the latter), shall refer specifically to this Agreement, and shall be personally delivered, sent by fax or telecommunications transmission (which in either case provides written confirmation to the sender of its delivery), sent by registered mail or certified mail, return receipt requested, postage prepaid, or sent by next-business-day courier service, in each case to the address or fax number set forth for such party in Schedule 1, or to such other address or number as such party hereafter specifies by notice to the other parties hereto. Each such notice, request, demand, authorization, direction, consent, waiver, or other communication shall be effective when received or, if made, given, furnished, or filed by fax or telecommunication transmission, when confirmed.

11.8 Governing Law; Submission to Jurisdiction; Venue .

 

(a)

THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY, AND PERFORMANCE.

 

(b)

EACH PARTY HERETO HEREBY IRREVOCABLY AGREES, ACCEPTS, AND SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN THE CITY AND COUNTY OF NEW YORK AND OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, IN CONNECTION WITH ANY LEGAL ACTION, SUIT, OR PROCEEDING WITH RESPECT TO ANY MATTER RELATING TO OR ARISING OUT OF OR IN CONNECTION WITH THE OPERATIVE AGREEMENTS.

 

(c)

EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES TO THE SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES, AND DOCUMENTS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION, OR PROCEEDING MAY BE MADE BY MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT THE ADDRESS SET FORTH PURSUANT TO SECTION 11.7. EACH PARTY HERETO HEREBY AGREES THAT SERVICE UPON IT, OR ANY OF ITS AGENTS, IN EACH CASE IN ACCORDANCE WITH THIS SECTION 11.8(c), SHALL CONSTITUTE VALID AND EFFECTIVE PERSONAL SERVICE UPON SUCH PARTY, AND EACH PARTY HERETO HEREBY AGREES THAT THE FAILURE OF ANY OF ITS AGENTS TO GIVE ANY NOTICE OF SUCH SERVICE TO ANY SUCH PARTY SHALL NOT IMPAIR OR AFFECT IN ANY WAY THE VALIDITY OF SUCH SERVICE ON SUCH PARTY OR ANY JUDGMENT RENDERED IN ANY ACTION OR PROCEEDING BASED THEREON.

 

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(d)

EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR PROCEEDING BROUGHT HEREUNDER IN ANY OF THE ABOVE-NAMED COURTS, THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER, OR THAT ANY OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS.

 

(e)

EACH PARTY HERETO HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION IN ANY COURT IN ANY JURISDICTION BASED UPON OR ARISING OUT OF OR RELATING TO THE OPERATIVE AGREEMENTS.

11.9 Third-Party Beneficiary .

This Agreement is not intended to, and shall not, provide any Person not a party hereto (except the Persons referred to in Sections 6.3, 6.4 or 9 who are intended third-party beneficiaries of Sections 6.3, 6.4 or 9) with any rights of any nature whatsoever against any of the parties hereto, and no Person not a party hereto shall have any right, power, or privilege in respect of any party hereto, or have any benefit or interest, arising out of this Agreement.

11.10 Entire Agreement .

This Agreement, together with the other Operative Agreements, on and as of the date hereof, constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and all prior understandings or agreements, whether written or oral, among any of the parties hereto with respect to such subject matter are hereby superseded in their entireties.

11.11 Further Assurances .

Each party hereto shall execute, acknowledge, and deliver (or shall cause to be executed, acknowledged, and delivered) all such further agreements, instruments, certificates, or other documents, and shall do and cause to be done such further things, as any other party hereto reasonably requests in connection with the administration of, or to carry out more effectively the purposes of, or to assure and confirm better to such other party the rights and benefits to be provided under, this Agreement and the other Operative Agreements.

11.12 Section 1110.

Borrower and the Lenders intend that each Mortgagee shall be entitled to the benefits of Section 1110 in the event of a case under Chapter 11 of the Bankruptcy Code in which Borrower is a debtor.

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IN WITNESS WHEREOF, each of the parties has executed this Loan Agreement.

 

 

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ANNEX A

D EFINITIONS

G ENERAL P ROVISIONS

(a) In the Loan Agreement, unless otherwise expressly provided, a reference to:

(1) each of “Borrower”, “Lender”, “Mortgagee” and any other Person includes any successor in interest to it and any permitted transferee, permitted purchaser, or permitted assignee of it;

(2) any agreement or other document (including any annex, schedule, or exhibit thereto, or any other part thereof) includes that agreement or other document as amended, supplemented, or otherwise modified from time to time in accordance with its terms and in accordance with the Loan Agreement and any agreement or other document entered into in substitution or replacement therefor;

(3) unless the context otherwise requires, any provision of any Law includes any such provision as amended, modified, supplemented, substituted, reissued, or reenacted before the date of the Loan Agreement and thereafter from time to time;

(4) “Agreement”, “this Agreement”, “hereby”, “herein”, “hereto”, “hereof”, “hereunder”, and words of similar import, when used in the Loan Agreement, refer to the Loan Agreement as a whole and not to any particular provision of the Loan Agreement;

(5) “including”, “include”, and terms or phrases of similar import means “including, without limitation”;

(6) a reference to a “Section”, an “Exhibit”, an “Annex”, or a “Schedule” in the Loan Agreement, or in any annex thereto, is a reference to a section of, or an exhibit, an annex, or a schedule to, the Loan Agreement or such annex, respectively; and

(b) Each exhibit, annex, and schedule to the Loan Agreement is incorporated in, and is a part of, the Loan Agreement.

(c) Unless otherwise defined or specified in the Loan Agreement, all accounting terms therein shall be construed and all accounting determinations thereunder shall be made in accordance with GAAP.

(d) Headings used in the Loan Agreement are for convenience only, and shall not in any way affect the construction of, or be taken into consideration in interpreting, the Loan Agreement.

 

A-1

D EFINED T ERMS

Accepted Jurisdiction : United States, France, Germany, The Netherlands, Ireland, Sweden or United Kingdom.

Actual Knowledge : (a) as it applies to WFB, actual knowledge of a responsible officer in the Corporate Trust Office, and (b) as it applies to Borrower, actual knowledge of a Vice President or more-senior officer of Borrower or any other officer of Borrower having responsibility for the transactions contemplated by the Operative Agreements; provided, that each of Borrower and WFB shall be deemed to have “Actual Knowledge” of any matter as to which it has received notice from Borrower or any Lender given pursuant to Section 11.7 of the Loan Agreement.

Affiliate : of any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person. For purposes of this definition, “control” means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract, or otherwise, and “controlling”, “controlled by”, and “under common control with” have correlative meanings.

After-Tax Basis : a basis such that any payment to be received or receivable by any Person is supplemented by a further payment to that Person so that the sum of all the two payments, after deducting all Taxes (taking into account any current credits or current deductions attributable to the event or circumstance giving rise to the requirement that the original payment be made) currently payable by such Person or any of its Affiliates under any applicable Law or governmental authority, is equal to the payment due to such Person.

Aircraft : defined in the recitals of the Loan Agreement.

Aircraft Bill of Sale : in respect of an Aircraft, the full warranty bill of sale covering such Aircraft delivered by Seller to Borrower on the Applicable Closing Date or pursuant to Section 4.5(c) of the Applicable Mortgage.

Airframe Manufacturer : The Boeing Company.

Applicable: when combined with the term (aa) “Aircraft”, refers to an individual Aircraft in the context of a particular Closing Date or in relation to particular documents or circumstances, (bb) “Closing Date”, refers to the Closing Date of a specific individual Aircraft to which it relates, (cc) “Equipment Note” or “Equipment Notes”, refers to an Equipment Note or Equipment Notes issued pursuant to a Mortgage related to a specific individual Aircraft, (dd) “Mortgage”, refers to a Mortgage related to a specific individual Aircraft, (ee) “Mortgagee”, refers to an individual Mortgagee that is a party to a Mortgage related to a specific individual Aircraft, or (ff) “Operative Agreement” or “Operative Agreements”, refer to an Operative Agreement or set of Operative Agreements related to a specific individual Aircraft (including, in each case, the Loan Agreement).

Aviation Authority : in respect of an Aircraft, the FAA or, if such Aircraft is registered with any other Government Entity under and in accordance with Section 4.2(e) of the Applicable Mortgage, such other Government Entity.

 

A-2

Bankruptcy Code : the United States Bankruptcy Code, 11 U.S.C. § 101 et seq.

Bills of Sale : in respect of an Aircraft, the FAA Bill of Sale and the Aircraft Bill of Sale related to such Aircraft.

Borrower Person : Borrower, any lessee, assignee, successor, or other user or Person in possession of the Aircraft, the Airframe, or an Engine with or without color of right, or any Affiliate of any of the foregoing (but excluding, in each case, any Tax Indemnitee or any related Tax Indemnitee with respect thereto, or any Person using or claiming any rights with respect to the Aircraft, the Airframe, or an Engine directly by or through any of the Persons in this parenthetical).

Borrower’s Advisor : SkyWorks Capital, LLC.

Business Day : any day other than a Saturday, Sunday, or other day on which commercial banks are authorized or required by law to close in New York, NY, Orlando, FL, or the city and state in which WFB maintains its Corporate Trust Office or receives and disburses funds and, if in relation to the payment of interest and principal of any Equipment Note, or any prepayment thereof, or delivery of any Drawdown Notice, a day on which Dollar transaction are effected in London, England.

Citizen of the United States : defined in Section 40102(a)(15) of the Transportation Code and in the FARs.

Closing : defined in Section 2.4 of the Loan Agreement.

Closing Date : defined in Section 2.1 of the Loan Agreement.

Code : the Internal Revenue Code of 1986, as amended, or any successor thereto; provided, that, when used in relation to a Plan, “Code” shall be interpreted in accordance with the regulations and rulings issued thereunder.

Collateral : in respect of an Aircraft, as defined in the Granting Clause of the Applicable Mortgage.

Commitment : ***per Aircraft and, in respect of each Lender (subject to any Transfer pursuant to Section 7.1(a) and 7.2 of the Loan Agreement), the Dollar amount of its commitment per Aircraft as set forth opposite its name in Schedule 2 to the Loan Agreement.

Commitment Fee: in respect of an Aircraft, ^*** per annum of the outstanding Commitment in respect of such Aircraft.

 

***

Represents material which has been redacted and filed separately with the Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. Page 1 of 8 pages containing information redacted pursuant to a request for confidential treatment.

 

A-3

Commitment Termination Date: May 16, 2006.

Consent and Agreement : in respect of an Aircraft, the consent and agreement of Airframe Manufacturer to the assignment contemplated by Granting Clause (2) of the Applicable Mortgage.

Corporate Trust Office : WFB’s principal office, located at WFB’s address for notices under the Loan Agreement, or such other office at which WFB’s corporate trust business shall be administered and which WFB specifies by notice in writing to Borrower and each Lender.

Cutoff Date : as defined in Section 2.2(e)(4).

Debt Rate : for any Equipment Note, for each Interest Period, the LIBOR Rate for such Interest Period plus Loan Margin.

Default : (1) any event or condition that, with the giving of notice or the lapse of time, would become an Event of Default, or (2) any Event of Default.

Delivery Date: the date on which an Aircraft is tendered for delivery by Seller to Borrower which shall be a Business Day.

Dollars, United States Dollars, or $ : the lawful currency of the United States.

Drawdown Notice : a notice substantially in the form set out in Exhibit B to the Loan Agreement.

Engine : in respect of an Aircraft, as defined in Annex A of the Applicable Mortgage.

Engine Consent and Agreement : in respect of an Aircraft, the consent and agreement of Engine Manufacturer to the assignment contemplated by Granting Clause (2) of the Applicable Mortgage.

Engine Manufacturer : CFM International, Inc.

Equipment Note : in respect of an Aircraft, any equipment note issued under the Applicable Mortgage in the form specified in Section 2.1 and Exhibit B thereof (as such form may be varied pursuant to the terms of such Mortgage), or any Equipment Note issued under such Mortgage in exchange for or replacement of any such Equipment Note.

ERISA : the Employee Retirement Income Security Act of 1974.

Event of Default : in respect of an Aircraft, as defined in Section 5.1 of the Applicable Mortgage.

Event of Loss : in respect of an Aircraft, the Airframe or any Engine, as defined in Annex A of the Applicable Mortgage.

Expenses : any and all liabilities, obligations, losses, damages, settlements, penalties, claims, actions, suits, costs, expenses, and disbursements (including reasonable fees and disbursements of legal counsel, accountants, appraisers, inspectors, or other professionals, and costs of investigation).

 

A-4

FAA : the Federal Aviation Administration of the United States or any Government Entity succeeding to the functions of such Federal Aviation Administration.

FAA Bill of Sale : in respect of an Aircraft, a bill of sale for such Aircraft on AC Form 8050-2 (or such other form as may be approved by the FAA) delivered to Borrower on the Applicable Closing Date by Seller or pursuant to Section 4.5(c)(1)(bb) of the Applicable Mortgage.

FAA Counsel : Lytle, Soulé & Curlee.

FAA-Filed Documents : in respect of an Aircraft, the Applicable Mortgage, FAA Bill of Sale related to such Aircraft, and an application for registration of such Aircraft with the FAA in Borrower’s name.

Financing Statements : in respect of an Aircraft, the UCC-1 financing statements covering the Collateral (as defined in the Applicable Mortgage), by Borrower, as debtor, showing the Applicable Mortgagee as secured party, for filing in Delaware and each other jurisdiction where filing is necessary to perfect its Lien on such Collateral.

GAAP : generally accepted accounting principles as set forth in the statements of financial accounting standards issued by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants, as varied by any applicable financial accounting rules or regulations issued by the SEC or the Public Company Accounting Oversight Board, and applied on a basis consistent with prior periods except as may be disclosed in the pertinent Person’s financial statements.

GEES Acknowledgment and Agreement: in respect of an Aircraft, the acknowledgment and agreement of G.E. Engine Services, Inc. to the assignment contemplated by Granting Clause (2) of the Applicable Mortgage and the agreement of Borrower as to certain matters addressed therein.

Government Entity : (1) any federal, state, provincial, or similar government, and any body, board, department, commission, court, tribunal, authority, agency, or other instrumentality of any such government or otherwise exercising any executive, legislative, judicial, administrative, or regulatory functions of such government, or (2) any other government entity having jurisdiction over any matter contemplated by the Operative Agreements or relating to the observance or performance of the obligations of any of the parties to the Operative Agreements.

Holdings : AirTran Holdings, Inc., a Nevada corporation.

Indemnified Withholding Taxes : defined in Section 9.3 of the Loan Agreement.

Indemnitee : (1) WFB (in its individual capacity and as a Mortgagee), (2) each separate or additional trustee appointed pursuant to any of the Mortgages, (3) the Lenders, (4) each Affiliate of the Persons described in clauses (1) through (4) above, (5) the directors, officers, employees, and agents of each of the Persons described in clauses (1) through (4) above and (6) the successors and permitted assigns of the persons described in clauses (1) through (4).

 

A-5

Initial Lender : Calyon New York Branch.

Interest Period : for any Applicable Equipment Note, (a) initially, the period commencing on an Applicable Closing Date and ending on the first Payment Date for such Equipment Note (or if such date is not a Business Day, the next succeeding Business Day unless, if by virtue of such extension such day would fall in the next succeeding calendar month, then on the next preceding Business Day) and (b) thereafter, each successive period commencing on the final day of the preceding Interest Period and ending on the next succeeding Payment Date for such Equipment Note (or if such date is not a Business Day, the next succeeding Business Day unless, if by virtue of such extension such day would fall in the next succeeding calendar month, then on the next preceding Business Day).

IRS : the Internal Revenue Service of the United States, or any Government Entity succeeding to the functions of such Internal Revenue Service.

Junior Loan : defined in Section 7.3 of the Loan Agreement.

Law : (1) any constitution, treaty, statute, law, decree, regulation, order, rule, or directive of any Government Entity, and (2) any judicial or administrative interpretation or application of, or decision under, any of the foregoing.

Lender : in respect of an Aircraft (1) initially each Person identified in Schedule 2 of the Loan Agreement as a Lender making (or holding a commitment to make) a secured loan in respect of such Aircraft (subject to any Transfer pursuant to Section 7.1(a) and 7.2 of the Loan Agreement), and (2) thereafter any Person registered as a holder of one or more Equipment Notes related to such Aircraft.

LIBOR Breakage Amount : as of the date of determination thereof the amount, if any, required to compensate any Lender in respect of the net amount of any loss, cost or expense incurred by such Lender in connection with a premature unwinding or liquidating of any deposits or funding or financing arrangement with its funding sources as the result of any failed borrowing or the redemption of all or any Outstanding Amount of any Equipment Note held by it on a date other than the last day of the then current Interest Period therefor, as reasonably determined by such Lender. Such amount to include without limitation, any and all penalties or charges for prepayment or liquidation or other arrangement or redeployment of funds.

LIBOR Rate : with respect to any Interest Period, the rate per annum at which Dollar deposits are offered in the London interbank market for a six-month period as such rate (rounded upwards, if necessary, to the nearest 1/64 of 1%) as displayed on Telerate Page 3750 at approximately 11:00 a.m., London time (or as soon thereafter as practicable), or if such service no longer displays any such quote, the arithmetic mean (rounded upwards, if necessary, to the nearest 1/64 of 1%) of such rates as displayed on Reuters Page LIBO at approximately 11:00 a.m., London time (or as soon thereafter as practicable), or if such service no longer displays any such quote, the arithmetic mean (rounded upwards, if necessary, to the nearest 1/64 of 1%) of such rates, as quoted by two reputable dealers selected by the Lenders and Borrower, in either

 

A-6

case on the date two Business Days (for purposes of this definition, the term “Business Days” shall mean any day other than a Saturday or Sunday or day on which commercial banks are required or authorized to close in New York City and London) prior to the Applicable Closing Date or applicable Payment Date.

Lien : any mortgage, pledge, lien, charge, claim, encumbrance, lease, or security interest affecting the title to or any interest in property.

Loan Agreement : the Loan Agreement, dated as of February __, 2006, among Borrower, the Lenders and WFB.

Loan Margin : ***per annum.

Materially Adverse Change: with respect to any Person, any event, condition, or circumstance that mate