LOAN AGREEMENT

EXHIBIT 10.24

 

Execution Version

 

CONFIDENTIAL INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT REQUEST PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE OMITTED CONFIDENTIAL INFORMATION APPEARS ON NINE (9) PAGES OF THIS EXHIBIT.

 

 

LOAN AGREEMENT

 

dated as of August 31, 2005

 

among

 

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

 

T HE R OYAL B ANK OF S COTLAND PLC N EW Y ORK B RANCH , as Security Agent

 

 

Twelve (12) 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 A GREEMENT

EXHIBIT D – F ORM OF C ONSENT AND A GREEMENT

EXHIBIT E – F ORM OF E NGINE C ONSENT AND A GREEMENT

EXHIBIT F – F ORM OF GEES A CKNOWLEDGMENT AND A GREEMENT

 

SCHEDULE 1 – A CCOUNTS A DDRESSES

SCHEDULE 2 – C OMMITMENTS ; T RANSACTION E XPENSES

SCHEDULE 3 – P ERMITTED C OUNTRIES

SCHEDULE 4 – D ELIVERY M ONTHS

 

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LOAN AGREEMENT

 

T HIS L OAN A GREEMENT (this “Agreement”) is entered into as of August 31, 2005 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) T HE R OYAL B ANK OF S COTLAND PLC N EW Y ORK B RANCH , as agent for the Lenders (the “Security Agent”).

 

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, twelve (12) Boeing model 737-7BD aircraft, each equipped with two (2) CFM International model CFM56-7B20 engines, to be delivered on 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 AND 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; 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 an amount not to exceed such Lender’s Commitment; and

 

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

 

If any Lender shall default in its obligation to make the amount of its Commitment available pursuant to this Article 2 in respect of any Aircraft, except as provided below in this

 

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Section 2.1 with respect to RBS, no other Lender shall have an obligation to increase the amount of its Commitment for such Aircraft and, notwithstanding the further provisions of this paragraph, the obligations of the non-defaulting Lenders shall remain subject to the terms and conditions set forth in this Agreement. If a Lender to whom RBS has transferred its Commitment in whole or in part pursuant to Section 7.1 without the consent of Borrower with respect to an Aircraft fails to perform its obligation to make a secured loan on an Applicable Closing Date, RBS shall be obligated to make an additional secured loan on such Applicable Closing Date in an amount equal to the amount of the secured loan that such Lender was so obligated to, but did not, make. In the event that the preceding sentence is applicable and RBS is obligated to make an additional secured loan, the Commitment of RBS shall be increased by the amount of such additional secured loan, and the Commitment of the affected Lender shall be reduced by an equivalent amount, effective on the Applicable Closing Date. In the circumstances of the second preceding sentence, such Lender shall be liable to RBS (but not the Borrower) for any damages attributable to its failure to make the secured loan in question which was made, instead, by RBS.

 

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 (10th) 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 fourth (4th) Business Day prior to the Scheduled Delivery Date for any Aircraft, Borrower shall deliver to Security Agent on behalf of each Lender the Drawdown Notice 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 aggregate Commitment for such Aircraft (or such lesser amount, but not less than the amount required to pay the related PDP Note in full, 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, Security Agent shall deliver the amortization schedule for the Applicable Aircraft to Borrower and Borrower shall no later than 5:00 p.m., New York City time, on such day deliver written confirmation of such amortization schedule to Security Agent. In the event a Postponement Notice is delivered pursuant to Section 2.2(e), Security Agent 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 5:00 p.m., New York City time, on such day or as promptly as practicable thereafter, written confirmation of such schedule to Security Agent.

 

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(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 Borrower, in each case in immediately available funds by 12:00 Noon, 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, Borrower, by delivery of the Drawdown Notice to Security Agent, instructs, subject to its rights to postpone under Section 2.2(e) below, the Lenders to wire transfer (for receipt by no later than 12:00 Noon New York City time) on the Scheduled Delivery Date for such Aircraft its Commitment for such Aircraft by the wiring of immediately available funds to the account of Security Agent 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 Security Agent for the account of such Lender. Upon the fulfillment or waiver of the conditions precedent set forth in Article 3 hereof in respect of the Applicable Aircraft, such Lender shall instruct Security Agent to disburse the Deposit for application of its Commitment for such Aircraft. Notwithstanding the foregoing, if a Postponement Notice postponing the Scheduled Delivery Date shall have been received by Security Agent by 3:30 p.m., New York City time, on the Business Day preceding the postponed Scheduled Delivery Date and if a Lender has not already wired its Commitment to the Account, (i) such Lender shall not make its Commitment for the Aircraft available for disbursement on the postponed Scheduled Delivery Date and (ii) each such Lender shall cancel, terminate or otherwise unwind its funding arrangements made in the London interbank market to fund its Commitment on the Scheduled Delivery Date for such Aircraft, subject, however, to such Lender’s continuing commitment to fund as provided herein.

 

(e) Postponement of Scheduled Delivery Date .

 

(1) Borrower may in the case of each Aircraft change or postpone (indefinitely, or to a specified date) the Scheduled Delivery Date for an Aircraft by telephonic notice (to be confirmed promptly in writing) to Security Agent, provided such notice (specifying the new Delivery Date, if any) is received by Security Agent not later than 3:30 p.m. on such Scheduled Delivery Date being postponed (the “Postponement Notice”). 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 Security Agent at the sole direction, for the account, and at the risk of Borrower in an overnight investment selected by Borrower and acceptable to Security Agent (acting reasonably and in good faith). Upon Borrower’s oral (to be confirmed in writing) instructions, earnings on any such investments shall be applied to Borrower’s payment obligations to each Lender under Section 2.2(e)(3) to the extent of such earnings.

 

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(3) If the Scheduled Delivery Date for an Aircraft is postponed and the Deposit has been paid by the Lenders into the Account, then 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 or (ii) the date of return of the Deposit to such Lender pursuant to clause (4) below if such amounts are received by such Lender before 12:00 Noon, New York City time, on such date (and if such amounts are received by such Lender after 12:00 Noon, New York City time, 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 date and (ii) if accrued to the date of return of the Deposit, be paid 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 (3) Business Days after the Scheduled Delivery Date for such Aircraft, (y) the Commitment Termination Date for such Aircraft or (z) such earlier date as Borrower shall specify (the “Cutoff Date”), then each such Lender shall promptly cancel, terminate or otherwise unwind its funding arrangements made in the London interbank market or otherwise (including any Swap Transaction) to fund its Commitment, and such Lender shall notify Security Agent thereof, and Security Agent shall return its Deposit for such Aircraft, subject, however, to such Lender’s continuing commitment to fund at a later Closing Date as provided herein.

 

(5) In the event of the occurrence of the events described in Section 2.2(d)(ii) or clause (4) above, 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 (in addition to interest owing under clause (3) above, if any), an amount of 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, if applicable, any Swap Break Amount, 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) Borrower shall make payments to Security Agent 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

 

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schedules in the aggregate for all Applicable Equipment Notes issued in respect of any Aircraft shall be calculated as follows: using the Debt Rate (calculated on the basis of a year of 360 days and actual number of days elapsed or if the Fixed Rate Option has been elected under Section 4.5, on the basis of a year of 360 days consisting of twelve 30-day months) for such Equipment Notes (being, if the Fixed Rate Option has been elected, the Fixed Rate for such Equipment Notes, otherwise, the initial Debt Rate for such Equipment Notes), mortgage-style (level pay) payments payable on each Payment Date for such Equipment Notes (x) from the Delivery Date for such Equipment Notes through the second anniversary of the Delivery Date relating to such Equipment Notes, payments on each Payment Date during such period sufficient to amortize such Equipment Notes to an aggregate outstanding principal balance on such date equal to Twenty-Five Million Seven Hundred Twenty Thousand Dollars (US$25,720,000) (or if the Fixed Rate Option has been exercised under Section 4.5, Twenty-Two Million Five Hundred Eighty-Four Thousand Two Hundred Seventy-Nine and 50/100 Dollars (US$22,584,279.50)) or, if Borrower shall have delivered a No Winglet Notice in respect of such Aircraft pursuant to Section 2.6 hereof, Twenty-Five Million One Hundred Eighty Thousand Dollars (US$25,180,000) (or if the Fixed Rate Option has been exercised under Section 4.5, Twenty-Two Million One Hundred Twenty-Six Thousand Nine Hundred Thirty Three Dollars (US$22,126,933))and (y) thereafter, through the Maturity Date of such Equipment Notes, payments on each Payment Date during such period sufficient to amortize such Equipment Notes to an aggregate outstanding principal balance balloon payment due on the Maturity Date, after giving effect to the installment of principal due on such date, of Five Million Nine Hundred Thousand Dollars (US$5,900,000), or if Borrower shall have delivered a No-Winglet Notice in respect of such Aircraft pursuant to Section 2.6 hereof, of Five Million Eight Hundred Forty Thousand Dollars (US$5,840,000). 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.

 

(2) Interest on each Equipment Note will accrue at the Debt Rate for such Equipment Note (calculated on the basis of a year of 360 days and actual number of days elapsed or if the Fixed Rate Option has been elected under Section 4.5, on the basis of a year of 360 days consisting of twelve 30-day months) and will be payable on each Payment Date or other date for the payment of interest provided herein or in such Applicable Equipment Note. The interest payable on each Payment Date or other date, as aforesaid, for any Equipment Note shall include interest accrued to such Payment Date or other date, as aforesaid.

 

(3) The Debt Rate for each Interest Period shall be established by Security Agent in accordance with relevant provisions of this Agreement. Security Agent shall give prompt notice to Borrower and the Lenders of the

 

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applicable Debt Rate determined by Security Agent from time to time in accordance with the applicable provisions hereof and the rate, if any, furnished by each Reference Bank and used by Security Agent for the purpose of determining the LIBOR Rate. Each determination by Security Agent of a Debt Rate pursuant hereto shall be presumed correct, absent manifest error.

 

(4) Each payment received by Security Agent in respect of an Applicable Equipment Note shall be applied: first, to pay amounts due hereunder or under such Equipment Note other than as specified in the following clauses, second, to pay accrued interest and any Breakage Amount 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 its maturity.

 

(5) Amounts repaid or prepaid on the Equipment Notes may not be reborrowed.

 

2.4 Closing .

 

(a) Location . Each closing (a “Closing”) of the Transactions shall take place on the Applicable Closing Date at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York 10017.

 

(b) Funds . Except as provided above, all payments (including prepayments) by Borrower pursuant to this Article 2 and on any Equipment Note whether on account of principal, interest, Breakage Amount, fees or otherwise shall be made in immediately available funds without set-off, counterclaim or defense to the account of Security Agent as set forth in Schedule 1 hereto.

 

(c) Business Days . If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding sentence, interest thereon shall be payable at the Debt Rate during such extension.

 

2.5 Commitment Termination .

 

Notwithstanding any provision in this Loan Agreement to the contrary, in the event the delivery of an Aircraft is postponed to a date that is three (3) months beyond the last day of the Scheduled Delivery Month of such Aircraft but such date is prior to the Commitment Termination Date, Security Agent, acting at the written direction of all (and not less than all) of the Lenders committed to financing the acquisition of such Aircraft by Borrower, may terminate the Commitment under this Agreement as and to the extent related to such Aircraft upon written notice to Borrower within thirty (30) days of Security Agent’s receipt of written notice from

 

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Borrower informing Security Agent of such postponement. Notwithstanding any provision in this Agreement to the contrary, in the event the delivery of an Aircraft has been cancelled, Borrower may terminate the Commitment under this Loan Agreement, in whole, but not in part, as and to the extent related to such Aircraft upon written notice to Security Agent but Borrower may not otherwise reduce or terminate the Commitments under this Loan Agreement (except as provided in Section 2.6 hereof). 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)(determined without regard to Section 7.5 hereof) shall have occurred and be continuing, Security Agent (acting at the direction of the Majority in Interest of the Lenders with respect to the Aircraft subject thereto) may, by written notice to the Borrower, cancel the Commitment(s) in respect of such Aircraft, and upon such notice, such Commitment(s) shall be cancelled and of no further effect. If an Event of Default under Sections 5.1(e), (f) or (g) under any Mortgage (or form of Mortgage, as aforesaid) shall have occurred and be continuing, the Commitments in respect of all of the Aircraft shall automatically, without any action or notice, be cancelled and of no further effect. The day on which the Commitment under this Agreement as and to the extent related to one or more Aircraft is terminated by Security Agent or Borrower pursuant to the foregoing shall for purposes of this Agreement be deemed a “Termination Date” with respect thereto.

 

2.6 No Winglet Notice .

 

In respect of any Aircraft, at any time (but in no event later than four (4) Business Days prior to the Scheduled Delivery Date in respect of any Aircraft) Borrower may deliver written notice to Security Agent of Borrower’s intent not to finance the acquisition of winglets for installation on such Aircraft (the “No Winglet Notice”), in which case the Commitment for such Aircraft shall be adjusted as provided in Schedule 2 hereof and the Commitment Fee from and after the date on which Security Agent receives such notice shall be calculated based on the adjusted Commitment for such Aircraft.

 

2.7 Pro Rata Treatment and Payments .

 

(1) Each borrowing by Borrower from the Lenders hereunder, each payment by Borrower on account of any Commitment Fee and, except as provided in Section 2.5, any reduction of the Commitment of the Lenders shall be made pro rata according to the respective Commitment of the relevant Lenders.

 

(2) Each payment (including each prepayment) by Borrower on account of principal of and interest on the Equipment Notes shall be made pro rata according to the respective outstanding principal amounts of the Equipment Notes then held by the Lenders (except as otherwise provided in the Mortgage).

 

2.8 Use of Proceeds .

 

Borrower agrees that it shall use the proceeds of each secured loan described in Section 2.1(a) to pay in full the related PDP Notes issued with respect to the Applicable Aircraft and all other amounts due and owing to the Lender under the PDP Credit Agreement and to pay the full amount of the remaining balance of the purchase price of such Applicable Aircraft to the

 

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Airframe Manufacturer, and any amounts remaining thereafter shall be used for general corporate purposes.

 

3. C LOSING C ONDITIONS

 

3.1 Conditions to each Lender’s Obligations .

 

Each Lender’s obligation to make the secured loans 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 waiver before or on the Applicable Closing Date, of the following conditions:

 

(a) Equipment Notes . Borrower tenders to such Lender the Applicable Equipment Notes in accordance with Article 2 of the Applicable Mortgage.

 

(b) Delivery of Documents . Each Lender and Security Agent 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 and (y) are in full force and effect:

 

(1) the Mortgage and any supplement thereto;

 

(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) (A) a copy of Borrower’s certificate of incorporation, by-laws, and resolutions, in each case certified as of the Applicable Closing Date 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; (B) incumbency certificate of Borrower as to the person(s) authorized to execute and deliver the Applicable Operative Agreements on its behalf; and (C) good-standing certificate from the Secretary of States of Delaware and Florida dated as of a date reasonably near the Applicable Closing Date, as to the due incorporation and good standing of Borrower;

 

(6) 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) and that no Default or Event of Default exists as of such date;

 

(7) the Financing Statements;

 

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(8) the following opinions of counsel, in each case in form and substance reasonably acceptable to Security Agent and dated as of the Closing Date: (A) an opinion of Smith, Gambrell & Russell, LLP, special counsel to Borrower; (B) an opinion of Borrower’s Legal Department; and (C) an opinion of FAA Counsel;

 

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

 

(10) Borrower’s audited consolidated balance sheet for the most-recent fiscal year ended December 31, 2004 and for the most-recent fiscal year, and the related consolidated statements of operations and cash flows for the period then ended, prepared in accordance with GAAP;

 

(11) a duly completed and executed Drawdown Notice; and

 

(12) such other documents as Security Agent 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, Security Agent 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.

 

(d) Violation of Law . No change shall have occurred after the date of this Agreement in any applicable Law that makes it a violation of Law for (i) Borrower, any Lender or Security Agent to execute, deliver, and perform the Applicable Operative Agreements to which any of them is a party or (ii) 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 the Borrower contained in Section 5(a) of this Agreement shall be 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 shall be true and accurate in all material respects as of such specified date).

 

(f) No Event of Default . On the Applicable Closing Date, no Default or Event of Default shall exist or would result from the borrowing hereunder and the mortgaging of the Applicable Aircraft and the other Collateral (as defined in the Applicable Mortgage), the use of proceeds of such borrowing or the consummation of the Transactions contemplated in the Operative Agreements.

 

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

 

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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 shall have good and valid title (subject to filing of the FAA Bill of Sale with the FAA) to the Applicable Aircraft, free and clear of all Liens, except Permitted Liens.

 

(i) Certification . The Applicable Aircraft shall have 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 and Security Agent shall have received a copy of such certification.

 

(j) Section 1110 . Security Agent shall be entitled to the benefits of Section 1110 (as currently in effect) with respect to the right to take possession of the Airframe and Engines 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 shall be 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 shall have been duly filed or shall be in the process of being duly filed in the appropriate jurisdiction.

 

(l) No Proceedings . No action or proceeding shall have been instituted, nor shall any action be, to the Actual Knowledge of Borrower threatened, before any Governmental Entity, nor has any order, judgment, or decree been issued or proposed to be issued by any Governmental 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 Governmental 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 and all such orders, permits, waivers, authorizations, exemptions and approvals shall be in full force and effect on the Applicable Closing Date.

 

(n) No Material Adverse Change . Since December 31, 2004, there shall have been no Material Adverse Change to Borrower on the Applicable Closing Date, and each Lender and Security Agent shall have received an Officer’s Certificate of Borrower to such effect.

 

(o) Upfront Fee . Such Lender shall have received payment of the Upfront Fee related to the Applicable Aircraft.

 

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(p) Delivery Condition . The Aircraft shall be new, ex factory, in a serviceable condition.

 

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 an Aircraft is subject to the satisfaction (or waiver), on or before the Applicable Closing Date, of the conditions in this Section 3.2.

 

(a) Documents . Borrower shall have received (or has waived receipt of) (i) executed original counterparts of the documents related to the Applicable Aircraft as described in Section 3.1(b) (other than the Equipment Notes, as to which it shall receive a copy only) and such documents shall be reasonably satisfactory to Borrower, (ii) an Officer’s Certificate of each Lender, 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) and (cc) such other documents as Borrower may reasonably request from Security Agent 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), (i), (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 relevant Lender and Security Agent a favorable opinion or opinions addressed to each of them with respect to such registration and recordation.

 

4. F EES , C OSTS , F IXED R ATE O PTION AND I LLEGALITY

 

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 Article 2 hereof, Borrower agrees to the pay the Transaction Expenses related to such Aircraft, subject to the limits set forth in Section 3 of Schedule 2.

 

4.2 Upfront Fee .

 

In respect of each Aircraft on or before the Applicable Closing Date, Borrower shall pay to Security Agent an amount equal to the Upfront Fee. Security Agent shall distribute the Upfront Fee when received to the Lenders in such amounts as separately agreed.

 

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4.3 Commitment Fee .

 

In respect of each Aircraft, Borrower agrees to pay a Commitment Fee for each such Aircraft to Security Agent in arrears on the last day of the calendar quarter following the date of this Agreement and on the last day of each calendar quarter thereafter and on the Closing Date or the Termination Date (as the case may be) for each such Aircraft, 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, for any such Aircraft, its Closing Date or Termination Date (as the case may be). The Commitment Fee shall be payable by Borrower to Security Agent on the due date thereof in immediately available funds no later than 12:00 Noon, New York City time, on such date to the account of Security Agent on Schedule 1. Security Agent shall distribute the Commitment Fee when received to the Lenders in the manner provided in Section 2.7(1). 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) Subject to the provisions of Section 4.4(e) below, Borrower shall promptly pay directly to each Lender such amounts as are reasonably necessary to compensate such Lender for any increase in costs which are attributable to such Lender’s making, maintaining or continuing of its Commitment or the loans evidenced by its Equipment Notes or funding arrangements utilized in connection with such loans (including any hedging arrangement relating to any Fixed Rate), or any reduction in any amount receivable by such Lender hereunder in respect of any of its Commitments or under the Equipment Notes, such loans or such arrangements (such increases in costs and reductions in amounts receivable being herein called “Additional Costs”), applicable to the period commencing thirty (30) days prior to Lender’s notification thereof pursuant to Section 4.4(c) and resulting from the adoption of or any change after the date hereof in Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of Law but, if not having the force of Law, is generally applied by Lender with respect to similar credits under similar circumstances) from any central bank or other Governmental Entity made subsequent to the date hereof that:

 

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

 

(2) shall impose or modify any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender; 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.

 

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(b) Without duplication of any amounts payable by Borrower under Section 4.4(a), if any Lender shall have determined, acting reasonably and in good faith, that after the date hereof, the adoption of or any change in any Law regarding capital adequacy or in the interpretation or application thereof, or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of Law but, if not having the force of law, is generally applied by such Lender with respect to similar credits under similar circumstances) from any Governmental Entity made subsequent to the date hereof, shall have the effect of reducing the rate of return on such Lender’s or such corporation’s capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by such Lender to be material acting reasonably and in good faith, then from time to time, after submission by such Lender to Borrower (with a copy to Security Agent) of a written request therefor, Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction attributable to the period commencing thirty (30) days prior to Lender’s notification thereof pursuant to Section 4.4(c).

 

(c) Each Lender will furnish to Borrower (with a copy to Security Agent) an Officer’s Certificate setting forth in reasonable detail (i) the events giving rise to the request by such Lender for compensation under subsection (a) or (b) of this Section 4.4, (ii) the basis for determining such compensation and (iii) the amount of each request by such Lender for compensation under subsection (a) or (b) of this Section 4.4, together with a statement that the determinations made in respect of the such compensation comply with the provisions of this Section 4.4 and that none of the exceptions set forth in Section 4.4(d) apply with respect to such compensation. Determinations set forth in such Officer’s Certificate shall be presumed correct, absent manifest error.

 

(d) Borrower shall not be required to make payments under this Section 4.4 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(e)), or (iii) if a comparably situated borrower is being treated more favorably by such Lender (as reasonably determined by such Lender) in respect of a claim made hereunder.

 

(e) Each Lender will, if requested by Borrower, to the extent not inconsistent with any applicable legal or regulatory restrictions and subject to the overall policy considerations of such Lender, use commercially reasonable efforts to designate a different lending office for the Equipment Notes of such Lender affected by such event or, failing that, to take other reasonable measures requested by Borrower (including transferring such Equipment Notes pursuant to Section 7.1(d) hereof) to mitigate the amount of payment of Additional Costs or other amounts under this Section 4.4, if as a result thereof the additional amounts that would otherwise be required to be paid to such Lender pursuant to this Section 4.4 would be reduced or eliminated and if the making, funding or maintaining of its interest in the Equipment Notes through such other lending

 

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office or the taking of such other reasonable measures would not, in the good faith judgment of such Lender, result in any economic, legal or regulatory disadvantage (other than de minimis disadvantages) or adverse tax consequences to such Lender (other than adverse tax consequences for which Borrower agrees to indemnify such Lender); provided, that such Lender will not be obligated to utilize such other lending office pursuant to this Section 4.4 unless Borrower agrees to pay all incremental out-of-pocket expenses, if any, reasonably incurred by such Lender as a result of utilizing such other lending office as described above; provided, further, that such Lender shall have no obligation to designate another lending office that does not maintain loans comparable to the loan evidenced by such Lender’s Equipment Note. An Officer’s Certificate as to the amount of any such expenses (setting forth in reasonable detail the basis for requesting such amount and the calculation thereof) submitted by such Lender to Borrower shall be presumed correct, absent manifest error. If after using commercially reasonably efforts as aforesaid such Lender is not able to mitigate the amount of or the need for the Additional Costs 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. Nothing in this Section shall affect or postpone any of the obligations of Borrower or the rights of any Lender pursuant to this Section 4.4.

 

4.5 Fixed Rate Option .

 

(a) In respect of any Aircraft, at Borrower’s written request, which shall be made in the Drawdown Notice in accordance with Article 2 hereof (the “Fixed Rate Option”), each Lender agrees that the Applicable Equipment Notes in respect of up to five (5) Aircraft shall bear interest at a Fixed Rate. If Borrower exercises the Fixed Rate Option in respect of an Aircraft, the aggregate Commitment for each such Aircraft shall be reduced to the amount specified in Section 2 of Schedule 2 of this Agreement. If such request is so made by Borrower, Borrower shall conduct a swap auction in which each Lender and Acceptable Potential Swap Counterparty selected by Borrower shall be invited to submit its fixed-rate quote to act as Swap Counterparty in the Swap Transaction with each Lender. At Borrower’s option, Borrower shall have the right to conduct a second swap auction on the second Business Day before the scheduled Closing Date in which each Lender and Acceptable Potential Swap Counterparty selected by Borrower shall be invited to submit its fixed-rate quote to act as Swap Counterparty in the Swap Transaction. Three basis points shall be added to the fixed rate quote submitted by each Acceptable Potential Swap Counterparty that is not a Lender (such quote as so adjusted, the “Adjusted Fixed Rate Quote”). Subject to the next succeeding sentence, the institution submitting the lowest fixed-rate quote (as adjusted in accordance with the immediately preceding sentence) in such swap auction (or, if a second swap auction is held, such second swap auction) shall be the Swap Counterparty, and

 

(1) if such institution is a Lender, its quote in such swap auction (or, if a second swap auction is held, such second swap auction) shall be the Debt Rate for the Applicable Equipment Notes, or

 

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(2) if such institution is not a Lender, its Adjusted Fixed Rate Quote in such swap auction (or, if a second swap auction is held, such second swap auction) shall be the Debt Rate for the Applicable Equipment Notes.

 

(b) If a Lender submits a fixed-rate quote equal to the lowest Adjusted Fixed Rate Quote submitted by a non-Lender and no other Lender has submitted a lower fixed-rate quote, then such Lender shall be the Swap Counterparty; provided, if there shall be two or more such Lenders, each such Lender shall be a Swap Counterparty for a pro rata portion of the Swap Transaction with each Lender. Security Agent and Borrower shall promptly notify the Lenders of the Debt Rate determined in accordance with the above procedures and the identity of the “winning” Swap Counterparty and at the Applicable Closing Date and with respect only to the Applicable Equipment Notes, each Lender shall enter into a Swap Transaction with each such Swap Counterparty.

 

(c) Each Lender agrees that (A) on the date of any redemption or prepayment (whether voluntary or mandatory) of the Applicable Equipment Notes for any reason (including any redemption of the Applicable Equipment Notes effected pursuant to Sections 2.9 and 2.10 of the Applicable Mortgage) each such Lender will, and (B) upon or at any time following the acceleration of the Applicable Equipment Notes upon or following the occurrence of an Event of Default, such Lender may ask the Swap Counterparty to settle-out the Swap Transaction, and in furtherance thereof will request the Swap Counterparty to notify Borrower and such Lender by 1:00 p.m., New York time, on such date (the “Settlement Date”) of the Swap Break Amount; provided that if the Obligations are paid in full and the Lien of the Applicable Mortgage is discharged, then such Lender will promptly settle-out the Swap Transaction.

 

(d) Subject to due compliance with and after payment in full of all amounts then due and owing to all Lenders under the Applicable Equipment Notes and if no Default or Event of Default has occurred and is continuing, each Lender shall pay over to Borrower any Swap Breakage Gain that it receives from the Swap Counterparty as a result of a payment contemplated by Section 4.5(c), promptly after such Lender receives such payment, in immediately available funds, to such account as Borrower directs; provided, if a Default or Event of Default is then in existence, such payment shall be made to Security Agent as security for Borrower’s obligations under the Applicable Operative Agreements, and at such time as such Default or Event of Default no longer exists, such payment and any gain realized as a result of investments required to be made pursuant to Article 6 of the Applicable Mortgage shall be (to the extent not applied as provided in the Mortgage) paid over to Borrower.

 

(e) If a Lender (or any of its Affiliates) is the “winning” Swap Counterparty with respect to such Lender’s Applicable Equipment Notes, then:

 

(1) such Lender shall be deemed to have entered into a Swap Transaction with itself (or its Affiliate) satisfying in each case the terms and conditions of Section 4.5(a); and

 

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(2) such Lender (in its capacity as Swap Counterparty) agrees, or will cause its Affiliate to agree, to the swap settlement and unwind procedures contained in Section 4.5(c), and covenants to pay any Swap Breakage Gain promptly as if it were a third party Swap Counterparty (and in its capacity as a Lender to apply such amounts as provided in the Operative Agreements) and to comply with all of the terms and conditions thereof applicable to the Swap Counterparty.

 

4.6 Past Due Interest .

 

Any amounts not paid under the Operative Agreements by 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 or if the Fixed Rate Option has been elected under Section 4.5, on the basis of a year of 360 days consisting of twelve 30-day months), and shall be payable on demand.

 

4.7 Illegality .

 

In the event that at any time any Lender shall determine that due to a change of Law it shall become unlawful for any Lender to make or maintain or fund all or a portion of the Equipment Notes it holds in the manner contemplated by the Operative Agreements, then such Lender shall give prompt notice thereof to Borrower. Thereafter, the affected Lender agrees that it will, if requested by Borrower, to the extent not inconsistent with any applicable legal or regulatory restrictions and subject to the overall policy considerations of such Lender, use commercially reasonable efforts to avoid such illegality by designating a different lending office for the affected Equipment Notes of such Lender affected by such illegality or, failing that, shall take other reasonable measures requested by Borrower (including transferring such Equipment Notes pursuant to Section 7.1(d) hereof) to avoid such illegality and if the making, funding and maintaining of its interest in the affected Equipment Notes through such other lending office or the taking of such other reasonable measures would not, in the good faith judgment of such Lender, result in any economic, legal or regulatory disadvantage (other than a de minimi s disadvantage) or adverse tax consequences to such Lender (other than adverse tax consequences for which Borrower agrees to indemnify such Lender); provided, that such Lender shall not be obligated to utilize such other lending office pursuant to this Section 4.7 unless Borrower agrees to pay all incremental out-of-pocket expenses, if any, reasonably incurred by such Lender as a result of utilizing such other lending office as described above; provided, further that such Lender shall have no obligation to designate another lending office that does not maintain loans comparable to the loan evidenced by such Lender’s Equipment Note. If after using commercially reasonable efforts as aforesaid such Lender is not able to avoid such illegality within thirty (30) days after such Lender’s notice thereof to Borrower, the affected Equipment Notes may be prepaid by Borrower in accordance with Section 2.10 of the Applicable Mortgage.

 

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5. R EPRESENTATIONS AND W ARRANTIES .

 

5.1 Borrower’s Representations and Warranties .

 

In respect of each Aircraft and the transactions hereby with respect thereto, Borrower represents and warrants to each Lender making a secured loan in respect of such Aircraft and Security Agent that:

 

(a) Organization; Qualification . Borrower is a corporation duly incorporated, validly existing and in good standing under the Laws of Delaware, and has the corporate power and authority to conduct the business in which it is currently engaged and to own or hold under lease its properties and to enter into and perform its obligations under 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 Material Adverse Change with respect to Borrower.

 

(b) Corporate Authorization . The execution and delivery by Borrower of, and performance by Borrower of its obligations under, this Agreement and 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 and do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of Borrower, except such as have been duly obtained and are in full force and effect.

 

(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 certificate of incorporation or by-laws, (2) violate any Law applicable to or binding on Borrower, or (3) violate or constitute any default under, or result in the creation of any Lien (other than as permitted under the Applicable Mortgage) upon the Applicable Aircraft or the other Collateral (as defined in the Applicable Mortgage) under, any material 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 and the consummation by Borrower of any transactions contemplated hereby or thereby 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 (1) any trustee or other holder of any debt of Borrower, or (2) any Governmental 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 and each of the other Applicable Operative Agreements to which Borrower is or is to become a party have

 

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been duly authorized and when duly executed and delivered by Borrower, assuming the due authorization, execution, and delivery thereof by the other parties hereto and thereto, 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’ most recent annual report on Form 10-K, quarterly report on Form 10-Q or current report on Form 8-K filed by with the SEC on or prior to December 31, 2004, no action, claim or proceeding is now pending or, to Borrower’s Actual Knowledge, threatened, against Borrower before any Governmental Entity, that is reasonably likely to be determined adversely to Borrower and if determined adversely to Borrower would result in a Material Adverse Change with respect to Borrower, and there is no action, suit or proceeding now pending, or to the Actual Knowledge of Borrower threatened, before or by any court, arbitrator or administrative agency, body or official to which Borrower is subject, that questions the validity of the Operative Agreements.

 

(g) Financial Condition . The financial statements delivered by Borrower pursuant to Section 3.1(b)(10) have been prepared in accordance with GAAP and fairly present in all material respects in accordance with GAAP the financial condition of Borrower and its consolidated subsidiaries as of such dates and the results of its operations and cash flows for such periods, and since the date of such balance sheet, there has been no material adverse change in such financial condition or results of operations, except for matters disclosed in (1) the financial statements referred to above, or (2) any subsequent report filed with the SEC.

 

(h) Registration and Recordation . (1) Except for the security interest granted to Security Agent for the ratable benefit of the Lenders pursuant to the Applicable Mortgage and except for Permitted Liens, Borrower will own each item of the Applicable Collateral free and clear of any and all Liens or claims of others. No financing statement or other public notice with respect to all or any part of the Applicable Collateral will then be on file or of record in any public office, except such as have been filed in favor of Security Agent, for the ratable benefit of the Lenders, pursuant to the Applicable Mortgage. 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 Security Agent’s first priority Lien on the Applicable Aircraft and the other Collateral (as defined in the Applicable Mortgage), as against Borrower and any other Person, in any applicable jurisdiction in the United States. The security interests granted pursuant to this Applicable Mortgage, upon completion of the filings specified in

 

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the prior sentence, will constitute valid first priority security interests in all of the Collateral in favor of Security Agent, for the ratable benefit of the Lenders, as collateral security for the Obligations, enforceable in accordance with the terms hereof against all creditors of Borrower and any Persons purporting to purchase any Collateral from Borrower, in any applicable jurisdiction in the United States.

 

(2) On the date hereof, Borrower’s jurisdiction of organization, identification number from the jurisdiction of organization (if any) and the location of Borrower’s chief executive office are as follows:

 

 

(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 the Collateral (as defined in the Applicable Mortgage), or any of the Applicable Equipment Notes, 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 registration requirements of the Securities Act or in violation of the registration requirements of applicable state or foreign securities Laws.

 

(j) Section 1110 . Security Agent 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 and to enforce its other rights or remedies, 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.

 

(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.

 

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

 

(n) Compliance with Laws . Borrower holds all material licenses, permits, and franchises from the appropriate Governmental Entities necessary to authorize Borrower to engage in air transportation and to carry on scheduled commercial passenger service as currently conducted.

 

(o) Investment Company Act and Public Utility Holding Company Act . Borrower is not (A) an “investment company” or a company controlled by an

 

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“investment company” within the meaning of the Investment Company Act of 1940 or (B) a “holding company” as defined in and subject to regulation under, the Public Utility Holding Company Act of 1935, as amended.

 

(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.

 

(r) No Defaults . Borrower is not (A) in default under any indenture, mortgage, lease or credit agreement or under any other agreement or instrument of a material nature to which Borrower is now a party or by which it is bound or (B) in violation of any law, order, injunction, decree, rule or regulation applicable to Borrower of any court or administrative body, which violation or default referred to in the preceding clause (A) or (B) (x) would reasonably be expected to result in a Material Adverse Change or (y) would involve a material risk of the sale, forfeiture or loss of or the creation of any Lien on, the Applicable Aircraft.

 

(s) ERISA . Assuming the representations of the Lenders in Section 5.2(c) hereof are correct, none of the execution and delivery of this Agreement or any of the Applicable Operative Agreements or the consummation of the Transactions contemplated herein or therein will involve any prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code.

 

5.2 Lender’s Representations and Warranties .

 

In respect of each Aircraft to which it is a Lender and the transactions contemplated hereby with respect thereto, each Lender represents and warrants to Borrower that:

 

(a) Valid and Binding Agreements . This Agreement has been duly authorized, executed, and delivered by it and, assuming the due authorization, execution, and delivery thereof by the other parties hereto, 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 (except any such fees which have been paid in full, in the case of Lenders other than The Royal Bank of Scotland plc New York Branch).

 

(c) ERISA . Either (i) no portion of the funds used by it to purchase the Applicable Equipment Notes constitute “plan assets” (within the meaning of the Department of Labor regulations codified at 29 C.F.R. Section 2510.3-101) of any Plan

 

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or (ii) the purchase of the Equipment Notes do not constitute a non-exempt prohibited transaction under Section 406(a) of ERISA or Section 4975(c)(1)(A)-(D) of the Code.

 

(d) Securities Laws . Neither it 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 the Collateral (as defined in the Applicable Mortgage) or any of the Applicable Equipment Notes 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 registration requirements of the Securities Act or in violation of the registration requirements of applicable state or foreign securities Laws.

 

6. C ERTAIN C OVENANTS OF THE P ARTIES .

 

6.1 Borrower Covenants .

 

In respect of each Aircraft and the transactions contemplated hereby with respect thereto, Borrower agrees for the benefit of Security Agent and each applicable Lender as follows:

 

(a) Corporate Existence, U.S. Air Carrier . Borrower shall at all times maintain its corporate existence, except as permitted by Section 4.7 of the Applicable Mortgage, and shall at all times remain a U.S. Air Carrier.

 

(b) Notice of Change of Name or Location . Borrower will give to Security Agent timely written notice (but in any event at least thirty (30) days before the expiration of the period of time specified under applicable Law to prevent lapse of perfection) of any change of its name of or its jurisdiction of organization (as defined in UCC Article 9), and will promptly take any action required by Section 6.1(c)(3) as a result of such change of name or relocation.

 

(c) Certain Assurances . With respect to an Aircraft:

 

(1) Borrower shall duly execute, acknowledge, and deliver (or cause to be executed, acknowledged, and delivered) all such further documents, and shall do and cause to be done such further things, as Security Agent reasonably requests to accomplish the purposes of the Applicable Operative Agreements, provided that any document so executed by Borrower will not expand any obligations or limit any rights of Borrower in respect of the Transactions.

 

(2) Borrower shall, at its own cost, promptly take such action with respect to the recording, filing, re-recording, and re-filing of the Applicable Mortgage, and any supplements thereto, as shall be necessary to continue the perfection and priority of the Lien created by the Mortgage.

 

(3) Borrower will cause the FAA-Filed Documents, the Financing Statement, all continuation statements (and any amendments necessitated by any combination, consolidation, or merger of Borrower, or any change in its name or of its jurisdiction of organization) in respect of the Financing Statements, to be

 

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prepared and duly and timely filed and recorded, or filed for recordation, to the extent permitted under the Transportation Code (with respect to the FAA-Filed Documents) or the UCC or similar law of any other applicable jurisdiction (with respect to such other documents).

 

(4) At the reasonable request of Security Agent, or in connection with the re-registration of the Aircraft pursuant to Section 4.2(e) of the Mortgage, the parties undertake to enter into new transaction documents effective from the date the Convention takes effect in the United States or the Permitted Country in which registration is being effected pursuant to Section 4.2(e) of the Mortgage that constitute (an) “international interest(s)” under the Convention. The new transaction documents shall retain the commercial agreements set forth herein modified only to ensure that an international interest is constituted and to reflect and enhance the enforceability of the commercial agreements of the parties in the context of the Convention. The parties intend that Security Agent’s first priority position is not prejudiced thereby, and, should there be a risk thereof that Security Agent finds unacceptable, the current documents shall remain in force. In that case, an additional international interest may be created in favor of the Security Agent and appropriate subordination arrangements shall be made. All such international interest(s) shall be registered in the international registry, on that effective date, by one party and the other shall consent thereto. The Lenders agree that they shall reimburse Borrower and Security Agent for all of their reasonable out-of-pocket costs and expenses (including reasonable fees and disbursements of counsel) incurred in connection with Borrower’s and Security Agent’s taking the actions contemplated by this Section 6.1(c)(4), unless the actions contemplated hereby result from Borrower’s re-registering of the Aircraft pursuant to Section 4.2(e) of the Mortgage, in which case the reasonable costs and expenses of the Lenders and Security Agent (including reasonable fees and disbursements of counsel) arising under this clause shall be for the account of Borrower.

 

(d) Securities Laws . Neither Borrower nor any Person authorized to act on its behalf will directly or indirectly offer any beneficial interest or Security relating to the ownership of the Aircraft or any interest in the Collateral (as defined in the Applicable Mortgage) or any of the Applicable Equipment Notes, for sale to, or solicit any offer to acquire any such interest or security from, or sell any such interest or security to, any Person in violation of the registration requirements of the Securities Act or in violation of the registration requirements of applicable state or foreign securities Laws.

 

(e) Financial Information .

 

(1) Borrower shall provide to Security Agent, copies of its (x) audited financial statements for its financial year ended December 31, 2005 and for each financial year thereafter as soon as they are available but in any event not later than 120 days after the close of the relevant period and (y) unaudited financial statements for each quarterly period as soon as they are available but in any event not later than sixty (60) days after the close of the relevant period. Each financial

 

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statement provided hereunder shall have been prepared in accordance with GAAP and each annual financial statement shall be accompanied by an Officer’s Certificate of Borrower, stating that, based on an examination sufficient to enable such officer to make an informed statement, no Default or Event of Default under the Operative Agreements has occurred or is continuing or, if such is not the case, specifying such Default or Event of Default and its nature, when it occurred and the steps being taken by Borrower with respect thereto. Notwithstanding the foregoing to the contrary, if Borrower is subject to, and so long as Borrower is complying with the reporting requirements under the Securities and Exchange Act of 1934, the timely delivery (or public posting on the website of the Securities Exchange Commission (“SEC”) of a copy of Borrower’s report on Form 10-K (or any successor form) with respect to the relevant year shall satisfy the requirements of clause (x) and the timely delivery (or public posting on the SEC’s website) a copy of Borrower’s report on Form 10Q (or any successor form) for the relevant quarter shall satisfy the requirements of clause (y); and

 

(2) Without limiting Security Agent’s inspection rights in the Mortgage, promptly upon the reasonable request of Security Agent, (x) such additional financial information and other information regarding Borrower that has been publicly disclosed and which Borrower releases or otherwise makes available to lessors and/or creditors generally and (y) (i) so long as no Event of Default shall have occurred and be continuing, such other information regarding the Collateral which Borrower generally releases or otherwise makes available to lessors and/or creditors regarding similar property and (ii) if an Event of Default is in existence, other information (not subject to a confidentiality agreement that prohibits disclosure to the Lenders) regarding the Collateral.

 

6.2 Merger of Borrower .

 

(a) In General . Borrower shall not convey all or substantially all of its assets in one or a series of related transactions to, or consolidate with or merge with or into any other Person under circumstances in which Borrower is not the surviving corporation, unless:

 

(1) after giving effect to such conveyance, consolidation or merger, such Person is organized, existing, and in good standing under the Laws of the United States, any state of the United States, or the District of Columbia, and, upon consummation of such transaction, such Person will be a U.S. Air Carrier with respect to which, absent a change in law or court interpretation, Security Agent will be entitled to the benefits of Section 1110;

 

(2) such Person executes and delivers to Security Agent a duly authorized, legal, valid and binding agreement, reasonably satisfactory in form and substance to Security Agent, containing an effective assumption by such Person of the due and punctual performance and observance of each covenant, agreement, and condition in the Operative Agreements to be performed or

 

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observed by Borrower, together with customary officer’s certificates and legal opinions in form and substance reasonably satisfactory to Security Agent;

 

(3) such Person, immediately after giving effect to such conveyance, consolidation or merger, shall have a tangible net worth of not less than the lesser of (aa) Borrower’s tangible net worth (determined in each case in accordance with GAAP) as of the calendar quarter ending March 31, 2005 or (bb) Borrower’s tangible net worth (determined in each case in accordance with GAAP) immediately prior to such conveyance, consolidation or merger, and

 

(4) immediately after giving effect to such conveyance, consolidation or merger, no Event of Default has occurred or is continuing, and

 

(5) Borrower has at least thirty (30) days prior to such conveyance, consolidation or merger, given written notice of such transaction to Security Agent.

 

(b) Effect of Merger . Upon any such conveyance, consolidation or merger of Borrower with or into any Person in accordance with this Section 6.2, such Person will succeed to, and be substituted for, and may exercise every right and power of, Borrower under the Operative Agreements with the same effect as if such Person had been named as “Borrower” therein. No such conveyance, consolidation or merger shall have the effect of releasing Borrower or such Person from any of the obligations, liabilities, covenants, or undertakings of Borrower under the Mortgage.

 

6.3 Lender Covenants .

 

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

 

(a) Quiet Enjoyment . It agrees that so long as no Event of Default shall have occurred and be continuing, it shall not, and shall not permit any Affiliate or other Person claiming by, through or under it to, and shall not instruct Security Agent to interfere with Borrower’s or any Permitted Lessee’s right of continuing possession, use and operation of, and quiet enjoyment of, any Aircraft subject to the restrictions therein provided in the Applicable Operative Agreements.

 

(b) Liens . No Lender (1) will directly or indirectly create, incur, assume, or suffer to exist any Lien on all or any part of the Collateral arising as a result of (a) claims against such Lender not related to its interest in any Aircraft or the Collateral or the transactions contemplated by the Operative Agreements or (b) acts of such Lender not permitted by, or the failure of such Lender to take any action required by, the Operative Agreements and (2) will, at its own cost and expense, promptly take such action as is necessary to discharge any such Lien attributable to such Lender on all or any part of the Collateral.

 

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6.4 Security Agent Covenants .

 

In respect of each Aircraft and the Transactions with respect thereto, Security Agent agrees for the benefit of Borrower and each applicable Lender as follows:

 

(a) Liens . Security Agent (1) will not directly or indirectly create, incur, assume, or suffer to exist any Lien on all or any part of the Collateral arising as a result of (a) claims against Security Agent not related to its interest in any Aircraft or the Collateral or the transactions contemplated by the Operative Agreements or (b) acts of the Security Agent not permitted by, or the failure of the Security Agent to take any action required by, the Operative Agreements and (2) will, at its own cost and expense, promptly take such action as is necessary to discharge any such Lien attributable to Security Agent on all or any part of the Collateral.

 

(b) Securities Laws . Security Agent will not offer any beneficial interest or security relating to the ownership of the Aircraft or any interest in the Collateral (as defined in the Applicable Mortgage), or any of the Applicable Equipment Notes for sale to, or solicit any offer to acquire any such interest or security from, or sell any such interest or security to, any Person in violation of the registration requirements of the Securities Act or in violation of the registration requirements of applicable state or foreign securities Laws.

 

7. A SSIGNMENT OR T RANSFER OF I NTEREST ; S ALE -L EASEBACK T RANSACTIONS ; J UNIOR L OANS ; 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 Applicable Mortgage, any Lender may, at any time, Transfer or grant participations in all or any portion of its Commitment, Equipment Notes or all or any portion of its interest in or represented by its Commitment or Equipment Notes to a Transferee; provided, that any participant in any such participation shall not have any direct rights under the Applicable Operative Agreements or any Lien on all or any part of the Applicable Aircraft or the Collateral (as defined in the Applicable Mortgage) except that each participant shall be entitled to the benefits of Sections 4.4, 9.3 and 11.15 to the same extent as if it were a Lender and had acquired its interest by Transfer pursuant to this Section 7.1; 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 (x) in the case of a Transfer, that which would result had any such Transfer not occurred (except to the extent resulting from a change in Law after the date of such Transfer) or (y) in the case of a participation, that which would have resulted had the relevant Lender retained the interest in the Commitment or the Equipment Notes that is the subject of such participation. In the case of any Transfer, the Transferee, by execution and delivery of a Transfer Agreement in connection with such Transfer, shall be bound, to the extent provided therein, by all of the covenants of the transferring Lender in the Applicable Operative Agreements. In connection with any Transfer or participation, Article 8 shall continue to apply with respect to any confidential and proprietary information of Borrower and, prior to disclosing such information to a Transferee or participant or potential Transferee or participant, Lender shall obtain the

 

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agreements of Transferee(s) and such other Persons as contemplated by clause (b) of Article 8. Notwithstanding any provisions of the Operative Agreements to the contrary, no Lender shall be entitled to Transfer or grant participations to any Person in all or any portion of its Commitment, Equipment Notes or all or any portion of its beneficial interest in its Commitment or Equipment Notes as it relates to an Aircraft, unless such Transfer or participation is in respect of a Commitment amount or an unpaid Original Amount with respect to such Aircraft that is greater than or equal to Five Million Dollars (US$5,000,000), or if less, the outstanding Original Amount of the Applicable Equipment Notes or the outstanding amount of such Lender’s Commitment, as the case may be.

 

(b) Securities Law . Each Lender agrees that it will not Transfer or grant participations in its Commitment, any Equipment Note which it holds or any interest in, or represented by, its Commitment or any Equipment Note which it holds in violation of the registration requirements of the Securities Act or in violation of the registration requirements of applicable state or foreign securities Laws.

 

(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 a written representation in the applicable Transfer Agreement that either (a) no portion of the funds used by it to purchase such Equipment Note constitutes “plan assets” (within the meaning of the Department of Labor regulations codified at 29 C.F.R. Section 2510.3-101) of any Plan, or (b) its purchase of such Equipment Note will not constitute a non-exempt prohibited transaction under Section 4975(c)(1)(A)-(D) of the Code or Section 406(a) of ERISA.

 

(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 in accordance with this Section 7.1 the affected Equipment Notes to a Person identified by Borrower to which payments under the Equipment Notes would not be subject to withholding Taxes under then applicable Law for an amount 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 Breakage Amount. In the circumstances required in Section 4.4 and Section 4.7, the affected Lender shall, upon the written request of Borrower, sell in accordance with this Section 7 the affected Equipment Notes to a Person identified by Borrower for an amount 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 Breakage Amount. Out-of-pocket costs and expenses, if any, (including reasonable fees and disbursements of counsel) reasonably incurred by any Lender or Security Agent in connection with any such transfer shall be for the account of Borrower.

 

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(e) Federal Reserve Bank . Any Lender may at any time pledge or grant a security interest in its interest in the Equipment Notes it holds and in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or grant of a security interest to secure obligations to a Federal Reserve Bank, and Section 7.1 shall not apply to any such pledge or grant of a security interest; provided that no such pledge or grant of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or grantee for such Lender as a party hereto; and provided, further, that no such pledge or grant 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 had any such pledge or grant not occurred (except to the extent resulting from a change in Law after the date of such pledge or grant) and that in connection with any such pledge or grant, (except to the Federal Reserve Bank, but subject to confidentiality arrangements as are customary in pledges or grants to the Federal Reserve Bank) Article 8 shall continue to apply with respect to any confidential and proprietary information of Borrower and, prior to disclosing such information to pledgee or grantee, Lender shall obtain the agreements of pledgee(s), grantee(s) and such other Persons as contemplated by clause (b) of Article 8.

 

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 interest therein or represented thereby), 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 with respect to such transferred Equipment Note under the Applicable Operative Agreements to the extent such liabilities and obligations arise with respect to the period after such Transfer (or as otherwise agreed between the transferring Lender and the Transferee) 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 (or as otherwise agreed between the transferring Lender and the Transferee). The transferring Lender agrees that it shall reimburse, or shall cause the Transferee to reimburse, Borrower and Security Agent 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 thirty (30) days’ prior written notice to the parties hereto, if no Event of Default has occurred and is continuing, Borrower shall have the right to issue, at any time within eighteen (18) months following the Closing Date in respect of the final Aircraft financed pursuant to this Agreement, additional debt secured by a Lien on an Eligible Aircraft junior to the Lien of the Mortgage to which any such Eligible Aircraft is subject (a “Junior Loan”); provided, that there shall be no more than fifty percent (50%) of such Eligible Aircraft financed pursuant to this Agreement secured by a Junior Loan at any time. If the number of Eligible Aircraft financed pursuant to this

 

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Agreement is not divisible by two, then the number of Eligible Aircraft that may be subject to a Junior Loan shall be rounded down (for example, if nine (9) Aircraft have been financed pursuant to this Agreement, than no more than four (4) Eligible Aircraft may be subject to a Junior Loan). In connection with any such Junior Loan, each of the parties hereto (or their successors) and the lender(s) providing such Junior Loan will execute and deliver an intercreditor agreement dealing with the terms of subordination and enforcement of remedies and other intercreditor matters in form and substance reasonably satisfactory to the parties hereto (or their successors) and the lender(s) providing such Junior Loan, which agreement shall ensure there is no diminution of Security Agent’s first priority and perfected Lien in such Aircraft and all other then-existing Collateral (as defined in the Applicable Mortgage). Borrower shall reimburse Security Agent 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 documenting any such Junior Loan.

 

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, if no Event of Default has occurred and is continuing, Borrower shall have the right to sell, at any time within eighteen (18) months following the Closing Date in respect of the final Aircraft financed pursuant to this Agreement, up to fifty percent (50%) of such Eligible 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 Security Agent pursuant to an amended and restated mortgage (a “Sale-Leaseback”); provided, that there shall be no more than fifty (50%) of such Eligible Aircraft financed pursuant to this Agreement subject to a Sale-Leaseback at any time. If the number of Eligible Aircraft financed pursuant to this Agreement is not divisible by two, then the number of Eligible Aircraft that may be subject to a Sale-Leaseback shall be rounded down (for example, if nine (9) Aircraft have been financed pursuant to this Agreement, than no more than four (4) Eligible Aircraft may be subject to a Sale-Leaseback). In connection with such Sale-Leaseback, each of the parties hereto (or their successors) will execute and deliver appropriate documentation, if reasonably satisfactory in form and substance to it, 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. In connection with any such Sale-Leaseback, (a) the documents, each in form and substance reasonably acceptable to Security Agent, shall include, but not be limited to, (1) a participation agreement among the parties hereto (or their successors), the owner trustee, and the owner participant, (2) a net lease agreement between Borrower and the owner trustee providing for minimum rent payments equal in timing and amounts to all required debt service payments under the Applicable Operative Agreements and for a covenant or obligation equivalent to all other financial and non-financial obligations of Borrower under the Applicable Operative Agreements, (3) an amended and restated mortgage (amending and restating the Applicable Mortgage) between Security Agent and owner trustee, (4) a purchase agreement assignment, and (5) a trust agreement between the

 

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owner trustee and the owner participant; and (b) the Applicable Equipment Notes shall be delivered to Security Agent for cancellation in exchange for new equipment notes to be issued to the Lenders by the owner trustee. Borrower shall reimburse Security Agent 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.

 

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 the “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 any one or more other Aircraft and/or holding a majority (or more) of the aggregate unpaid principal amount of all PDP Notes, if any, issued and outstanding in respect of one or more other Aircraft, then unless such change of holding occurred as the result of the lawful exercise of remedies following an Event of Default (x) the Applicable Equipment Notes and/or the PDP Notes issued, as the case may be, and the Mortgages entered into, in respect of such one or more other Aircraft and/or the PDP Security Agreement, as the case may be, shall, without further act of the parties hereto or thereto, no longer be deemed to be “Related Notes” or “Related Mortgages” for purposes of the Mortgage entered into in respect of such Relevant Aircraft and (y) the Applicable Equipment Notes issued, and the Applicable 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 Notes” or “Related Mortgage” for purposes of the Applicable Mortgage(s) in respect of such one or more other Aircraft and/or the PDP Security Agreement, as the case may be.

 

(b) Sale-Leaseback; Junior Loan . If an Aircraft is one of twenty-five percent (25%) or more of the Eligible Aircraft subjected to a Sale-Leaseback pursuant to Section 7.4 or Junior Loan pursuant to Section 7.3 (for purposes of this Section 7.5(b) only, the “Relevant Aircraft”) then (x) the Applicable Equipment Notes issued, and the Applicable Mortgages entered into, in respect of the Aircraft not subjected to a Sale-Leaseback or Junior Loan with the same owner participants (in the case of Section 7.4) or lenders (in the case of Section 7.3) (for purposes of this Section 7.5(b) only, the “No-Cross Aircraft”) and the PDP Notes and PDP Security Agreement shall, without further act of the parties hereto or thereto, no longer be deemed to be “Related Notes” or “Related Mortgages” for purposes of the Applicable Mortgage entered into in respect of such Relevant Aircraft and (y) the Applicable Equipment Notes issued, and the Applicable 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 Notes” or “Related Mortgage” for purposes the Applicable Mortgage(s) in respect of the No-Cross Aircraft and the PDP Security Agreement.

 

(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 Applicable 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

 

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Applicable Mortgage is discharged and terminated in accordance with the terms thereof, then (x) the Applicable Equipment Notes issued, and the Applicable Mortgages entered into, in respect of other Aircraft and the PDP Notes and the PDP Security Agreement shall, without further act of the parties hereto or thereto, no longer be deemed to be “Related Notes” or “Related Mortgages” for purposes of the Applicable Mortgage entered into in respect of such Relevant Aircraft and (y) the Applicable Equipment Notes issued, and the Applicable 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 Notes” or “Related Mortgage” for purposes of the Applicable Mortgage(s) in respect of such other Aircraft and the PDP Security Agreement.

 

8. C ONFIDENTIALITY

 

Each of Security Agent and each Lender agrees to keep confidential all non-public information provided to it by Borrower, Security Agent or any Lender pursuant to or in connection with this Agreement that is designated by the provider thereof as confidential; provided that nothing herein shall prevent Security Agent or any Lender from disclosing any such information (a) to Security Agent, any other Lender or any Affiliate thereof or of such Lender, (b) subject to an agreement by such Transferee or participant to comply with the provisions of this Section, to any actual or prospective Transferee (and its employees, directors, agents, attorneys, accountants and advisors or those of any of its Affiliates) or participant, (c) to its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its Affiliates, (d) upon the request or demand of any Governmental Entity, (e) in response to any order of any court or other Governmental Entity or as may otherwise be required pursuant to any Law, (f) if requested or required to do so in connection with any litigation or similar proceeding, (g) that has been publicly disclosed by Borrower, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender’s investment portfolio in connection with ratings issued with respect to such Lender, or (i) in connection with the exercise of any remedy hereunder or under any other Operative Agreement; provided, that any and all disclosures permitted by clauses (d), (e), (f), (h) or (i) 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 any of the transactions contemplated hereby or thereby or the enforcement of any of the Operative Agreements during the existence of a Default;

 

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(2) the Aircraft, the Airframe, any Engine, or any Part or any engine installed on the Airframe or any airframe on which an Engine is installed, including, with respect thereto, (A) whether or not arising out of the manufacture, design, installation, purchase, acceptance, non-acceptance, rejection, ownership, registration, re-registration, deregistration, delivery, non-delivery, lease, sublease, assignment, possession, use, non-use, operation, maintenance, testing, repair, overhaul, condition, alteration, modification, addition, improvement, storage, airworthiness, replacement, financing, refinancing, sale, substitution, return, abandonment, redelivery, transfer of title or other disposition of the Aircraft, any Engine, or any Part, (B) any claim or penalty arising out of violations of applicable Laws by Borrower (or any Permitted Lessee), (C) tort liability, whether or not arising out of the negligence of any Indemnitee (whether active, passive, or imputed), (D) latent or other defects, whether or not discoverable, death or property damage of passengers, shippers, or others, (E) environmental control, noise, or pollution and any claim for patent, trademark or copyright infringement, (F) any Liens in respect of the Aircraft, any Engine, or any Part, and (G) the offer, sale or delivery by Borrower of any Equipment Notes issued on the Closing Date; 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, including, without limitation, any Default or Event of Default under any of the Operative Agreements.

 

(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;

 

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

 

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(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 being party to 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 express 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 its Commitment in violation of the registration requirements of the Securities Act or in violation of the registration requirements of any applicable state or foreign securities Laws (other than any thereof caused by acts or omissions of Borrower);

 

(7) to the extent attributable to Security Agent’s failure to distribute funds received and distributable by it in accordance with the Operative Agreements;

 

(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 or such Indemnitee expressly agrees shall not be paid by or be reimbursed by Borrower;

 

(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

 

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the extent arising from a cause other than Borrower’s failure to comply with such specified responsibility or obligation; or

 

(13) to the extent imposed on an Indemnitee as a result of any non-exempt “prohibited transaction” under 406(a) of ERISA or Section 4975(c)(1) of the Code caused by such Indemnitee.

 

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.

 

(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.

 

(2) Borrower or its insurer(s) shall have the right, at its or their cost and expense, to investigate and the right in Borrower’s sole discretion, acting through counsel reasonably satisfactory to the respective Indemnitee, if Borrower has acknowledged in writing that it will indemnify such Indemnitee for such Expense (except that such acknowledgment does not apply if its is determined that Borrower is not liable hereunder) (A) in any judicial or administrative proceeding that involves an Expense and other claims which do not involve such Indemnitee, to assume responsibility for and control of the defense thereof, (B) in any judicial or administrative proceeding that involves an Expense and other claims against such Indemnitee related or unrelated to the transactions contemplated by the Operative Agreements, (x) to assume responsibility for and control of the defense of such Expense to the extent that the same may be and is severed from such other claims (and such Indemnitee shall use its reasonable efforts to obtain such severance) or (y) if such Expense is not severable from

 

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other claims that are material to such Indemnitee in relation to the Equipment Notes held by such Indemnitee, to assume responsibility for and control of the defense of such Expense if such assumption would not, in such Indemnitee’s reasonable judgment, prejudice or impair in any material respect, such Indemnitee’s management of such other claims and (C) in any other case, to be consulted by such Indemnitee and in which case such Indemnitee agrees to cooperate with reasonable requests of Borrower, each such request at Borrower’s cost and expense, with respect to judicial proceedings subject to the control of such Indemnitee and to be allowed, at Borrower’s cost and expense, to participate therein. The Indemnitee may participate at its own cost and expense and with its own counsel in any judicial proceeding controlled by Borrower pursuant to the preceding provisions; provided that such Indemnitee’s participation does not, in Borrower’s reasonable judgment, prejudice or impair in any material respect the defense and management of such case. Borrower shall not be entitled to control the defense of any such action, suit, or proceeding, or to compromise any such Expense (and the relevant Indemnitee shall be entitled to assume such control), while (a) any Event of Default exists, or (b) if such proceedings will involve (i) 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, (c) if such proceedings are likely to entail any risk of criminal liability or material risk of civil liability being imposed on such Indemnitee that, in the case of civil liability in the reasonable opinion of such Indemnitee, adversely affects in any material respect the business reputation of such Indemnitee or if, in the reasonable opinion of such Indemnitee, control by Borrower would be inappropriate due to a conflict of interest.

 

(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 or is required by Law to do so.

 

(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 all reasonable requests of 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 Article 9.

 

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

 

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(f) Information . Borrower will provide the relevant Indemnitee with such information not within the control of such Indemnitee (but in Borrower’s control or 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 10.4) 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 from any party other than Borrower or its insurers, 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 Default or Event of Default exists, in which case such amount shall be paid over to Security Agent to hold as security for Borrower’s obligations under the relevant Operative Agreements until such time as such Default or Event of Default no longer exists, in which case such amount and any gain realized as a result of investments required to be made pursuant to Article 6 of the Applicable Mortgage shall be (except to the extent theretofore applied as provided in the Mortgage) paid over to Borrower.

 

9.2 Expenses .

 

Except as otherwise provided with respect to particular matters in the Operative Agreements, Borrower shall pay all reasonable out-of-pocket costs and expenses (including the reasonable fees and disbursements of counsel) incurred by Security Agent in connection with any waiver, consent or approval or amendment or modification of any Operative Agreement requested by Borrower; and each Lender agrees that it shall reimburse Borrower and Security Agent for all reasonable out-of-pocket costs and expenses (including the reasonable fees and disbursements of counsel) incurred by Borrower and Security Agent in connection with any waiver, consent or approval or amendment or modification of any Operative Agreement requested by it.

 

9.3 General Tax Indemnity .

 

(a) Withholding Taxes . Except as provided in Section 9.3(c), Borrower agrees that each payment paid by Borrower under the Equipment Notes, and any other payment

 

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or indemnity paid by Borrower to 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 law, and if any such withholding or deduction for any such payment is required by applicable Law, (1) all such withholdings or deductions shall be made as provided in Section 2.3(b) of the Mortgage, (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 so that, after making all required withholdings or deductions, such Lender receives the same amount that it would have received had no 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 or Security Agent, as the case may be, shall 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, withholding taxes imposed by any Government, other than United States withholding Taxes imposed as of the time the Lender owning such Equipment Note became a Lender (except to the extent that (i) such Lender acquired such Equipment Note by assignment from another Lender and (ii) immediately prior to such assignment Borrower was paying additional amounts to the assigning Lender pursuant to this Section 9.3(a) with respect to United States withholding Taxes that were Indemnified Taxes). For the avoidance of doubt, in the event that the amount of United States withholding Taxes payable with respect to an Equipment Note changes after the date the Lender owning such Equipment Note became a Lender, such United States withholding Taxes shall constitute Indemnified Withholding Taxes only to the extent that, as the result of a change in U.S. federal tax 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 date the Lender owing such Equipment Notes becomes a Lender, such withholding Taxes become applicable with respect to a payment by Borrower to the Lender (if none had previously been imposed or required) or the rate applicable to a previously imposed or required withholding Tax is increased. In the event that Indemnified Withholding Taxes become payable by Borrower as provided above, the Lender will use commercially reasonable efforts to 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 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, in the case of United States withholding Taxes, the applicable change in U.S. federal tax law or regulation or the interpretation thereof or change in tax treaty; provided that such Lender shall not be required to transfer the Equipment Notes as provided above in this sentence if such transfer would cause such Lender to suffer economic, legal or regulatory disadvantage that is not indemnified by Borrower in a manner reasonably acceptable to such Lender; and provided further, that nothing in this sentence shall affect or postpone

 

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any of the obligations of Borrower or the rights of such Lender pursuant to this Section 9.3(a) prior to such transfer of the affected Equipment Notes.

 

(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, alteration, improvement, operation, registration, transfer or change of registration, re-registration, 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 any Taxing Authority or governmental subdivision thereof or therein (A) 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 (B) 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 (A) or (B), (y) sales, use, license, or property Taxes, or (z) any Taxes imposed by any Taxing Authority (other than a Taxing Authority within whose jurisdiction such Tax Indemnitee (i) is incorporated or organized or maintains its principal place of business or (ii) maintains a permanent establishment in the United States, if and to the extent that the income, receipts or gains to which such Taxes relate are effectively connected with such permanent establishment, other than by reason of a change in law occurring after the date such Tax Indemnitee acquires an interest in the Commitment or an Equipment Note.) if such Tax Indemnitee would not have been subject to Taxes of such type by such jurisdiction but for

 

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(i) the location, use, or operation of the Aircraft, the Airframe, any Engine, or any Part thereof by an 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 Borrower 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) Borrower having made (or having been deemed to have made) payments to such Tax Indemnitee from the relevant jurisdiction, or (v) in the case of Lender, Borrower’s being incorporated or organized or maintaining a place of business or conducting activities in such jurisdiction);

 

(2) on, with respect to, or measured by any fees, commissions, or compensation received by Security Agent;

 

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

 

(4) 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;

 

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

 

(6) in excess of those that would have been imposed had there not been a transfer or other disposition described in clause (6) of this Section 9.3(c) by or to such Tax Indemnitee or a related Tax Indemnitee (except to the extent resulting from a change in Law after the date of such transfer or disposition);

 

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

 

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

 

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

 

(10) in the nature of an intangible or similar Tax upon or with respect to the value or principal amount of the interest of any 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 are imposed because of the place of incorporation or the activities unrelated to the Transactions in the taxing jurisdiction of such Tax Indemnitee;

 

(11) imposed on a Tax Indemnitee by a Taxing Authority, to the extent that such Taxes result from a connection between the Tax Indemnitee or a related Tax Indemnitee and such jurisdiction imposing such Tax unrelated to the Transactions; or

 

(12) to the extent imposed on an Indemnitee as a result of any non-exempt “prohibited transaction” under 406(a) of ERISA or Section 4975(c)(1) of the Code caused by such Indemnitee.

 

For purposes hereof, a Tax Indemnitee and any other Tax Indemnitees who are successors, assigns, agents, or Affiliates of such Tax Indemnitee shall be related Tax Indemnitees.

 

(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 imposed upon the receipt or accrual of the amounts payable under this Section 9.3 and any 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 request, in the event there is a dispute with respect to 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 (including, without limitation, whether a Tax refund has been received that a Tax Indemnitee would be required to pay to Borrower pursuant to Section 9.3(f) and whether a Tax Benefit has been realized that a Tax Indemnitee would be required to pay to Borrower pursuant to Section 9.3(d)(5)) such computation 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 request provide to such accounting firm such information in such Tax

 

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Indemnitee’s possession or control as is reasonably necessary (which such determination is in such accounting firm’s sole discretion, exercised in good faith), 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); provided, however, that in no event shall the tax returns, filings and confidential work papers of such Tax Indemnitee be required to be disclosed (provided that the disclosure of information set forth in such tax returns, filings and confidential work papers (as distinct from such returns, filings and work papers), shall be provided and shall not be protected from disclosure if needed for the verification of the computation of such indemnity payment or such amount owed to Borrower). For the avoidance of doubt, in no event shall Borrower have the right to receive any information provided to the accounting firm pursuant to the prior sentence. Such verification shall be binding. 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 that exceeds the greater of (A) 7.5% of the net present value of the payment as computed by such Tax Indemnitee or (B) $15,000, 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, and Borrower reasonably requests to minimize any indemnity payment pursuant to this Section 9.3.

 

(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 demand of a Tax Indemnitee, to such Tax Indemnitee within thirty (30) days of such demand (or, if a contest occurs in accordance with Section 9.3(d), within thirty (30) days after a Final Determination (as defined below)), but in no event more than three (3) Business Days before the related Tax is due. If requested by a Tax Indemnitee in writing, Borrower shall furnish 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 promptly upon written request such data as any Tax Indemnitee reasonably requires to enable such Tax Indemnitee to comply with the requirements of any taxing jurisdiction, unless such data are not within the possession or control of Borrower or (unless such data are specifically requested by a Taxing Authority) are not customarily furnished by U.S. domestic air carriers under similar circumstances. For purposes of this Section 9.3, a “Final Determination” is (A) 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, (B) a closing agreement

 

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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 (C) the termination of administrative proceedings and the expiration of the time for instituting a claim in a court proceeding.

 

(5) If any Tax Indemnitee actually realizes a Tax Benefit 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 Tax Benefit 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 (A) the amount of such tax savings, plus any additional tax savings recognized as the result of any payment made pursuant to this sentence, and (B) 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 (A) over the amount described in clause (B) 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 an Event of Default of a monetary nature exists. If a Tax Benefit is later disallowed or denied, the disallowance or denial shall be treated as a Tax indemnifiable under Section 9.3(b) without regard to the provisions of Section 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; provided that, notwithstanding the foregoing, the positions taken by such Tax Indemnitee on its Tax returns and filings, and, subject to the provisions of Section 9.3(e) hereof, in any Tax proceedings shall be within 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.

 

(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 increases the amount of Taxes subject to such claim as the result of the imposition of penalties or interest or unless the failure to notify effectively forecloses 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 thirty (30) days following Borrower’s receipt of such notice. In addition, such Tax Indemnitee shall (provided that Borrower shall have agreed to keep such information confidential other than to the extent necessary in order to

 

41

contest the claim) furnish Borrower with copies 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 thirty (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 and to the extent provided below, 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 (with the determination of which alternative to be used made in the sole discretion of the party controlling the contest). If requested to do so by Borrower, 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. Borrower shall have the right, at its cost and expense, (A) in any judicial or administrative proceeding that involves an indemnified Tax and other Taxes which do not involve such Tax Indemnitee, to assume responsibility for and control of the defense thereof, (B) in any judicial or administrative proceeding that involves an indemnified Tax and other Taxes asserted against such Tax Indemnitee related or unrelated to the transactions contemplated by the Operative Agreements, (x) to assume responsibility for and control of the defense of such indemnified Tax to the extent that the same may be and is severed from such other claims (and such Tax Indemnitee shall use its reasonable efforts to obtain such severance) or (y) if such indemnified Tax is not severable from other claims with respect to Taxes asserted against such Tax Indemnitee that are material to such Tax Indemnitee, to assume responsibility for and control of the defense of such indemnified Tax if such assumption would not, in such Tax Indemnitee’s reasonable judgment, prejudice or impair in any material respect, such Tax Indemnitee’s management of such other claims and (C) in any other case, to be consulted by such Tax Indemnitee and in which case such Tax Indemnitee agrees to cooperate with reasonable requests of Borrower, each such request at Borrower’s cost and expense, with respect to judicial proceedings subject to the control of such Tax Indemnitee and to be allowed, at Borrower’s cost and expense, to participate therein. The Tax Indemnitee may participate at its own cost and expense and with its own counsel in any judicial proceeding controlled by Borrower pursuant to the preceding provisions; provided that such Tax Indemnitee’s participation does not, in Borrower’s reasonable judgment, prejudice or impair in any material respect the defense and management of such case. Borrower shall not be entitled to control the defense of any such judicial or administrative proceeding (and the relevant Tax Indemnitee shall be entitled to assume such control) if such proceedings are likely to entail any risk of criminal liability or material risk of civil liability being imposed on such Tax Indemnitee that, in the case of civil liability in the reasonable opinion of such Tax Indemnitee,

 

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adversely affects in any material respect the business reputation of such Tax Indemnitee or if, in the reasonable opinion of such Tax Indemnitee, control by Borrower would be inappropriate due to a conflict of interest. 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), which consent may not be unreasonably withheld).

 

(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 (A) 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, (B) if such contest involves the payment of the claim, Borrower advances the amount thereof (to the extent indemnified hereunder) that is 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), (C) the action to be taken will not result in any material risk of forfeiture, sale, or loss of the Aircraft (unless Borrower makes provisions to protect the interests of any such Tax Indemnitee in a manner reasonably satisfactory to such Tax Indemnitee) (provided, that such Tax Indemnitee shall notify Borrower in writing promptly after it becomes aware of any such risk), (D) no Event of Default exists, unless Borrower has provided security for its obligations hereunder by advancing to such Tax Indemnitee, before proceeding or continuing with such contest, the amount of the Tax being contested, plus any interest and penalties and an amount estimated in good faith by such Tax Indemnitee for expenses, and (E) Borrower has acknowledged in writing its obligations to indemnify the Tax Indemnitee for the Tax to be contested; provided, however, that Borrower will not be bound by the acknowledgment of liability if the contest is resolved on a basis that clearly establishes that Borrower would not have been liable to the Tax Indemnitee under this Agreement in the absence of such acknowledgment. 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 (which permission may not be unreasonably withheld), Borrower’s obligation to indemnify such Tax Indemnitee with respect to such claim (and all directly-related claims, and claims based on the outcome of such claim) shall terminate, and such Tax Indemnitee shall repay to Borrower any amount previously paid or advanced to such Tax Indemnitee with respect to such claim, plus interest at the rate that would have been payable by the relevant Taxing Authority on a refund of such Tax.

 

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(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 (A) 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), and (B) pays to Borrower any amount previously paid or advanced by Borrower pursuant to this Section 9.3 with respect to such Tax, plus interest at the rate that would have been payable by the relevant Taxing Authority on a refund of such Tax.

 

(f) Refund . If in the ordinary course of administering its Tax affairs any Tax Indemnitee determines or discovers the existence of a refund, or that such Tax Indemnitee is entitled to a credit against other liability, which such refund or credit is in whole or in part directly attributable to any Taxes paid, reimbursed, or advanced by Borrower pursuant to Section 9.3, such Tax Indemnitee shall pay to Borrower within thirty (30) days of such receipt an amount equal to the lesser of (i) the amount of such refund or credit that is directly attributable to Taxes paid, reimbursed or advanced by Borrower, 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 (i)), and (ii) 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 (i) over the amount described in clause (ii) 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 thirty (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. If a Tax Indemnitee pays Borrower any amount under this Section 9.3(f) and if and to the extent that it is subsequently determined pursuant to a contest conducted in accordance with Section 9.3(e) that such Tax Indemnitee was not entitled to the refund for which such Tax Indemnitee made such payment to Borrower, such determination shall be treated as the imposition of a Tax for which Borrower is obligated to indemnify such Tax Indemnitee pursuant to the provisions of Section 9.3(b), without regard to the provisions of Section 9.3(c) (other than Section 9.3(c)(5), (8) or (10)). Notwithstanding anything to the contrary herein, if Borrower provides a Tax Indemnitee with a written notice setting forth facts and circumstances which create a reasonable possibility of a refund of (or a credit against other liability with respect to) an indemnified Tax, such Tax Indemnitee shall make a determination as to whether it has received such a refund (or is entitled to such a credit). If a Tax Indemnitee determines that it has received such a refund (or is entitled to such a credit) it shall pay such refund (or the amount of such credit) to Borrower in accordance with the terms of this Section 9.3(f). For the avoidance of doubt, in no event shall any Tax Indemnitee be required to make available any of its Tax Documents (or any other

 

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information relating to its Taxes its deems confidential), to Borrower or any other Person (except as provided in Section 9.3(d)(2) of this Agreement).

 

(g) Tax Filing . Borrower shall timely file any report, return, or statement that is required to be filed with respect to any Tax which is subject to indemnification under this 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 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 in writing 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 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.

 

(h) Forms . Each Tax Indemnitee agrees to furnish from time to time to Borrower, Security Agent, or such other Person as Borrower or Security Agent shall designate, at Borrower’s or Security Agent’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, and (ii) Borrower has provided such Tax Indemnitee with any information necessary to complete such form not otherwise reasonably available to such Tax Indemnitee. For the avoidance of doubt, by failing to comply with this Section 9.3(h) (whether by failing to provide a form when required to do so or by providing an inaccurate or invalid form), such Tax Indemnitee shall be in breach of the foregoing covenant and responsible for damages resulting therefrom.

 

(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.

 

(j) Subrogation . Upon payment of any Tax by Borrower pursuant to this Section 9.3 to or on behalf of a Tax Indemnitee, without any further action, Borrower shall be subrogated to any claims that such Tax Indemnitee may have relating to that Tax. Such Tax Indemnitee shall cooperate reasonably and in good faith with Borrower to permit Borrower to pursue such claims.

 

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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 thirtieth (30 ^th ) 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 Article 9 and shall have duly complied with all the terms of this Article 9, Borrower’s liability for indemnification under this Article 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 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(s).

 

10. S ECURITY A GENT .

 

10.1 Appointment and Powers .

 

Each Lender hereby and by acceptance of an Equipment Note irrevocably appoints, designates and authorizes The Royal Bank of Scotland plc New York Branch as Security Agent under this Agreement and under each other Applicable Operative Agreement, irrevocably appoints The Royal Bank of Scotland plc New York Branch as a “representative” of the Lenders within the meaning of Section 9-511 of the UCC and irrevocably authorizes Security Agent to take such action on its behalf under the provisions of this Agreement and each other Applicable Operative Agreements and to exercise the powers and perform the duties as are expressly delegated to it by the terms of this Agreement or any other Applicable Operative Agreement, together with such powers as are reasonably incidental thereto. Security Agent hereby accepts

 

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such appointments, designations and authorizations. Notwithstanding any provision to the contrary contained in this Agreement or in any other Applicable Operative Agreement, Security Agent shall not have any duties or responsibilities, except those expressly set forth herein and in the Applicable Operative Agreements, nor shall Security Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Applicable Operative Agreement or otherwise exist against Security Agent.

 

10.2 Limitation on Security Agent’s Liability .

 

Neither Security Agent nor any of its directors, officers, employees or agents shall be liable or responsible to any Lender for any action taken or omitted to be taken by it or them under or in connection with the Applicable Operative Agreements, except for its or their own gross negligence, willful misconduct or knowing violations of Law. Security Agent shall not be responsible to any Lender for (a) any recitals, statements, representations or warranties contained in the Applicable Operative Agreements or in any certificate or other document referred to or provided for in, or received by any of the Lenders under, the Applicable Operative Agreements, (b) the value, validity, effectiveness, genuineness or enforceability of the Applicable Operative Agreements or any such certificate or other document, (c) the value or sufficiency of the Collateral (as defined in the Applicable Mortgage) or (d) any failure by Borrower to perform any of its obligations under the Applicable Operative Agreements. Security Agent may exercise any of its duties under this Agreement and the other Applicable Operative Agreements by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Security Agent shall not be responsible to any Lender for the negligence or misconduct of any such agents or attorneys-in-fact so long as Security Agent was not grossly negligent in selecting or directing such agents or attorneys-in-fact. Security Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Applicable Operative Documents, or to inspect the properties, books or records of Borrower. Security Agent shall be entitled to rely and shall be fully protected in relying upon any certification, notice or other communication (including any thereof by telephone or telecopier) believed by it to be genuine and correct and to have been signed or given by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by Security Agent. Security Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Applicable Operative Agreements unless it shall first receive such advice or concurrence of the Majority in Interest of the Lenders in respect of the Applicable Aircraft (or, if so specified by this Agreement, all Lenders, or as otherwise provided in Section 2.5) as it deems appropriate or it shall first be indemnified to its satisfaction in accordance with Section 10.4 against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. Security Agent shall in all cases in respect of the Lenders be fully protected in acting, or in refraining from acting, under this Agreement and the other Operative Agreements in accordance with a request of the Majority in Interest of the Lenders in respect of the Applicable Aircraft (or, if so specified by this Agreement, all Lenders, or as otherwise provided in Section 2.5), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Equipment Notes.

 

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10.3 Rights as Lender .

 

Each Person acting as Security Agent that is also a Lender shall, in its capacity as a Lender, have the same rights and powers under the Applicable Operative Agreements as any other Lender and may exercise the same as though it were not acting as Security Agent, and the term “Lender” or “Lenders” shall include such Person in its individual capacity. Each Person acting as Security Agent (whether or not such Person is a Lender) and its Affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with Borrower and its Affiliates as if it were not acting as Security Agent.

 

10.4 Indemnification .

 

In respect of an Aircraft to which it is a Lender and the Transactions with respect thereto, each Lender agrees, as between itself and Security Agent, to indemnify Security Agent (to the extent not reimbursed by Borrower under the Applicable Operative Agreements and without limiting the obligation of Borrower to do so), ratably on the basis of the unpaid Original Amounts of the Applicable Equipment Notes held by such Lenders (or, if no Equipment Notes in respect of such Aircraft are at the time issued, ratably on the basis of their respective Commitments applicable to such Aircraft), for any and all Expenses that may be imposed on, incurred by or asserted against Security Agent (including the costs and expenses that Borrower is obligated to pay under the Applicable Operative Agreements) in any way relating to or arising out of the Applicable Operative Agreements or any other documents contemplated thereby or referred to therein or the transactions contemplated thereby or the enforcement of any of the terms thereof or of any such other documents, provided that no such Lender shall be liable for any of the foregoing to the extent such Expenses result from Security Agent’s gross negligence, willful misconduct or knowing violations of Law by Security Agent. The agreements in this Section 10.4 shall survive the payment of the Equipment Notes and all other amounts payable under the Operative Agreements.

 

10.5 Non-reliance on Security Agent and other Lenders .

 

Each Lender agrees that it has made and will continue to make, independently and without reliance on Security Agent or any other Lender, and based on such documents and information as it deems appropriate, its own credit analysis of Borrower, its own evaluation of the Collateral (as defined in the Applicable Mortgage) and its own decision to enter into the Applicable Operative Agreements and to take or refrain from taking any action in connection therewith. Security Agent shall not be required to keep itself informed as to the performance or observance by Borrower of the Applicable Operative Agreements or any other document referred to or provided for therein or to inspect the properties or books of Borrower or the Collateral (as defined in the Applicable Mortgage). Except for notices, reports and other documents and information expressly required to be furnished to the Lenders by Security Agent under the Applicable Operative Agreements, Security Agent shall have no obligation to provide any Lender with any information concerning the business, status or condition of Borrower or any Affiliate thereof, the Applicable Operative Agreements or the Collateral (as defined in the Applicable Mortgage) that may come into the possession of Security Agent or any of its Affiliates.

 

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10.6 Successor Security Agent .

 

(a) The institution acting as Security Agent or any successor thereto may resign at any time without cause by giving at least thirty (30) days’ prior written notice to Borrower and each Lender, such resignation to be effective upon the acceptance by a successor institution of its appointment as Security Agent. In addition, a Majority in Interest of the Lenders in respect of all Aircraft may at any time (but only with the consent of Borrower (unless an Event of Default shall have occurred and be continuing), which consent shall not be unreasonably withheld, delayed or conditioned) remove the institution acting as Security Agent without cause by an instrument in writing delivered to Borrower and Security Agent, and Security Agent shall promptly notify each Lender thereof in writing, such removal to be effective upon the acceptance by a successor institution of its appointment as Security Agent. In the case of the resignation or removal of the institution acting as Security Agent, a Majority in Interest of the Lenders in respect of all Aircraft may appoint a successor agent by an instrument signed by such holders, subject to approval by Borrower (unless an Event of Default shall have occurred and be continuing), which approval shall not be unreasonably withheld or delayed, whereupon such successor agent shall succeed to the rights, powers and duties of Security Agent and the term “Security Agent” shall mean such successor agent effective upon such appointment and approval and the former Security Agent’s rights, powers and duties as Security Agent shall be terminated, without any other or further act or deed on the part of such former Security Agent or any of the parties to this Agreement or any holder of the Equipment Notes. If a successor is not appointed within thirty (30) days after such notice of resignation or removal, Security Agent, Borrower or any Lender may apply to any court of competent jurisdiction to appoint a successor to act until such time as agent by an instrument signed by such holders, as a successor is appointed as provided above. The court-appointed successor shall immediately and without further act be superseded by any successor appointed by the Majority in Interest of the Lenders in respect of all Aircraft as provided for above. After any retiring Security Agent’s resignation as Security Agent, the provisions of this Section 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Security Agent under this Agreement and the other Operative Agreements.

 

(b) Any successor institution acting as Security Agent, however appointed, shall execute and deliver to Borrower and the predecessor institution acting as Security Agent an instrument accepting such appointment and assuming the obligations of Security Agent arising from and after the time of such appointment, and thereupon, without further act, such successor shall become vested with all the estates, properties, rights, powers, and duties of the predecessor hereunder and under the other Operative Agreements as if originally named Security Agent herein and therein; but nevertheless upon the written request of such successor Security Agent, such predecessor shall execute and deliver an instrument transferring to such successor, all the estates, properties, rights, and powers of such predecessor, and such predecessor shall duly assign, transfer, deliver, and pay over to such successor all money or other property then held by such predecessor hereunder and thereunder. Any successor Security Agent shall be bound by all actions taken or omitted to be taken under the Operative Agreements by each predecessor Security Agent.

 

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(c) Any successor institution acting as Security Agent, however appointed, shall be a bank or trust company or a branch of a foreign commercial bank that is subject to regulatory supervision by the Federal Reserve Board (within the meaning of Treasury Regulation 1.1441-1(b)(2)(iv)(A)) and that, in the case of such bank, trust company or branch, has its principal place of business in the United States of America, and that has (or the bank of which such branch is a branch has) (or whose obligations under the Operative Agreements are guaranteed by an affiliated entity that has) a combined capital and surplus of at least $500,000,000, if such an institution is then willing, able, and legally qualified to perform the duties of Security Agent under the Operative Agreements upon reasonable or customary terms.

 

10.7 Notice of Default .

 

In respect of an Aircraft, if Security Agent obtains Actual Knowledge of a Default (as defined in the Applicable Mortgage), Security Agent shall notify each Lender holding an Equipment Note. Subject to Sections 5.6 of the Applicable Mortgage and Section 10.8 hereof, Security Agent shall take such action, or refrain from taking such action, with respect to an Event of Default or Default (including with respect to the exercise of any rights or remedies hereunder) as Security Agent shall be instructed in writing by a Majority in Interest of the Lenders in respect of the Applicable Aircraft. Unless it has Actual Knowledge, Security Agent shall not be deemed to have knowledge or notice of a Default or an Event of Default unless notified in writing by Borrower or one or more Lenders.

 

10.8 Instructions from a Majority in Interest of Lenders .

 

Except as provided in Sections 2.5, 10.2 and 11.1 hereof or in Section 7.1 of the Applicable Mortgage, upon the written instructions at any time and from time to time of a Majority in Interest of the Lenders with respect to the Applicable Aircraft, Security Agent shall, in respect of an Aircraft and the transaction contemplated with respect thereto, take such of the following actions as shall be specified in such instructions: (a) give such notice or direction or exercise such right, remedy, or power under any of the Applicable Operative Agreements as shall be specified in such instructions, (b) approve as satisfactory to Security Agent all matters required by any of the Applicable Operative Agreements to be satisfactory to Security Agent, and (c) enter into any amendment, modification or supplement of any of the Applicable Operative Agreements or grant consents, waivers or approvals requested by Borrower under any of the Applicable Operative Agreements.

 

10.9 Reports, Notices, etc .

 

Security Agent will furnish to each relevant Lender, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, and other instruments furnished by Borrower to Security Agent under any of the Applicable Operative Agreements.

 

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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. The Majority in Interest of the Lenders in respect of the Applicable Aircraft and Borrower may, or, with the written consent of the Majority in Interest of the Lenders in respect of the Applicable Aircraft, parties to the Applicable Operative Agreements may, from time to time, and Security Agent shall, at the direction of the Majority in Interest of the Lenders in respect of the Applicable Aircraft, (unless its respective rights or obligations as Security Agent are adversely affected thereby), (a) enter into written amendments, supplements or modifications hereto and to the other Operative Agreements for the purpose of adding any provisions to this Agreement or the other Operative Agreements or changing in any manner the rights of the Lenders, Security Agent or Borrower hereunder or thereunder in respect of the Applicable Aircraft, or (b) waive, on such terms and conditions as the Majority in Interest of the Lenders may specify in such instrument, any of the requirements of this Agreement or the other Operative Agreements or any Default or Event of Default and its consequences in respect of the Applicable Aircraft; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) forgive the principal amount or extend the final scheduled date of maturity of any Equipment Note, extend the scheduled date of any payment of principal of any Equipment Note, reduce the stated rate of any interest payable on any Equipment Note or any interest or fee payable hereunder or extend the scheduled date of any payment thereof or, increase the amount or extend the expiration date of the Commitments, in each case without the written consent of each Lender directly affected thereby; (ii) eliminate or reduce the voting rights of any Lender under this Section 11.1 without the written consent of such Lender; (iii)(w) reduce any percentage specified in the definition of Majority in Interest of the Lenders, (x) consent to the assignment or transfer by Borrower of any of its rights and obligations under this Agreement and the other Applicable Operative Agreements or (y) reduce, modify or amend any indemnities in favor of Security Agent or the Lenders, in any such case without the consent of each Person affected thereby; (iv) amend, modify or waive any provision of Section 10 without the written consent of Security Agent; or (v) take any action inconsistent with the provisions of this Section 11.1 without the written consent of each Lender affected thereby. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the applicable Lenders and shall be binding upon Borrower, the applicable Lenders, Security Agent and all future holders of the Applicable Equipment Notes. In the case of any waiver, Borrower, the Lenders and Security Agent shall be restored to their former position and rights hereunder and under the other Operative Agreements, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. 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.

 

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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 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 of and when made) made in this Agreement, in the other Applicable Operative Agreements and in any document, certificate or statement delivered pursuant hereto or in connection herewith 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 (other than Equipment Notes), 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 may be executed in any number of counterparts (or upon separate signature pages bound together into one or more counterparts), each fully-executed set taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with Borrower and Security Agent.

 

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

 

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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. To the extent permitted by applicable Law, the rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law.

 

11.7 Notices .

 

Unless otherwise expressly permitted by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers, and other communications required or permitted to be made, given, furnished, or filed hereunder shall be in writing (and the specification of a writing in certain instances and not in others does not imply an intention that a writing is not required as to the latter), shall refer specifically to this Agreement, and shall be personally delivered, sent by fax or 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 .

 

THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

11.9 Submission to Jurisdiction; Waivers .

 

Each of the parties hereto hereby irrevocably and unconditionally:

 

(a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Operative Agreements to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof;

 

(b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

 

(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party, at its address set forth on

 

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Schedule 1 or at such other address of which the Security Agent shall have been notified pursuant thereto;

 

(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by Law or shall limit the right to sue in any other jurisdiction; and

 

(e) waives, to the maximum extent not prohibited by Law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.

 

11.10 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 Section 9 who are intended third-party beneficiaries of Section 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.

 

11.11 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.

 

11.12 Acknowledgments .

 

Borrower hereby acknowledges that:

 

(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the Applicable Operative Agreements;

 

(b) neither Security Agent nor any Lender has any fiduciary relationship with or duty to Borrower arising out of or in connection with this Agreement or any of the other Applicable Operative Agreements, and the relationship between Security Agent and the Lenders, on one hand, and Borrower, on the other hand, in connection herewith or therewith is solely that of creditor and debtor respectively; and

 

(c) no joint venture is created hereby or by the other Operative Agreements or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among Borrower, Security Agent and the Lenders.

 

11.13 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

 

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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.

 

11.14 Section 1110 .

 

Borrower and the Lenders intend that Security Agent 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.

 

11.15 Adjustments; Set-Off .

 

(a) Except to the extent this Agreement expressly provides for payments to be allocated to a particular Lender, if any Lender (a “Benefitted Lender”) shall, at any time after the Equipment Notes and other amounts payable hereunder shall immediately become due and payable pursuant to Article 5 of the Applicable Mortgage, receive any payment of all or part of the obligations owing to it, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set off, pursuant to events or proceedings of the nature referred to in Article 5 of the Applicable Mortgage or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of the Applicable Equipment Notes owing to such other Lender, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of the Applicable Equipment Notes owing to each such other Lender, or shall provide such other Lenders with the benefits of any such collateral, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.

 

(b) In addition to any rights and remedies of the Lenders provided by Law, each Lender shall have the right, without prior notice to Borrower, any such notice being expressly waived by Borrower to the extent permitted by applicable Law, upon any amount becoming due and payable by Borrower hereunder (whether at the stated maturity, by acceleration or otherwise), to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of Borrower. Each Lender agrees promptly to notify Borrower and the Security Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of each Lender under this Section are in addition to other rights and remedies that such Lender may have.

 

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11.16 Successors and Assigns .

 

The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (i) Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with Section 7.1.

 

11.17 Waivers of Jury Trial .

 

THE BORROWER, THE SECURITY AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.

 

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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”, “Security Agent” 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) 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

 

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

 

(b) 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.

 

(c) 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

 

Acceptable Potential Swap Counterparties : (A) JPMorgan Chase, Deutsche Bank, Lloyds Bank, BNP Paribas, Calyon, Bayern Landesbank, CIBC, Royal Bank of Canada, ING, Hypo-Vereinsbank, Dresdner, Bank of America, N.A., Barclays Bank, Citibank, Wachovia, N.A. Halifax Bank of Scotland or HSH Nordbank; provided, that each such bank agrees to a mutual break clause on the tenth (10 ^th ) anniversary of the exercise of the Fixed Rate Option or (B) such other banks as Security Agent and Borrower may mutually agree.

 

Account : as defined in Section 2.2(d) of the Loan Agreement.

 

Actual Knowledge : as it applies to any Person, actual knowledge of a vice president or more-senior officer of such Person or any ot