-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VZ5BnnAKVjm6bNvlEvtRYIsB32++fFDaJOdmk9kASgFjUtUIS56wT5I67Qme6BfC kjfh6ppX8pYrRHuNxEeINg== 0000931763-96-000064.txt : 19960304 0000931763-96-000064.hdr.sgml : 19960304 ACCESSION NUMBER: 0000931763-96-000064 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960229 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960301 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELTA AIR LINES INC /DE/ CENTRAL INDEX KEY: 0000027904 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 580218548 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05424 FILM NUMBER: 96530425 BUSINESS ADDRESS: STREET 1: HARTSFIELD ATLANTA INTL AIRPORT STREET 2: 1030 DELTA BLVD CITY: ATLANTA STATE: GA ZIP: 30320-6001 BUSINESS PHONE: 4047152600 MAIL ADDRESS: STREET 1: 1030 DELTA BLVD STREET 2: DEPT 971 CITY: ATLANTA STATE: GA ZIP: 30320-6001 FORMER COMPANY: FORMER CONFORMED NAME: DELTA AIR CORP DATE OF NAME CHANGE: 19660908 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ____________ FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): February 29, 1996 DELTA AIR LINES, INC. ------------------------------------------------------ (Exact name of Registrant as Specified in its Charter) Delaware ---------------------------------------------- (State or Other Jurisdiction of Incorporation) 1-5424 ------------------------ (Commission File Number) 58-0218548 ------------------------------------ (IRS Employer Identification Number) Hartsfield Atlanta International Airport Atlanta, Georgia 30320 - ---------------------------------------- ------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (404) 715-2600 -------------- Not applicable ----------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS The documents attached hereto as Exhibits 4(a)(2), 4(a)(3), 4(c)(1), 4(c)(2), 4(d), 4(e) and 4(f) are being filed in connection with, and incorporated by reference into, the Company's Registration Statement on Form S-3 (File No. 33-50175) which was declared effective on November 17, 1993. Signatures ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DELTA AIR LINES, INC. By: /s/ James H. Sanregret -------------------------------- James H. Sanregret Treasurer Date: February 29, 1996 INDEX TO EXHIBITS Exhibit Number and Description - ------------------------------ 4(a)(2) Forms of Pass Through Certificates (included in 4(a)(3)). 4(a)(3) Forms of Series Supplement 1996 - Series A1 and A2 to the Pass Through Trust Agreement between Delta Air Lines, Inc. and the Pass Through Trustee relating to the Pass Through Certificates.* 4(c)(1) Forms of Trust Indenture and Security Agreement (Delta 1994-1), dated as of April 1, 1994, Amended and Restated as of March 1, 1996, between the Owner Trustee and the Indenture Trustee, relating to Equipment Trust Certificates (Delta 1996-A1 and A2). 4(c)(2) Forms of Equipment Trust Certificate (included in Exhibit 4(c) (1)). 4(d) Forms of Participation Agreement (Delta 1994-1), dated as of April 1, 1994, Amended and Restated as of March 1, 1996, among Delta Air Lines, Inc., as Lessee, the Owner Participant(s), the Owner Trustee, the Indenture Trustee, and the Pass Through Trustee relating to Equipment Trust Certificates (Delta 1996-A1 and A2). 4(e) Forms of Trust Agreement (Delta 1994-1), dated as of April 1, 1994, Amended and Restated as of March 1, 1996, between the Owner Participant and the Owner Trustee relating to Equipment Trust Certificates (Delta 1996-A1 and A2). 4(f) Forms of Lease Agreement (Delta 1994 -1), dated as of April 1, 1994, Amended and Restated as of March 1, 1996, between the Owner Trustee, as the Lessor, and Delta Air Lines, Inc., as Lessee, relating to Equipment Trust Certificates (Delta 1994 -A1 and A2). ___________________ * Separate Series Supplements will be entered into with respect to both series of Pass Through Certificates. Except for differences in designations, dollar amounts, interest rates, percentages, final distribution dates and the like, which are indicated at appropriate places in the text, there are no material details in which the Series Supplements and related forms of Pass Through Certificates differ from the corresponding Exhibits for the forms of such documents. EX-4.(A)(3) 2 FORM OF SERIES SUPPLEMENT 1996 =================================================================== SERIES SUPPLEMENT 1996-A1 Dated February __, 1996 to PASS THROUGH TRUST AGREEMENT Dated as of August 1, 1992 In Each Case Between THE BANK OF NEW YORK, as Pass Through Trustee, and DELTA AIR LINES, INC. $__________ Delta Air Lines Pass Through Trust, 1996-A1 Delta Air Lines 1996 Pass Through Certificates, Series A1 =================================================================== TABLE OF CONTENTS -----------------
Page ---- RECITALS 1 ARTICLE I CERTAIN DEFINITIONS 2 ARTICLE II DESIGNATIONS; PASS THROUGH TRUST FORMATION; ISSUANCE OF PASS THROUGH CERTIFICATES SECTION 2.01 Designations; Aggregate Amount 4 SECTION 2.02 Declaration of Trust; Authorization 4 SECTION 2.03 Issuance of Pass Through Certificates 4 SECTION 2.04 Purchase of Equipment Trust Certificate 5 SECTION 2.05 Representations and Warranties of the Company 5 SECTION 2.06 Conditions Precedent 5 ARTICLE III DISTRIBUTION AND RECORD DATES; CERTIFICATE AND SPECIAL PAYMENTS ACCOUNTS SECTION 3.01 Distribution Dates 6 SECTION 3.02 Record Dates 6 SECTION 3.03 Certificate Account and Special Payments Account 6
-i- SECTION 3.04 Form of Pass Through Certificates 6 SECTION 3.05 Appointment of Authenticating Agent; Paying Agent and Registrar 6 ARTICLE IV MISCELLANEOUS SECTION 4.01 Governing Law; Counterpart Form 7 SECTION 4.02 Modification and Ratification of the Pass Through Agreement 7 SECTION 4.03 Termination 9 EXHIBIT A - Form of Pass Through Certificate SCHEDULE I Equipment Trust Certificate; Related Indenture Documents
-ii- SERIES SUPPLEMENT 1996-A1 SERIES SUPPLEMENT 1996-A1dated February __, 1996, (this "Series Supplement"), to the Pass Through Trust Agreement, dated as of August 1, 1992 (the "Pass Through Agreement"), in each case between DELTA AIR LINES, INC., a Delaware corporation (the "Company") and THE BANK OF NEW YORK, a New York banking corporation, as successor Pass Through Trustee (the "Pass Through Trustee"). RECITALS WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, Section 2.01 of the Pass Through Agreement provides, among other things, that the Company and the Pass Through Trustee may execute and deliver one or more series supplements, each for the purpose of forming a separate pass through trust for the benefit of the certificateholders of the series of pass through certificates to be issued pursuant to such pass through trust, establishing certain terms of such pass through certificates, and pursuant to which the pass through certificates of such series shall be executed and authenticated by the Pass Through Trustee and delivered as directed by the Company; WHEREAS, pursuant to the Participation Agreement, the Company has agreed to cause the Equipment Trust Certificate to be issued and sold to the Pass Through Trustee, and the Pass Through Trustee has agreed to purchase the Equipment Trust Certificate, which will be held in trust as Trust Property for the benefit of the Certificateholders; WHEREAS, in order to facilitate such sale, the Company has agreed, pursuant to the Underwriting Agreement, to cause the Pass Through Trustee to issue and sell the Pass Through Certificates to the Underwriters; WHEREAS, pursuant to the Pass Through Agreement and the terms of this Series Supplement, the Pass Through Trustee will execute, authenticate and deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of the purchase price therefor, which will be applied in accordance with this Series Supplement to purchase the Equipment Trust Certificate; WHEREAS, the Pass Through Trustee hereby declares the creation of this Pass Through Trust for the benefit of the Certificateholders, and the initial Certificateholders of such Pass Through Certificates, as the grantors of such Pass Through Trust, by their respective acceptances of such Pass Through Certificates, join in the creation of such Pass Through Trust; WHEREAS, to facilitate the sale of the Equipment Trust Certificate to, and the purchase of the Equipment Trust Certificate by, the Pass Through Trustee on behalf of this Pass Through Trust, the Company has duly authorized the execution and delivery of this Series Supplement as the "issuer," as such term is defined in and solely for purposes of the Securities Act, of the Pass Through Certificates and as the "obligor," as such term is defined in and solely for purposes of the Trust Indenture Act, with respect to all such Pass Through Certificates; WHEREAS, this Series Supplement is subject to the provisions of the Trust Indenture Act and shall, to the extent applicable, be governed by such provisions; IT IS HEREBY COVENANTED AND AGREED by and between the parties hereto as follows: ARTICLE I CERTAIN DEFINITIONS All terms used in this Series Supplement that are defined in the Pass Through Agreement, either directly or by reference therein, have the meanings assigned to them therein as supplemented by this Article I, if applicable, except to the extent the context clearly requires otherwise. Any such defined term that is defined in the Pass Through Agreement as relating to a particular Pass Through Trust or Series rather than to any Pass Through Trust or Series generally shall, when used in this Series Supplement, relate solely to the Delta Air Lines Pass Through Trust, 1996-A1, or the Delta Air Lines 1996 Pass Through Certificates, Series A1, as the case may be, whether or not expressly so stated herein. "Authenticating Agent" has the meaning set forth in Section 3.05 hereof. -------------------- "Certificate Account" means the Certificate Account designated by the ------------------- Pass Through Trustee in accordance with Section 3.03 hereof. "Certificateholders" means the Certificateholders of the Series of Pass ------------------ Through Certificates designated in Section 2.01 hereof. "Cut-Off Date" means__________________, 1996. ------------ "Delivery Date" has the meaning set forth in the Participation Agreement. ------------- "Equipment Trust Certificate" means the Equipment Trust Certificate --------------------------- described in Schedule I hereto and any replacement thereof. -2- "Indenture" means the Trust Indenture and Security Agreement described in --------- Schedule I hereto. "Issuance Date" means the date defined as the Closing Date in the ------------- Underwriting Agreement. "Participation Agreement" means the Participation Agreement described ----------------------- in Schedule I hereto. "Pass Through Certificates" means the Pass Through Certificates designated ------------------------- in Section 2.01 hereof. "Pass Through Trust," "this Pass Through Trust" and other like words ------------------ ----------------------- means the Pass Through Trust designated in Section 2.01 hereof. "Paying Agent" means the Person specified as such in Section 3.05 hereof. ------------ "Record Date" means any Record Date specified in Section 3.02 hereof. ----------- "Registrar" means the Person specified as such in Section 3.05 hereof. --------- "Regular Distribution Date" means any Regular Distribution Date specified ------------------------- in Section 3.01 hereof. "Special Distribution Date" means any Special Distribution Date specified ------------------------- in Section 3.01 hereof. "Special Payments Account" means the Special Payments Account designated ------------------------ by the Pass Through Trustee in accordance with Section 3.03 hereof. "Trust Property" means all money, instruments, including the Equipment -------------- Trust Certificate that have been issued by the related Owner Trust and delivered to and accepted by the Pass Through Trustee for the benefit of the Certificateholders, and other property held as the property of this Pass Through Trust, including all distributions thereon and proceeds thereof. "Underwriters" means the several Underwriters named in the Underwriting ------------ Agreement. "Underwriting Agreement" means the Pricing Agreement dated February ---------------------- ____, 1996 among the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Goldman, Sachs & Co. which incorporates by reference the Standard Provisions (as such term is defined therein). -3- ARTICLE II DESIGNATIONS; PASS THROUGH TRUST FORMATION; ISSUANCE OF PASS THROUGH CERTIFICATES SECTION 2.01. Designations; Aggregate Amount. The Pass Through Trust ------------------------------- created hereby shall be designated Delta Air Lines Pass Through Trust, 1996-A1 (herein sometimes called this "Pass Through Trust"). The Pass Through Certificates evidencing Fractional Undivided Interests in such Pass Through Trust shall be designated as the Delta Air Lines 1996 Pass Through Certificates, Series A1 (herein sometimes called the "Series A1 Pass Through Certificates"), and shall be issued in minimum original denominations of $1,000 Fractional Undivided Interest and integral multiples thereof. The Series A1 Pass Through Certificates shall be the only instruments evidencing a fractional undivided interest in such Pass Through Trust. Except as provided in Section 2.09 of the Pass Through Agreement, the aggregate amount of[Series A1 Pass Through Certificates that may be authenticated, delivered and outstanding under this Series Supplement is limited to $[__________]. SECTION 2.02. Declaration of Trust; Authorization. Each initial ------------------------------------ Certificateholder, by its payment for and acceptance of any Series A1 Pass Through Certificate, is hereby deemed (1) as grantor, to join in the creation and declaration of this Pass Through Trust and (2) as beneficiary of such Pass Through Trust, to authorize and direct the Pass Through Trustee to execute and deliver all documents to which the Pass Through Trustee is a party that may be necessary or desirable to consummate the transactions contemplated hereby and to exercise its rights and perform its duties under the Participation Agreement, the Indenture, the Pass Through Agreement and this Series Supplement. The Pass Through Trustee hereby acknowledges and accepts this grant of trust and declares that it will hold the Trust Property as Pass Through Trustee upon this Pass Through Trust for the use and benefit of the Certificateholders. SECTION 2.03. Issuance of Pass Through Certificates. ------------------------------------- (a) Subject to the terms set forth herein, on the Issuance Date (i) the Company shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable by such Underwriters pursuant to the Underwriting Agreement with respect to the Series A1 Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the Series A1 Pass Through Certificates to the Underwriters as provided in the Underwriting Agreement upon receipt by the Pass Through Trustee of such proceeds. (b) Notwithstanding anything to the contrary in the Pass Through Trust Agreement and this Series Supplement, in no event shall the Equipment Trust Certificate be a Delayed ETC and no purchase thereof shall be permitted hereby at anytime after the Closing Date. -4- SECTION 2.04. Purchase of Equipment Trust Certificates. On the ----------------------------------------- Issuance Date, the Pass Through Trustee shall purchase, in accordance with Section 2.02 of the Pass Through Agreement, the Equipment Trust Certificate from the Owner Trustee upon the satisfaction or waiver of the conditions for such purchase by the Pass Through Trustee set forth in the Participation Agreement. SECTION 2.05. Representations and Warranties of the Company. All of ---------------------------------------------- the representations and warranties of the Company set forth or incorporated by reference in Section 2 of the Underwriting Agreement are incorporated by reference in this Series Supplement as if set forth herein and the Company represents and warrants that such representations and warranties are true and correct on the date hereof, except to the extent that such representations and warranties expressly relate solely to an earlier date or later date (in which case such representations and warranties are correct on and as of such earlier date or will be correct on and as of such later date, as the case may be). SECTION 2.06. Conditions Precedent. The obligations of the Pass --------------------- Through Trustee to participate in the transactions described in Sections 2.03 and 2.04 hereof are subject to (i) receipt by the Pass Through Trustee of a certificate of the Company to the same effect as the certificate of the Company delivered to the Underwriters pursuant to Section 6(b)(5) of the Underwriting Agreement, and (ii) satisfaction or waiver of the conditions for the purchase by the Underwriters of the Pass Through Certificates set forth in Section 6 of the Underwriting Agreement, which satisfaction or waiver for the purposes hereof shall be conclusively demonstrated by the receipt by the Pass Through Trustee of the total proceeds payable by such Underwriters pursuant to the Underwriting Agreement with respect to the Series A1 Pass Through Certificates. ARTICLE III DISTRIBUTION AND RECORD DATES; CERTIFICATE AND SPECIAL PAYMENTS ACCOUNT SECTION 3.01. Distribution Dates. The Regular Distribution Dates are ------------------- _____________ and _____________, commencing on ________, 1996. The Special Distribution Date for any month in which a Special Payment is to be distributed will be the 11th day of such month. SECTION 3.02. Record Dates. The Record Dates for the Regular Distribution ------------- Dates and for any Special Distribution Date is the fifteenth day preceding such Regular Distribution Date or Special Distribution Date, as the case may be, whether or not such date is a Business Day. SECTION 3.03. Certificate Account and Special Payments Account. In ------------------------------------------------- accordance with Section 5.01(a) of the Pass Through Agreement, upon receipt of any Scheduled Payment the Pass Through Trustee shall immediately deposit such Scheduled Payment into the Certificate Account, a separate and non-interest bearing account designated by the Pass Through Trustee to be used for such purpose. In accordance with Section 5.01(b) of the Pass Through Agreement, upon receipt of any -5- Special Payment the Pass Through Trustee shall immediately deposit such Special Payment into the Special Payments Account, a separate and, except as provided in Section 5.04 of the Pass Through Agreement, non-interest bearing account designated by the Pass Through Trustee to be used for such purpose. SECTION 3.04. Form of Pass Through Certificates. Subject to Section ---------------------------------- 2.07 of the Pass Through Agreement, each of the Series A1 Pass Through Certificates will be substantially in the form of Exhibit A hereto. The Company agrees that the Series A1 Pass Through Certificates will not be issued in the form of a Registered Global Security pursuant to Section 2.12 of the Pass Through Agreement. SECTION 3.05. Appointment of Authenticating Agent; Paying Agent and ----------------------------------------------------- Registrar. (a) The Pass Through Trustee may appoint an authenticating agent - ---------- (the "Authenticating Agent") with respect to the Pass Through Certificates which shall be authorized to act on behalf of the Pass Through Trustee to authenticate the Pass Through Certificates issued upon original issue and upon exchange or registration of transfer thereof or pursuant to Section 2.09 of the Pass Through Agreement and Pass Through Certificates so authenticated shall be entitled to the benefits of the Pass Through Agreement and this Series Supplement and shall be valid and obligatory for all purposes as if authenticated by the Pass Through Trustee. Whenever reference is made in the Pass Through Agreement or this Series Supplement to the authentication and delivery of Pass Through Certificates by the Pass Through Trustee or the Pass Through Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Pass Through Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Pass Through Trustee by an Authenticating Agent. (b) The Pass Through Trustee shall initially serve as the Paying Agent, Registrar and Authenticating Agent for the Series A1 Pass Through Certificates. ARTICLE IV MISCELLANEOUS SECTION 4.01. Governing Law; Counterpart Form. AS PROVIDED IN -------------------------------- SECTION 13.14 OF THE PASS THROUGH AGREEMENT, THIS SERIES SUPPLEMENT AND EACH SERIES A1 PASS THROUGH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Series Supplement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. -6- SECTION 4.02. Modification and Ratification of the Pass Through ------------------------------------------------- Agreement. (a) The Pass Through Agreement is incorporated herein by reference - ---------- in its entirety, except to the extent set forth below in subsection (b), and shall be deemed to be a part of this Series Supplement as if set forth in full herein, and is in all respects ratified and confirmed, as supplemented and modified by this Series Supplement. (b) The following Sections of the Pass Through Agreement as incorporated herein are modified as set forth below: (i) The second sentence of the first paragraph of Section 5.02(c) is modified to read as follows: "If the related Equipment Trust Certificates are to be redeemed or purchased in whole prior to their respective maturities, such notice shall be mailed not less than 20 days prior to the date any such Special Payment is to be distributed." (ii) The proviso in Section 5.02(d) is modified to insert the words "or Special" after the word "Scheduled" and before the word "Payment". (iii) The reference in Section 10.01(b) to "Section 7.13" is changed to "Section 315(e) of the Trust Indenture Act". (iv) The last paragraph of Section 11.01 is modified by adding the words "entered into pursuant to this Section 11.01" after the words "supplemental agreement". (v) In clause (aa) of the first paragraph of Section 11.02, the reference to "Section 7.11" is changed to "Section 7.10". (vi) Section 11.08 is modified to insert the following at the end of such Section: Notwithstanding anything herein to the contrary, the Pass Through Trustee may, in its own discretion and at its own direction and without the consent of the Certificateholders, consent or agree to or approve any modification, amendment, supplement to or addition to or deletion from any related Indenture Document, if, as reflected in an Opinion of Counsel to the party requesting such action addressed to the Pass Through Trustee and the other parties to the applicable agreement, such modification, amendment, supplement, addition or deletion does not adversely affect the interests of the Certificateholders. Upon the receipt by the Pass Through Trustee of an Officers' Certificate and an Opinion of Counsel (which opinion, in the case of the Lessee, shall be by counsel other than an employee of the Lessee unless the related modification, amendment, supplement, addition or deletion effects a change that relates solely to the period after there are no longer any Certificates Outstanding), the Pass Through Trustee shall consent and evidence its consent to any action permitted by this Section 11.08 and the Pass Through Trustee shall be fully protected in relying on such Officers' Certificate and Opinion of Counsel. -7- (vii) All references in the Pass Through Agreement to "NATIONSBANK OF SOUTH CAROLINA, NATIONAL ASSOCIATION" are hereby deleted and are changed to "THE BANK OF NEW YORK". (viii) The reference in Article I in the definition of "Business -------- Day" to "South Carolina" is hereby deleted. - --- (ix) The definition of "Corporate Trust Office" in Article I is ---------------------- modified to read as follows: "'Corporate Trust Office' means the corporate trust office of the Pass Through Trustee located at 101 Barclay Street, New York, New York 10286, or such other office at which the Pass Through Trustee's corporate trust business is administered and which the Pass Through Trustee shall have specified by notice in writing to the Company and the Certificateholders of each Series." (x) In clause (i) of the first paragraph of Section 13.06, the reference to "1901 Main Street, Columbia, South Carolina 29222 (telecopier (803) 765-8178), Attention: Corporate Trust Department (with a copy to NationsBank of Georgia, National Association, at 600 Peachtree Street, N.E., Suite 900, Atlanta, Georgia 30308, (telecopier (404) 607-6534), Attention: Corporate Trust Department" is changed to "The Bank of New York, 101 Barclay Street, New York, New York, New York 10286 (telecopier (212) 815-5915), Attention: Corporate Trust-Corporate Finance Group". (xi) All references in Exhibits A and B to the Pass Through Trust Agreement to "NationsBank of South Carolina, National Association" are changed to "The Bank of New York". SECTION 4.03. Termination. In no event shall this Pass Through Trust ------------ continue beyond the expiration of 21 years after the death of the last descendant of John F. Kennedy, living on the date of this Series Supplement. -8- IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by their respective officers thereunto duly authorized, all as of the day and year first above written. DELTA AIR LINES, INC. By:______________________________ Name: Title: THE BANK OF NEW YORK, as Pass Through Trustee By:______________________________ Name: Title: -9- Exhibit A to Series Supplement FORM OF PASS THROUGH CERTIFICATE DELTA AIR LINES PASS THROUGH TRUST, 1996-A1 1994 Pass Through Certificate, Series A1 Final Scheduled Regular Distribution Date: [_________, ____] evidencing a fractional undivided interest in a pass through trust, the property of which includes an Equipment Trust Certificate, secured by an aircraft leased to Delta Air Lines, Inc. Certificate No. A1- [______] $__________ Fractional Undivided Interest representing [ ]% of the Pass Through Trust per $1,000 face amount. THIS CERTIFIES THAT ____________ , for value received, is the registered owner of a $_________ (_____________ dollars) Fractional Undivided Interest in the Delta Air Lines Pass Through Trust, 1996-A1 (the "Pass Through Trust") created and declared by The Bank of New York, as pass through trustee (the "Pass Through Trustee"), pursuant to the Pass Through Trust Agreement dated as of August 1, 1992 (the "Pass Through Agreement"), as supplemented by Series Supplement 1996-A1 thereto dated February __, 1996 (the "Series Supplement") between the Pass Through Trustee and Delta Air Lines, Inc., a corporation incorporated under Delaware law (the "Company"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Pass Through Agreement and the Series Supplement. This Certificate is one of the duly authorized Certificates designated as "Delta Air Lines 1996 Pass Through Certificates, Series A1". This Pass Through Certificate is issued under and is subject to the terms, provisions, and conditions of the Pass Through Agreement and the Series Supplement, to which the Certificateholder of this Pass Through Certificate by virtue of the acceptance hereof assents and by which such Certificateholder is bound. The property of the Pass Through Trust (the "Trust Property") includes one or more Equipment Trust Certificates (the "Equipment Trust Certificates"). Each series of Equipment Trust Certificates is secured by a security interest in an aircraft leased to the Company. The Pass Through Certificates represent Fractional Undivided Interests in the Pass Through Trust and the Trust Property, and have no rights, benefits or interest in respect of any other separate trust established pursuant to the terms of the Pass Through Agreement for any other Series of Pass Through Certificates issued pursuant thereto. Subject to and in accordance with the terms of the Pass Through Agreement and the Series Supplement, from funds then available to the Pass Through Trustee, there will be distributed on each ________ and ___________ (a "Regular Distribution Date"), commencing on ___________, 1996, to the Person in whose name this Pass Through Certificate is registered at the close of business on the 15th day preceding the applicable Regular Distribution Date, an amount in respect of the Scheduled Payments on the Equipment Trust Certificates due on such Regular Distribution Date, the receipt of which has been confirmed by the Pass Through Trustee, equal to the product of the percentage interest in the Pass Through Trust evidenced by this Pass Through Certificate and an amount equal to the sum of such Scheduled Payments. Subject to and in accordance with the terms of the Pass Through Agreement and the Series Supplement, if Special Payments on the Equipment Trust Certificates are received by the Pass Through Trustee, from funds then available to the Pass Through Trustee, there shall be distributed on the applicable Special Distribution Date, to the Person in whose name this Pass Through Certificate is registered at the close of business on the 15th day preceding such Special Distribution Date, an amount in respect of such Special Payments on the Equipment Trust Certificates, the receipt of which has been confirmed by the Pass Through Trustee, equal to the product of the percentage interest in the Pass Through Trust evidenced by this Pass Through Certificate and an amount equal to the sum of such Special Payments so received. The Special Distribution Date shall be the 11th day of the month determined as provided in the Pass Through Agreement and the Series Supplement. The Pass Through Trustee will notify each Certificateholder by mail as provided in the Pass Through Agreement of each Special Payment and the Special Distribution Date therefor. If a Distribution Date is not a Business Day, distribution shall be made on the immediately following Business Day with the same force and effect as if made on such Distribution Date and no interest shall accrue during the intervening period. Distributions on this Pass Through Certificate will be made by the Pass Through Trustee to the Person entitled thereto, without the presentation or surrender of this Pass Through Certificate or the making of any notation hereon. Except as otherwise provided in the Pass Through Agreement and notwithstanding the above, the final distribution on this Pass Through Certificate will be made after notice mailed by the Pass Through Trustee of the pendency of such distribution and only upon presentation and surrender of this Pass Through Certificate at the office or agency of the Pass Through Trustee specified in such notice. NO EMPLOYEE BENEFIT PLAN SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR INDIVIDUAL RETIREMENT ACCOUNT OR EMPLOYEE BENEFIT PLAN SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (HEREINAFTER COLLECTIVELY REFERRED TO AS AN "ERISA" PLAN), MAY ACQUIRE OR HOLD ANY OF THE PASS THROUGH CERTIFICATES. THE ACQUIRING BY ANY PERSON OF ANY PASS THROUGH CERTIFICATE SHALL BE DEEMED TO CONSTITUTE A REPRESENTATION BY SUCH PERSON TO DELTA AIR LINES, INC., THE RELATED OWNER PARTICIPANTS, THE RELATED OWNER TRUSTEES, THE RELATED INDENTURE TRUSTEES AND THE PASS THROUGH TRUSTEE OR THEIR RESPECTIVE SUCCESSORS, AS THE CASE MAY BE, THAT SUCH PERSON IS NOT AN ERISA PLAN AND THAT SUCH PERSON IS NOT ACQUIRING, AND HAS NOT ACQUIRED, SUCH PASS THROUGH CERTIFICATE WITH ASSETS OF AN ERISA PLAN. -2- This Pass Through Certificate shall be governed by and construed in accordance with the laws of the State of New York. Reference is hereby made to the further provisions of this Pass Through Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Pass Through Trustee, by manual signature, this Pass Through Certificate shall not be entitled to any benefit under the related Pass Through Trust or be valid for any purpose. IN WITNESS WHEREOF, the Pass Through Trustee has caused this Pass Through Certificate to be duly executed. DELTA AIR LINES PASS THROUGH TRUST, 1996-A1 By: THE BANK OF NEW YORK, as Pass Through Trustee By: ___________________________ Authorized Signatory -3- THE PASS THROUGH TRUSTEE'S CERTIFICATE OF AUTHENTICATION Dated: March _____, 1996 This is one of the Pass Through Certificates referred to in the within- mentioned Pass Through Agreement and the Series Supplement. THE BANK OF NEW YORK, as Pass Through Trustee By: _____________________________ Authorized Signatory [Reverse of Pass Through Certificate] The Pass Through Certificates do not represent a direct obligation of, or an obligation guaranteed by, or an interest in, the Company or the Pass Through Trustee or any affiliate thereof. The Pass Through Certificates are limited in right of payment, all as more specifically set forth on the face hereof and in the Pass Through Agreement and the Series Supplement. All payments or distributions made to Certificateholders under the Pass Through Agreement shall be made only from the Trust Property and only to the extent that the Pass Through Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of the Pass Through Agreement and the Series Supplement. Each Certificateholder of this Pass Through Certificate, by its acceptance hereof, agrees that it will look solely to the income and proceeds from the Trust Property to the extent available for distribution to such Certificateholder as provided in the Pass Through Agreement and the Series Supplement. This Pass Through Certificate does not purport to summarize the Pass Through Agreement and the Series Supplement and reference is made to the Pass Through Agreement and the Series Supplement for information with respect to the interests, rights, benefits, obligations, proceeds, and duties evidenced hereby. A copy of the Pass Through Agreement and the Series Supplement may be examined during normal business hours at the principal office of the Pass Through Trustee, and at such other places, if any, designated by the Pass Through Trustee, by any Certificateholder upon request. As of the date of issuance of this Pass Through Certificate, and assuming that no early redemption, purchase or default in respect of the Equipment Trust Certificate shall occur, the aggregate scheduled repayments of principal on the Equipment Trust Certificate for the Pass Through Trust and the resulting Pool Factors for the Pass Through Trust after taking into account each such repayment are set forth below: -2- Pass Through Trust, 1996-A1
Scheduled Principal Regular Payments Distribution on Equipment Trust Date Certificate Pool Factor ------------ ------------------ -----------
-3- The Pass Through Agreement and the Series Supplement permit, with certain exceptions provided therein, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Certificateholders under the Pass Through Trust at any time by the Company and the Pass Through Trustee with the consent of the Majority In Interest of Certificateholders in the Pass Through Trust. Any such consent by the Certificateholder of this Pass Through Certificate shall be conclusive and binding on such Certificateholder and upon all future Certificateholders of this Pass Through Certificate and of any Pass Through Certificate issued upon the transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent is made upon this Pass Through Certificate. The Pass Through Agreement and the Series Supplement also permit the amendment thereof, in certain limited circumstances, without the consent of the Certificateholders of any of the Pass Through Certificates. As provided in the Pass Through Agreement and the Series Supplement and subject to certain limitations set forth therein, the transfer of this Pass Through Certificate is registrable in the Register upon surrender of this Pass Through Certificate for registration of transfer at the facilities or agencies maintained by the Pass Through Trustee in its capacity as Registrar, or by any successor Registrar, duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Pass Through Trustee and the Registrar duly executed by the Certificateholder hereof or such Certificateholder's attorney duly authorized in writing, and thereupon one or more new Pass Through Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Pass Through Trust will be issued to the designated transferee or transferees. The Pass Through Certificates are issuable only as registered Pass Through Certificates without coupons in minimum original denominations of $1,000 Fractional Undivided Interest and integral multiples thereof. As provided in the Pass Through Agreement and the Series Supplement and subject to certain limitations set forth therein, Pass Through Certificates are exchangeable for new Pass Through Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Pass Through Trust, as requested by the Certificateholder surrendering the same. No service charge will be made for any such registration of transfer or exchange, but the Pass Through Trustee shall require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Pass Through Trustee, the Registrar, and any agent of the Pass Through Trustee or the Registrar may treat the person in whose name this Pass Through Certificate is registered as the owner hereof for all purposes, and neither the Pass Through Trustee, the Registrar, nor any such agent shall be affected by any notice to the contrary. -4- The obligations and responsibilities created by the Pass Through Agreement and the Series Supplement and the Pass Through Trust created thereby shall terminate upon the distribution to Certificateholders of all amounts required to be distributed to them pursuant to the Pass Through Agreement and the Series Supplement and the disposition of all property held as part of the Trust Property. -5- SCHEDULE I Delta Air Lines, Inc. Pass Through Trust 1996-A1 Equipment Trust Certificate Related Indenture Documents 1. Equipment Trust Certificate (Delta 1994-1) Interest Rate: Maturity: Principal Amount: Related Indenture Documents: Trust Indenture and Security Agreement (Delta 1994-1) dated as of April 1, 1994, Amended and Restated as of February 1, 1996, between Wilmington Trust Company, as Owner Trustee, and The Bank of New York, as Indenture Trustee; Participation Agreement (Delta 1994-1) dated as of April 1, 1994, Amended and Restated as of February 1, 1996, among Delta Air Lines, Inc., as Lessee, the Owner Participant (as such term is defined therein), the Interim Refinancing Loan Participant (as such term is defined therein), Wilmington Trust Company, as Owner Trustee, The Bank of New York, as Indenture Trustee, and The Bank of New York, as Pass Through Trustee; Trust Agreement (Delta 1994-1) dated as of April 1, 1994, Amended and Restated as of February 1, 1996, between the Owner Participant (as such term is defined therein), and Wilmington Trust Company, as Owner Trustee; Lease Agreement (Delta 1994-1) dated as of April 1, 1994, Amended and Restated as of February 1, 1996, between Wilmington Trust Company, as Owner Trustee and Lessor, and Delta Air Lines, Inc., as Lessee. =================================================================== SERIES SUPPLEMENT 1996-A2 Dated February __, 1996 to PASS THROUGH TRUST AGREEMENT Dated as of August 1, 1992 In Each Case Between THE BANK OF NEW YORK, as Pass Through Trustee, and DELTA AIR LINES, INC. $__________ Delta Air Lines Pass Through Trust, 1996-A2 Delta Air Lines 1996 Pass Through Certificates, Series A2 =================================================================== TABLE OF CONTENTS -----------------
Page ---- RECITALS 1 ARTICLE I CERTAIN DEFINITIONS 2 ARTICLE II DESIGNATIONS; PASS THROUGH TRUST FORMATION; ISSUANCE OF PASS THROUGH CERTIFICATES SECTION 2.01 Designations; Aggregate Amount 4 SECTION 2.02 Declaration of Trust; Authorization 4 SECTION 2.03 Issuance of Pass Through Certificates 4 SECTION 2.04 Purchase of Equipment Trust Certificate 5 SECTION 2.05 Representations and Warranties of the Company 5 SECTION 2.06 Conditions Precedent 5 ARTICLE III DISTRIBUTION AND RECORD DATES; CERTIFICATE AND SPECIAL PAYMENTS ACCOUNTS SECTION 3.01 Distribution Dates 6 SECTION 3.02 Record Dates 6 SECTION 3.03 Certificate Account and Special Payments Account . 6
-i- SECTION 3.04 Form of Pass Through Certificates 6 SECTION 3.05 Appointment of Authenticating Agent; Paying Agent and Registrar 6 ARTICLE IV MISCELLANEOUS SECTION 4.01 Governing Law; Counterpart Form 7 SECTION 4.02 Modification and Ratification of the Pass Through Agreement 7 SECTION 4.03 Termination 9 EXHIBIT A - Form of Pass Through Certificate SCHEDULE I Equipment Trust Certificate; Related Indenture Documents
-ii- SERIES SUPPLEMENT 1996-A2 SERIES SUPPLEMENT 1996-A2 dated February __, 1996, (this "Series Supplement"), to the Pass Through Trust Agreement, dated as of August 1, 1992 (the "Pass Through Agreement"), in each case between DELTA AIR LINES, INC., a Delaware corporation (the "Company") and THE BANK OF NEW YORK, a New York banking corporation, as successor Pass Through Trustee (the "Pass Through Trustee"). RECITALS WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, Section 2.01 of the Pass Through Agreement provides, among other things, that the Company and the Pass Through Trustee may execute and deliver one or more series supplements, each for the purpose of forming a separate pass through trust for the benefit of the certificateholders of the series of pass through certificates to be issued pursuant to such pass through trust, establishing certain terms of such pass through certificates, and pursuant to which the pass through certificates of such series shall be executed and authenticated by the Pass Through Trustee and delivered as directed by the Company; WHEREAS, pursuant to the Participation Agreement, the Company has agreed to cause the Equipment Trust Certificate to be issued and sold to the Pass Through Trustee, and the Pass Through Trustee has agreed to purchase the Equipment Trust Certificate, which will be held in trust as Trust Property for the benefit of the Certificateholders; WHEREAS, in order to facilitate such sale, the Company has agreed, pursuant to the Underwriting Agreement, to cause the Pass Through Trustee to issue and sell the Pass Through Certificates to the Underwriters; WHEREAS, pursuant to the Pass Through Agreement and the terms of this Series Supplement, the Pass Through Trustee will execute, authenticate and deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of the purchase price therefor, which will be applied in accordance with this Series Supplement to purchase the Equipment Trust Certificate; WHEREAS, the Pass Through Trustee hereby declares the creation of this Pass Through Trust for the benefit of the Certificateholders, and the initial Certificateholders of such Pass Through Certificates, as the grantors of such Pass Through Trust, by their respective acceptances of such Pass Through Certificates, join in the creation of such Pass Through Trust; WHEREAS, to facilitate the sale of the Equipment Trust Certificate to, and the purchase of the Equipment Trust Certificate by, the Pass Through Trustee on behalf of this Pass Through Trust, the Company has duly authorized the execution and delivery of this Series Supplement as the "issuer," as such term is defined in and solely for purposes of the Securities Act, of the Pass Through Certificates and as the "obligor," as such term is defined in and solely for purposes of the Trust Indenture Act, with respect to all such Pass Through Certificates; WHEREAS, this Series Supplement is subject to the provisions of the Trust Indenture Act and shall, to the extent applicable, be governed by such provisions; IT IS HEREBY COVENANTED AND AGREED by and between the parties hereto as follows: ARTICLE I CERTAIN DEFINITIONS All terms used in this Series Supplement that are defined in the Pass Through Agreement, either directly or by reference therein, have the meanings assigned to them therein as supplemented by this Article I, if applicable, except to the extent the context clearly requires otherwise. Any such defined term that is defined in the Pass Through Agreement as relating to a particular Pass Through Trust or Series rather than to any Pass Through Trust or Series generally shall, when used in this Series Supplement, relate solely to the Delta Air Lines Pass Through Trust, 1996-A2, or the Delta Air Lines 1996 Pass Through Certificates, Series A2, as the case may be, whether or not expressly so stated herein. "Authenticating Agent" has the meaning set forth in Section 3.05 hereof. -------------------- "Certificate Account" means the Certificate Account designated by the ------------------- Pass Through Trustee in accordance with Section 3.03 hereof. "Certificateholders" means the Certificateholders of the Series of Pass ------------------ Through Certificates designated in Section 2.01 hereof. "Cut-Off Date" means __________________, 1996. ------------ "Delivery Date" has the meaning set forth in the Participation Agreement. ------------- "Equipment Trust Certificate" means the Equipment Trust Certificate --------------------------- described in Schedule I hereto and any replacement thereof. -2- "Indenture" means the Trust Indenture and Security Agreement described in --------- Schedule I hereto. "Issuance Date" means the date defined as the Closing Date in the ------------- Underwriting Agreement. "Participation Agreement" means the Participation Agreement described in ----------------------- Schedule I hereto. "Pass Through Certificates" means the Pass Through Certificates designated ------------------------- in Section 2.01 hereof. "Pass Through Trust," "this Pass Through Trust" and other like words ------------------ ----------------------- means the Pass Through Trust designated in Section 2.01 hereof. "Paying Agent" means the Person specified as such in Section 3.05 hereof. ------------ "Record Date" means any Record Date specified in Section 3.02 hereof. ----------- "Registrar" means the Person specified as such in Section 3.05 hereof. --------- "Regular Distribution Date" means any Regular Distribution Date specified ------------------------- in Section 3.01 hereof. "Special Distribution Date" means any Special Distribution Date specified ------------------------- in Section 3.01 hereof. "Special Payments Account" means the Special Payments Account designated ------------------------ by the Pass Through Trustee in accordance with Section 3.03 hereof. "Trust Property" means all money, instruments, including the Equipment -------------- Trust Certificate that have been issued by the related Owner Trust and delivered to and accepted by the Pass Through Trustee for the benefit of the Certificateholders, and other property held as the property of this Pass Through Trust, including all distributions thereon and proceeds thereof. "Underwriters" means the several Underwriters named in the Underwriting ------------ Agreement. "Underwriting Agreement" means the Pricing Agreement dated February ---------------------- ____, 1996 among the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Goldman, Sachs & Co. which incorporates by reference the Standard Provisions (as such term is defined therein). -3- ARTICLE II DESIGNATIONS; PASS THROUGH TRUST FORMATION; ISSUANCE OF PASS THROUGH CERTIFICATES SECTION 2.01. Designations; Aggregate Amount. The Pass Through Trust ------------------------------- created hereby shall be designated Delta Air Lines Pass Through Trust, 1996-A2 (herein sometimes called this "Pass Through Trust"). The Pass Through Certificates evidencing Fractional Undivided Interests in such Pass Through Trust shall be designated as the Delta Air Lines 1996 Pass Through Certificates, Series A2 (herein sometimes called the "Series A2 Pass Through Certificates"), and shall be issued in minimum original denominations of $1,000 Fractional Undivided Interest and integral multiples thereof. The Series A2 Pass Through Certificates shall be the only instruments evidencing a fractional undivided interest in such Pass Through Trust. Except as provided in Section 2.09 of the Pass Through Agreement, the aggregate amount of Series A2 Pass Through Certificates that may be authenticated, delivered and outstanding under this Series Supplement is limited to $[__________]. SECTION 2.02. Declaration of Trust; Authorization. Each initial ------------------------------------ Certificateholder, by its payment for and acceptance of any Series A2 Pass Through Certificate, is hereby deemed (1) as grantor, to join in the creation and declaration of this Pass Through Trust and (2) as beneficiary of such Pass Through Trust, to authorize and direct the Pass Through Trustee to execute and deliver all documents to which the Pass Through Trustee is a party that may be necessary or desirable to consummate the transactions contemplated hereby and to exercise its rights and perform its duties under the Participation Agreement, the Indenture, the Pass Through Agreement and this Series Supplement. The Pass Through Trustee hereby acknowledges and accepts this grant of trust and declares that it will hold the Trust Property as Pass Through Trustee upon this Pass Through Trust for the use and benefit of the Certificateholders. SECTION 2.03. Issuance of Pass Through Certificates. -------------------------------------- (a) Subject to the terms set forth herein, on the Issuance Date (i) the Company shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable by such Underwriters pursuant to the Underwriting Agreement with respect to the Series A2 Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the Series A2 Pass Through Certificates to the Underwriters as provided in the Underwriting Agreement upon receipt by the Pass Through Trustee of such proceeds. (b) Notwithstanding anything to the contrary in the Pass Through Trust Agreement and this Series Supplement, in no event shall the Equipment Trust Certificate be a Delayed ETC and no purchase thereof shall be permitted hereby at anytime after the Closing Date. -4- SECTION 2.04. Purchase of Equipment Trust Certificates. On the ----------------------------------------- Issuance Date, the Pass Through Trustee shall purchase, in accordance with Section 2.02 of the Pass Through Agreement, the Equipment Trust Certificate from the Owner Trustee upon the satisfaction or waiver of the conditions for such purchase by the Pass Through Trustee set forth in the Participation Agreement. SECTION 2.05. Representations and Warranties of the Company. All of ---------------------------------------------- the representations and warranties of the Company set forth or incorporated by reference in Section 2 of the Underwriting Agreement are incorporated by reference in this Series Supplement as if set forth herein and the Company represents and warrants that such representations and warranties are true and correct on the date hereof, except to the extent that such representations and warranties expressly relate solely to an earlier date or later date (in which case such representations and warranties are correct on and as of such earlier date or will be correct on and as of such later date, as the case may be). SECTION 2.06. Conditions Precedent. The obligations of the Pass --------------------- Through Trustee to participate in the transactions described in Sections 2.03 and 2.04 hereof are subject to (i) receipt by the Pass Through Trustee of a certificate of the Company to the same effect as the certificate of the Company delivered to the Underwriters pursuant to Section 6(b)(5) of the Underwriting Agreement, and (ii) satisfaction or waiver of the conditions for the purchase by the Underwriters of the Pass Through Certificates set forth in Section 6 of the Underwriting Agreement, which satisfaction or waiver for the purposes hereof shall be conclusively demonstrated by the receipt by the Pass Through Trustee of the total proceeds payable by such Underwriters pursuant to the Underwriting Agreement with respect to the [Series A1] [Series A2] Pass Through Certificates. ARTICLE III DISTRIBUTION AND RECORD DATES; CERTIFICATE AND SPECIAL PAYMENTS ACCOUNT SECTION 3.01. Distribution Dates. The Regular Distribution Dates are ------------------- _____________ and _____________, commencing on ________, 1996. The Special Distribution Date for any month in which a Special Payment is to be distributed will be the 11th day of such month. SECTION 3.02. Record Dates. The Record Dates for the Regular ------------- Distribution Dates and for any Special Distribution Date is the fifteenth day preceding such Regular Distribution Date or Special Distribution Date, as the case may be, whether or not such date is a Business Day. SECTION 3.03. Certificate Account and Special Payments Account. In ------------------------------------------------- accordance with Section 5.01(a) of the Pass Through Agreement, upon receipt of any Scheduled Payment the Pass Through Trustee shall immediately deposit such Scheduled Payment into the Certificate Account, a separate and non-interest bearing account designated by the Pass Through Trustee to be used for such purpose. In accordance with Section 5.01(b) of the Pass Through Agreement, upon receipt of any -5- Special Payment the Pass Through Trustee shall immediately deposit such Special Payment into the Special Payments Account, a separate and, except as provided in Section 5.04 of the Pass Through Agreement, non-interest bearing account designated by the Pass Through Trustee to be used for such purpose. SECTION 3.04. Form of Pass Through Certificates. Subject to Section ---------------------------------- 2.07 of the Pass Through Agreement, each of the [Series A1] [Series A2] Pass Through Certificates will be substantially in the form of Exhibit A hereto. The Company agrees that the [Series A1] [Series A2] Pass Through Certificates will not be issued in the form of a Registered Global Security pursuant to Section 2.12 of the Pass Through Agreement. SECTION 3.05. Appointment of Authenticating Agent; Paying Agent and ----------------------------------------------------- Registrar. (a) The Pass Through Trustee may appoint an authenticating agent - ---------- (the "Authenticating Agent") with respect to the Pass Through Certificates which shall be authorized to act on behalf of the Pass Through Trustee to authenticate the Pass Through Certificates issued upon original issue and upon exchange or registration of transfer thereof or pursuant to Section 2.09 of the Pass Through Agreement and Pass Through Certificates so authenticated shall be entitled to the benefits of the Pass Through Agreement and this Series Supplement and shall be valid and obligatory for all purposes as if authenticated by the Pass Through Trustee. Whenever reference is made in the Pass Through Agreement or this Series Supplement to the authentication and delivery of Pass Through Certificates by the Pass Through Trustee or the Pass Through Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Pass Through Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Pass Through Trustee by an Authenticating Agent. (b) The Pass Through Trustee shall initially serve as the Paying Agent, Registrar and Authenticating Agent for the Series A2 Pass Through Certificates. ARTICLE IV MISCELLANEOUS SECTION 4.01. Governing Law; Counterpart Form. AS PROVIDED IN -------------------------------- SECTION 13.14 OF THE PASS THROUGH AGREEMENT, THIS SERIES SUPPLEMENT AND EACH SERIES A2 PASS THROUGH CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. This Series Supplement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. -6- SECTION 4.02. Modification and Ratification of the Pass Through ------------------------------------------------- Agreement. (a) The Pass Through Agreement is incorporated herein by reference - ---------- in its entirety, except to the extent set forth below in subsection (b), and shall be deemed to be a part of this Series Supplement as if set forth in full herein, and is in all respects ratified and confirmed, as supplemented and modified by this Series Supplement. (b) The following Sections of the Pass Through Agreement as incorporated herein are modified as set forth below: (i) The second sentence of the first paragraph of Section 5.02(c) is modified to read as follows: "If the related Equipment Trust Certificates are to be redeemed or purchased in whole prior to their respective maturities, such notice shall be mailed not less than 20 days prior to the date any such Special Payment is to be distributed." (ii) The proviso in Section 5.02(d) is modified to insert the words "or Special" after the word "Scheduled" and before the word "Payment". (iii) The reference in Section 10.01(b) to "Section 7.13" is changed to "Section 315(e) of the Trust Indenture Act". (iv) The last paragraph of Section 11.01 is modified by adding the words "entered into pursuant to this Section 11.01" after the words "supplemental agreement". (v) In clause (aa) of the first paragraph of Section 11.02, the reference to "Section 7.11" is changed to "Section 7.10". (vi) Section 11.08 is modified to insert the following at the end of such Section: Notwithstanding anything herein to the contrary, the Pass Through Trustee may, in its own discretion and at its own direction and without the consent of the Certificateholders, consent or agree to or approve any modification, amendment, supplement to or addition to or deletion from any related Indenture Document, if, as reflected in an Opinion of Counsel to the party requesting such action addressed to the Pass Through Trustee and the other parties to the applicable agreement, such modification, amendment, supplement, addition or deletion does not adversely affect the interests of the Certificateholders. Upon the receipt by the Pass Through Trustee of an Officers' Certificate and an Opinion of Counsel (which opinion, in the case of the Lessee, shall be by counsel other than an employee of the Lessee unless the related modification, amendment, supplement, addition or deletion effects a change that relates solely to the period after there are no longer any Certificates Outstanding), the Pass Through Trustee shall consent and evidence its consent to any action permitted by this Section 11.08 and the Pass Through Trustee shall be fully protected in relying on such Officers' Certificate and Opinion of Counsel. -7- (vii) All references in the Pass Through Agreement to "NATIONSBANK OF SOUTH CAROLINA, NATIONAL ASSOCIATION" are hereby deleted and are changed to "THE BANK OF NEW YORK". (viii) The reference in Article I in the definition of "Business -------- Day" to "South Carolina" is hereby deleted. - --- (ix) The definition of "Corporate Trust Office" in Article I is ---------------------- modified to read as follows: "'Corporate Trust Office' means the corporate trust office of the Pass Through Trustee located at 101 Barclay Street, New York, New York 10286, or such other office at which the Pass Through Trustee's corporate trust business is administered and which the Pass Through Trustee shall have specified by notice in writing to the Company and the Certificateholders of each Series." (x) In clause (i) of the first paragraph of Section 13.06, the reference to "1901 Main Street, Columbia, South Carolina 29222 (telecopier (803) 765-8178), Attention: Corporate Trust Department (with a copy to NationsBank of Georgia, National Association, at 600 Peachtree Street, N.E., Suite 900, Atlanta, Georgia 30308, (telecopier (404) 607-6534), Attention: Corporate Trust Department" is changed to "The Bank of New York, 101 Barclay Street, New York, New York, New York 10286 (telecopier (212) 815-5915), Attention: Corporate Trust - - Corporate Finance Group". (xi) All references in Exhibits A and B to the Pass Through Trust Agreement to "NationsBank of South Carolina, National Association" are changed to "The Bank of New York". SECTION 4.03. Termination. In no event shall this Pass Through Trust ------------ continue beyond the expiration of 21 years after the death of the last descendant of John F. Kennedy, living on the date of this Series Supplement. -8- IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by their respective officers thereunto duly authorized, all as of the day and year first above written. DELTA AIR LINES, INC. By:______________________________ Name: Title: THE BANK OF NEW YORK, as Pass Through Trustee By:______________________________ Name: Title: -9- Exhibit A to Series Supplement FORM OF PASS THROUGH CERTIFICATE DELTA AIR LINES PASS THROUGH TRUST, 1996-A2 1994 Pass Through Certificate, Series A2 Final Scheduled Regular Distribution Date: [_________, ____] evidencing a fractional undivided interest in a pass through trust, the property of which includes an Equipment Trust Certificate, secured by an aircraft leased to Delta Air Lines, Inc. Certificate No. A2 - [______] $__________ Fractional Undivided Interest representing [ ]% of the Pass Through Trust per $1,000 face amount. THIS CERTIFIES THAT ____________ , for value received, is the registered owner of a $_________ (_____________ dollars) Fractional Undivided Interest in the Delta Air Lines Pass Through Trust, 1996-A2 (the "Pass Through Trust") created and declared by The Bank of New York, as pass through trustee (the "Pass Through Trustee"), pursuant to the Pass Through Trust Agreement dated as of August 1, 1992 (the "Pass Through Agreement"), as supplemented by Series Supplement 1996-A2 thereto dated February __, 1996 (the "Series Supplement") between the Pass Through Trustee and Delta Air Lines, Inc., a corporation incorporated under Delaware law (the "Company"), a summary of certain of the pertinent provisions of which is set forth below. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Pass Through Agreement and the Series Supplement. This Certificate is one of the duly authorized Certificates designated as "Delta Air Lines 1996 Pass Through Certificates, Series A2". This Pass Through Certificate is issued under and is subject to the terms, provisions, and conditions of the Pass Through Agreement and the Series Supplement, to which the Certificateholder of this Pass Through Certificate by virtue of the acceptance hereof assents and by which such Certificateholder is bound. The property of the Pass Through Trust (the "Trust Property") includes one or more Equipment Trust Certificates (the "Equipment Trust Certificates"). Each series of Equipment Trust Certificates is secured by a security interest in an aircraft leased to the Company. The Pass Through Certificates represent Fractional Undivided Interests in the Pass Through Trust and the Trust Property, and have no rights, benefits or interest in respect of any other separate trust established pursuant to the terms of the Pass Through Agreement for any other Series of Pass Through Certificates issued pursuant thereto. Subject to and in accordance with the terms of the Pass Through Agreement and the Series Supplement, from funds then available to the Pass Through Trustee, there will be distributed on each ________ and ___________ (a "Regular Distribution Date"), commencing on ___________, 1996, to the Person in whose name this Pass Through Certificate is registered at the close of business on the 15th day preceding the applicable Regular Distribution Date, an amount in respect of the Scheduled Payments on the Equipment Trust Certificates due on such Regular Distribution Date, the receipt of which has been confirmed by the Pass Through Trustee, equal to the product of the percentage interest in the Pass Through Trust evidenced by this Pass Through Certificate and an amount equal to the sum of such Scheduled Payments. Subject to and in accordance with the terms of the Pass Through Agreement and the Series Supplement, if Special Payments on the Equipment Trust Certificates are received by the Pass Through Trustee, from funds then available to the Pass Through Trustee, there shall be distributed on the applicable Special Distribution Date, to the Person in whose name this Pass Through Certificate is registered at the close of business on the 15th day preceding such Special Distribution Date, an amount in respect of such Special Payments on the Equipment Trust Certificates, the receipt of which has been confirmed by the Pass Through Trustee, equal to the product of the percentage interest in the Pass Through Trust evidenced by this Pass Through Certificate and an amount equal to the sum of such Special Payments so received. The Special Distribution Date shall be the 11th day of the month determined as provided in the Pass Through Agreement and the Series Supplement. The Pass Through Trustee will notify each Certificateholder by mail as provided in the Pass Through Agreement of each Special Payment and the Special Distribution Date therefor. If a Distribution Date is not a Business Day, distribution shall be made on the immediately following Business Day with the same force and effect as if made on such Distribution Date and no interest shall accrue during the intervening period. Distributions on this Pass Through Certificate will be made by the Pass Through Trustee to the Person entitled thereto, without the presentation or surrender of this Pass Through Certificate or the making of any notation hereon. Except as otherwise provided in the Pass Through Agreement and notwithstanding the above, the final distribution on this Pass Through Certificate will be made after notice mailed by the Pass Through Trustee of the pendency of such distribution and only upon presentation and surrender of this Pass Through Certificate at the office or agency of the Pass Through Trustee specified in such notice. NO EMPLOYEE BENEFIT PLAN SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR INDIVIDUAL RETIREMENT ACCOUNT OR EMPLOYEE BENEFIT PLAN SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (HEREINAFTER COLLECTIVELY REFERRED TO AS AN "ERISA" PLAN), MAY ACQUIRE OR HOLD ANY OF THE PASS THROUGH CERTIFICATES. THE ACQUIRING BY ANY PERSON OF ANY PASS THROUGH CERTIFICATE SHALL BE DEEMED TO CONSTITUTE A REPRESENTATION BY SUCH PERSON TO DELTA AIR LINES, INC., THE RELATED OWNER PARTICIPANTS, THE RELATED OWNER TRUSTEES, THE RELATED INDENTURE TRUSTEES AND THE PASS THROUGH TRUSTEE OR THEIR RESPECTIVE SUCCESSORS, AS THE CASE MAY BE, THAT SUCH PERSON IS NOT AN ERISA PLAN AND THAT SUCH PERSON IS NOT ACQUIRING, AND HAS NOT ACQUIRED, SUCH PASS THROUGH CERTIFICATE WITH ASSETS OF AN ERISA PLAN. -2- This Pass Through Certificate shall be governed by and construed in accordance with the laws of the State of New York. Reference is hereby made to the further provisions of this Pass Through Certificate set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Pass Through Trustee, by manual signature, this Pass Through Certificate shall not be entitled to any benefit under the related Pass Through Trust or be valid for any purpose. IN WITNESS WHEREOF, the Pass Through Trustee has caused this Pass Through Certificate to be duly executed. DELTA AIR LINES PASS THROUGH TRUST, 1996-A2 By: THE BANK OF NEW YORK, as Pass Through Trustee By: ___________________________ Authorized Signatory -3- THE PASS THROUGH TRUSTEE'S CERTIFICATE OF AUTHENTICATION Dated: March _____, 1996 This is one of the Pass Through Certificates referred to in the within- mentioned Pass Through Agreement and the Series Supplement. THE BANK OF NEW YORK, as Pass Through Trustee By: _____________________________ Authorized Signatory [Reverse of Pass Through Certificate] The Pass Through Certificates do not represent a direct obligation of, or an obligation guaranteed by, or an interest in, the Company or the Pass Through Trustee or any affiliate thereof. The Pass Through Certificates are limited in right of payment, all as more specifically set forth on the face hereof and in the Pass Through Agreement and the Series Supplement. All payments or distributions made to Certificateholders under the Pass Through Agreement shall be made only from the Trust Property and only to the extent that the Pass Through Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of the Pass Through Agreement and the Series Supplement. Each Certificateholder of this Pass Through Certificate, by its acceptance hereof, agrees that it will look solely to the income and proceeds from the Trust Property to the extent available for distribution to such Certificateholder as provided in the Pass Through Agreement and the Series Supplement. This Pass Through Certificate does not purport to summarize the Pass Through Agreement and the Series Supplement and reference is made to the Pass Through Agreement and the Series Supplement for information with respect to the interests, rights, benefits, obligations, proceeds, and duties evidenced hereby. A copy of the Pass Through Agreement and the Series Supplement may be examined during normal business hours at the principal office of the Pass Through Trustee, and at such other places, if any, designated by the Pass Through Trustee, by any Certificateholder upon request. As of the date of issuance of this Pass Through Certificate, and assuming that no early redemption, purchase or default in respect of the Equipment Trust Certificate shall occur, the aggregate scheduled repayments of principal on the Equipment Trust Certificate for the Pass Through Trust and the resulting Pool Factors for the Pass Through Trust after taking into account each such repayment are set forth below: -2- Pass Through Trust, 1996-A2
Scheduled Principal Regular Payments Distribution on Equipment Trust Date Certificate Pool Factor ------------ ------------------ -----------
-3- The Pass Through Agreement and the Series Supplement permit, with certain exceptions provided therein, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Certificateholders under the Pass Through Trust at any time by the Company and the Pass Through Trustee with the consent of the Majority In Interest of Certificateholders in the Pass Through Trust. Any such consent by the Certificateholder of this Pass Through Certificate shall be conclusive and binding on such Certificateholder and upon all future Certificateholders of this Pass Through Certificate and of any Pass Through Certificate issued upon the transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent is made upon this Pass Through Certificate. The Pass Through Agreement and the Series Supplement also permit the amendment thereof, in certain limited circumstances, without the consent of the Certificateholders of any of the Pass Through Certificates. As provided in the Pass Through Agreement and the Series Supplement and subject to certain limitations set forth therein, the transfer of this Pass Through Certificate is registrable in the Register upon surrender of this Pass Through Certificate for registration of transfer at the facilities or agencies maintained by the Pass Through Trustee in its capacity as Registrar, or by any successor Registrar, duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Pass Through Trustee and the Registrar duly executed by the Certificateholder hereof or such Certificateholder's attorney duly authorized in writing, and thereupon one or more new Pass Through Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Pass Through Trust will be issued to the designated transferee or transferees. The Pass Through Certificates are issuable only as registered Pass Through Certificates without coupons in minimum original denominations of $1,000 Fractional Undivided Interest and integral multiples thereof. As provided in the Pass Through Agreement and the Series Supplement and subject to certain limitations set forth therein, Pass Through Certificates are exchangeable for new Pass Through Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Pass Through Trust, as requested by the Certificateholder surrendering the same. No service charge will be made for any such registration of transfer or exchange, but the Pass Through Trustee shall require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Pass Through Trustee, the Registrar, and any agent of the Pass Through Trustee or the Registrar may treat the person in whose name this Pass Through Certificate is registered as the owner hereof for all purposes, and neither the Pass Through Trustee, the Registrar, nor any such agent shall be affected by any notice to the contrary. -4- The obligations and responsibilities created by the Pass Through Agreement and the Series Supplement and the Pass Through Trust created thereby shall terminate upon the distribution to Certificateholders of all amounts required to be distributed to them pursuant to the Pass Through Agreement and the Series Supplement and the disposition of all property held as part of the Trust Property. -5- SCHEDULE I Delta Air Lines, Inc. Pass Through Trust 1996-A2 Equipment Trust Certificate Related Indenture Documents 1. Equipment Trust Certificate (Delta 1994-1) Interest Rate: Maturity: Principal Amount: Related Indenture Documents: Trust Indenture and Security Agreement (Delta 1994-1) dated as of April 1, 1994, Amended and Restated as of February 1, 1996, between Wilmington Trust Company, as Owner Trustee, and The Bank of New York, as Indenture Trustee; Participation Agreement (Delta 1994-1) dated as of April 1, 1994, Amended and Restated as of February 1, 1996, among Delta Air Lines, Inc., as Lessee, the Owner Participant (as such term is defined therein), the Interim Refinancing Loan Participant (as such term is defined therein), Wilmington Trust Company, as Owner Trustee, The Bank of New York, as Indenture Trustee, and The Bank of New York, as Pass Through Trustee; Trust Agreement (Delta 1994-1) dated as of April 1, 1994, Amended and Restated as of February 1, 1996, between the Owner Participant (as such term is defined therein), and Wilmington Trust Company, as Owner Trustee; Lease Agreement (Delta 1994-1) dated as of April 1, 1994, Amended and Restated as of February 1, 1996, between Wilmington Trust Company, as Owner Trustee and Lessor, and Delta Air Lines, Inc., as Lessee. EX-4.(C)(1) 3 FORMS OF TRUST INDENTURE King & Spalding DRAFT: 2/28/96 TRUST INDENTURE AND SECURITY AGREEMENT (DELTA 1994-1) Dated as of April 1, 1994 Amended and Restated as of March 1, 1996 BETWEEN WILMINGTON TRUST COMPANY, Owner Trustee, AND THE BANK OF NEW YORK, Indenture Trustee TABLE OF CONTENTS
Page ---- RECITALS........................................................... 1 GRANTING CLAUSE.................................................... 2 HABENDUM CLAUSE.................................................... 4 ARTICLE I DEFINITIONS........................................................ 6 ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES SECTION 2.01 Authentication and Delivery of Certificates......... 14 SECTION 2.02 Execution of Certificates........................... 14 SECTION 2.03 Certificate of Authentication....................... 15 SECTION 2.04 Form and Terms of Certificates; Payments of Principal, Premium and Interest.................. 15 SECTION 2.05 Payments from Indenture Estate Only................. 16 SECTION 2.06 Registration, Transfer and Exchange................. 18 SECTION 2.07 Mutilated, Defaced, Destroyed, Lost and Stolen Certificates................................. 19 SECTION 2.08 Cancellation of Certificates; Destruction Thereof............................................. 20 SECTION 2.09 Temporary certificates.............................. 20 SECTION 2.10 Termination of Interest in Indenture Estate.............................................. 21 SECTION 2.11 Certificates in Respect of Replacement Airframe or Engine.................................. 21 ARTICLE III COVENANTS SECTION 3.01 Payment of Principal, Premium and Interest.......... 21
- i -
Page ---- SECTION 3.02 Offices for Payments, etc........................... 22 SECTION 3.03 Appointment to Fill a Vacancy in Office of Indenture Trustee................................... 22 SECTION 3.04 Paying Agents....................................... 22 SECTION 3.05 Covenants of the Trust Company and the Owner Trustee............................................. 23 SECTION 3.06 Intentionally Left Blank............................ 24 SECTION 3.07 Disposal of Indenture Estate........................ 24 SECTION 3.08 No Representations or Warranties as to Aircraft or Documents........................................... 24 SECTION 3.09 Further Assurances; Financing Statements............ 25 ARTICLE IV HOLDER LISTS AND REPORTS BY THE INDENTURE TRUSTEE........................ 25 ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE INDENTURE ESTATE SECTION 5.01 Basic Rent Distribution............................. 25 SECTION 5.02 Event of Loss and Replacement; Redemption or Purchase............................................ 26 SECTION 5.03 Payment After Indenture Event of Default, etc....... 27 SECTION 5.04 Certain Payments.................................... 28 SECTION 5.05 Other Payments...................................... 28 SECTION 5.06 Payments to Owner Trustee........................... 28 SECTION 5.07 Application of Payments............................. 29 SECTION 5.08 Investment of Amounts Held by Indenture Trustee..... 29 SECTION 5.09 Withholding Taxes................................... 30
- ii -
Page ---- ARTICLE VI REDEMPTION OR PURCHASE OF CERTIFICATES SECTION 6.01 No Redemption Prior to Maturity....................... 31 SECTION 6.02 Redemption or Purchase of Certificates................ 31 SECTION 6.03 Notice of Redemption or Purchase to Holders........... 32 SECTION 6.04 Deposit of Redemption Price........................... 32 SECTION 6.05 Certificates Payable on Redemption Date............... 33 SECTION 6.06 Mandatory Sinking Fund Redemptions.................... 33 ARTICLE VII REMEDIES OF INDENTURE TRUSTEE AND HOLDERS SECTION 7.01 Indenture Event of Default............................ 34 SECTION 7.02 Remedies.............................................. 36 SECTION 7.03 Return of Aircraft, etc............................... 39 SECTION 7.04 Indenture Trustee May Prove Debt...................... 42 SECTION 7.05 Remedies Cumulative................................... 44 SECTION 7.06 Suits for Enforcement................................. 44 SECTION 7.07 Discontinuance of Proceedings......................... 44 SECTION 7.08 Limitations on Suits by Holders....................... 45 SECTION 7.09 Unconditional Right of Holders to Receive Principal, Interest and Premium, and to Institute Certain Suits................................................. 45 SECTION 7.10 Control by Holders.................................... 45 SECTION 7.11 Waiver of Past Indenture Defaults..................... 46 SECTION 7.12 Notice of Indenture Defaults.......................... 47 SECTION 7.13 Waiver of Appraisement, etc.; Laws.................... 47
- iii -
Page ---- ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT SECTION 8.01 Certain Rights of Owner Trustee and Owner Participant........................................... 48 SECTION 8.02 Owner Participant's Right to Elect to Redeem or Purchase the Certificates, and to Provide for Payment............................................... 49 SECTION 8.03 Certain Rights of Owner Participant................... 51 ARTICLE IX CONCERNING THE INDENTURE TRUSTEE SECTION 9.01 Acceptance of Trusts.................................. 53 SECTION 9.02 Duties and Responsibilities of the Indenture Trustee; During an Indenture Default; Prior to an Indenture Default............................................... 53 SECTION 9.03 Certain Rights of the Indenture Trustee............... 55 SECTION 9.04 Indenture Trustee Not Responsible for Recitals, Disposition of Certificates or Application of Proceeds Thereof............................................... 57 SECTION 9.05 Indenture Trustee and Agents May Hold Certificates; Collections, etc...................................... 57 SECTION 9.06 Moneys Held by Indenture Trustee...................... 57 SECTION 9.07 Right of Indenture Trustee to Rely on Officers' Certificate, etc...................................... 57 SECTION 9.08 Replacement Airframes and Replacement Engines......... 57 SECTION 9.09 Trust Agreement and Trust Indenture Supplements for Replacements.......................................... 60 SECTION 9.10 Effect of Replacement................................. 61 SECTION 9.11 Compensation.......................................... 61 ARTICLE X CONCERNING THE HOLDERS SECTION 10.01 Evidence of Action Taken by Holders................... 61
- iv -
Page ---- SECTION 10.02 Proof of Execution of Instruments and of Holding of Certificates.......................................... 62 SECTION 10.03 Holders to Be Treated as Owners....................... 62 SECTION 10.04 Certificates Owned by Owner Trustee and the Lessee Deemed Not Outstanding................................ 62 SECTION 10.05 Right of Revocation of Action Taken................... 63 SECTION 10.06 ERISA Plan Prohibition................................ 64 ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE.................... 64 ARTICLE XII SUCCESSOR TRUSTEES SECTION 12.01 Notice of Successor Owner Trustee..................... 65 SECTION 12.02 Resignation and Removal of Indenture Trustee; Appointment of Successor.............................. 65 SECTION 12.03 Persons Eligible for Appointment as Indenture Trustee............................................... 67 SECTION 12.04 Acceptance of Appointment by Successor Trustee........ 67 SECTION 12.05 Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee......................... 68 SECTION 12.06 Appointment of Separate Trustees...................... 68 ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER DOCUMENTS SECTION 13.01 Supplemental Indentures Without Consent of Holders.... 71 SECTION 13.02 Supplemental Indentures With Consent of Holders....... 72 SECTION 13.03 Effect of Supplemental Indenture...................... 73 SECTION 13.04 Documents to Be Given to Indenture Trustee............ 74
- v -
Page ---- SECTION 13.05 Notation on Certificates in Respect of Supplemental Indentures.......................................... 74 SECTION 13.06 No Request Necessary for Lease Supplement or Trust Agreement and Trust Indenture Supplement............ 74 SECTION 13.07 Amendments, Waivers, etc. of Other Indenture Documents........................................... 74 ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS SECTION 14.01 Satisfaction and Discharge of Indenture; Termination of Indenture........................................ 76 SECTION 14.02 Application by Indenture Trustee of Funds Deposited for Payment of Certificates......................... 78 SECTION 14.03 Repayment of Moneys Held by Paying Agent............ 78 SECTION 14.04 Transfer of Moneys Held by Indenture Trustee and Paying Agent Unclaimed for Two Years and Eleven Months.............................................. 78 ARTICLE XV MISCELLANEOUS SECTION 15.01 Capacity in Which Acting............................ 79 SECTION 15.02 No Legal Title to Indenture Estate In Holders....... 79 SECTION 15.03 Sale of Indenture Estate by Indenture Trustee is Binding............................................. 79 SECTION 15.04 Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant and Holders.............. 79 SECTION 15.05 No Action Contrary to the Lessee's Rights Under the Lease............................................... 79 SECTION 15.06 Notices............................................. 79 SECTION 15.07 Officers' Certificates and Opinions of Counsel; Statements to Be Contained Therein.................. 80
- vi -
Page ---- SECTION 15.08 Severability........................................ 81 SECTION 15.09 No Oral Modifications or Continuing Waivers......... 82 SECTION 15.10 Successors and Assigns.............................. 82 SECTION 15.11 Headings............................................ 82 SECTION 15.12 Normal Commercial Relations......................... 82 SECTION 15.13 Governing Law; Counterpart Form..................... 82
ANNEX I - Description of Trust Indenture and Security Agreement and Lease Agreement, as previously filed EXHIBIT A - Intentionally Left Blank EXHIBIT B - Form of Certificate - vii - TRUST INDENTURE AND SECURITY AGREEMENT -------------------------------------- (DELTA 1994-1) ------------ TRUST INDENTURE AND SECURITY AGREEMENT (DELTA 1994-1) dated as of April 1, 1994, as amended and restated as of March 1, 1996, between Wilmington Trust Company, a Delaware banking corporation, not in its individual capacity, except as otherwise specifically set forth herein, but solely as owner trustee under the Trust Agreement, as defined herein, and The Bank of New York, as Indenture Trustee hereunder. RECITALS WHEREAS, capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, the Owner Participant and the Trust Company entered into the Original Trust Agreement whereby, among other things, the Owner Trustee declared a certain trust for the use and benefit of the Owner Participant, subject, ------- however, to the Lien of the Original Indenture; - ------- WHEREAS, the Owner Trustee and the Original Indenture Trustee are parties to the Original Indenture pursuant to which the Owner Trustee issued to the Interim Refinancing Loan Participant the Interim Refinancing Loan Certificate as evidence of the loan made by the Interim Refinancing Loan Participant to the Owner Trustee; WHEREAS, the Original Indenture was recorded by the FAA as described in Annex I hereto; WHEREAS, The Bank of New York, a New York banking corporation, acquired the corporate trust businesses of NationsBank of Georgia, National Association, and NationsBank of South Carolina, National Association, as of December 4, 1995, whereupon it became the successor Indenture Trustee and Pass Through Trustee in accordance with the terms of the Original Indenture and the Pass Through Agreement; WHEREAS, pursuant to Section 20 of the Original Participation Agreement, the parties hereto desire to prepay the Interim Refinancing Loan Certificate with the proceeds of the Certificates to be issued hereunder; WHEREAS, in connection with the refinancing of the Interim Refinancing Loan Certificate, the parties hereto desire to amend and restate the Original Indenture in its entirety as this Indenture sets forth, in order to provide, among other things, (i) for the issuance by the Owner Trustee of the Certificates which collectively evidence the debt financing by the Holders of the Owner Trustee's payment of Lessor's Cost, as provided in the Participation Agreement and (ii) for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Indenture Estate hereunder, among other things, of all of the Owner Trustee's right, title and interest in and to the Aircraft and the Indenture Documents and all payments and other amounts received hereunder or thereunder in accordance with the terms hereof (other than Excepted Payments), as security for, among other things, the Owner Trustee's obligations to the Holders and for the ratable benefit and security of such Holders; WHEREAS, the Owner Participant and the Trust Company, prior to the execution and delivery of this Indenture, entered into the Trust Agreement whereby the Original Trust Agreement was amended and restated and pursuant to which, among other things, the Owner Trustee is authorized and directed to execute and deliver this Indenture; WHEREAS, all things have been done to make the Certificates, when executed by the Owner Trustee, and authenticated and delivered by the Indenture Trustee hereunder, the valid obligations of the Owner Trustee; and WHEREAS, all things necessary to make this Indenture the valid, binding and legal obligation of the Owner Trustee, enforceable in accordance with its terms, have been done and performed and have happened. NOW, THEREFORE, the parties agree that such Original Indenture be and the same is hereby amended and restated to read in its entirety as follows: GRANTING CLAUSE NOW, THEREFORE, THIS TRUST INDENTURE AND SECURITY AGREEMENT WITNESSETH, that, to secure the prompt payment of the principal of and premium (if any) and interest on, and all other amounts due with respect to, all Certificates from time to time outstanding hereunder and the performance and observance by the Owner Trustee of all the agreements, covenants and provisions for the benefit of the Holders or the Indenture Trustee contained herein and in the Participation Agreement and the Certificates, and the prompt payment of any and all amounts from time to time owing under the Participation Agreement by the Owner Trustee, the Owner Participant or the Lessee to the Holders or the Indenture Trustee and for the uses and purposes and subject to the terms and provisions hereof, and in consideration of the premises and of the covenants herein contained, and of the acceptance of the Certificates by the Holders thereof, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery hereof, the receipt whereof is hereby acknowledged, the Owner Trustee has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Indenture Trustee, its successors and assigns, for the security and benefit of the Holders, from time to time, of - 2 - Certificates, a first priority security interest in and first mortgage lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property, rights and privileges, other than Excepted Payments (which collectively, excluding Excepted Payments but including all property hereafter specifically subjected to the Lien of this Indenture by a Trust Agreement and Trust Indenture Supplement or any other mortgage supplemental hereto, are included within the Indenture Estate) and subject always to the rights of the Owner Trustee and the Owner Participant under Article VIII hereof and to the other terms and conditions of this Indenture, to wit: 1. The Aircraft (including the Airframe and the Engines) and all replacements thereof and substitutions therefor to which the Owner Trustee shall from time to time acquire title as provided herein and in the Lease, all as more particularly described in the Trust Agreement and Trust Indenture Supplement executed and delivered with respect to the Aircraft or any such replacements or substitutions therefor, as provided in this Indenture; 2. The Lease and all Rent thereunder, including, without limitation, all amounts of Basic Rent and Supplemental Rent, and payments of any kind thereunder and including all rights of the Owner Trustee to execute any election or option or to give any notice, consent, waiver, or approval under or in respect of the Lease or to accept any surrender of the Aircraft or any part thereof as well as any rights, powers or remedies on the part of the Owner Trustee, whether arising under the Lease or by statute or at law or in equity or otherwise arising out of any Lease Default or Lease Event of Default; 3. The Purchase Agreement, the Purchase Agreement Assignment, the Consent and Agreement, the Engine Consent and Agreement, and the Bills of Sale and the Manufacturer's warranty bill of sale referred to in Section 2 of the Purchase Agreement Assignment and any sublease at any time assigned to the Owner Trustee pursuant to Section 7(b) of the Lease; 4. All rents, issues, profits, revenues and other income of the property subjected or required to be subjected to the Lien of this Indenture; 5. All insurance and requisition proceeds with respect to the Aircraft, including but not limited to the insurance required under Section 11 of the Lease; 6. All amounts from time to time deposited with the Indenture Trustee as security for the Lessee's obligations under the Lease and the Participation Agreement; and 7. All proceeds of the foregoing. - 3 - The Owner Trustee has previously delivered to the Indenture Trustee the sole original executed counterpart of the Original Lease (which contains a chattel paper receipt), and concurrently with the delivery of this Indenture, the Owner Trustee is delivering to the Indenture Trustee the sole original executed counterpart of the Lease which contains a chattel paper receipt, together with an executed copy of the Trust Agreement. HABENDUM CLAUSE TO HAVE AND TO HOLD all and singular the aforesaid property unto the Indenture Trustee, its successors and assigns, in trust, for the benefit and security of the Holders, from time to time, of the Certificates without (except as expressly provided herein) any priority of any one Certificate over any other, and for the uses and purposes and subject to the terms and provisions set forth in this Indenture. It is expressly agreed that anything herein contained to the contrary notwithstanding, the Owner Trustee shall remain liable under the Indenture Documents to perform all of the obligations assumed by it thereunder, all in accordance with and pursuant to the terms and provisions thereof, and the Indenture Trustee and the Holders shall have no obligation or liability under any thereof by reason of or arising out of the assignment hereunder, nor shall the Indenture Trustee or any of the Holders be required or obligated in any manner to perform or fulfill any obligations of the Owner Trustee under or pursuant to any of the Indenture Documents or, except as herein expressly provided, to make any payment, or to make any inquiry as to the nature or sufficiency of any payment received by it, or present or file any claim, or take any action to collect or enforce the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. Subject to the terms hereof, the Owner Trustee does hereby appoint and constitute the Indenture Trustee the true and lawful attorney of the Owner Trustee, irrevocably, with full power (in the name of the Owner Trustee or otherwise) to ask, require, demand, receive and give acquittance for any and all moneys and claims for moneys (in each case including insurance and requisition proceeds) due and to become due under or arising out of the Indenture Documents (other than Excepted Payments) and all other property which now or hereafter constitutes part of the Indenture Estate, to endorse any checks or other instruments or orders in connection therewith and to file any claims or to take any action or to institute any proceedings which the Indenture Trustee may deem to be necessary or advisable in the premises. Under the Lease, the Lessee is directed to make all payments of Rent (other than Excepted Payments) and all other amounts which are required to be paid to or deposited with the Owner Trustee pursuant to the Lease (other than Excepted Payments) directly to the Indenture Trustee at such address or addresses as the Indenture Trustee shall specify, for application as provided in - 4 - this Indenture. So long as this Indenture shall remain in effect and shall not have been terminated pursuant to Section 14.01 hereof, the Owner Trustee agrees that promptly on receipt thereof, it will transfer to the Indenture Trustee any and all moneys from time to time received by it constituting part of the Indenture Estate, for distribution by the Indenture Trustee pursuant to this Indenture, except that the Owner Trustee shall accept for distribution pursuant to the Trust Agreement any amounts distributed to it by the Indenture Trustee under this Indenture. The Owner Trustee agrees that at any time and from time to time, upon the written request of the Indenture Trustee, the Owner Trustee will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents as the Indenture Trustee may reasonably deem desirable in obtaining the full benefits of the assignment hereunder and of the rights and powers granted herein. The Owner Trustee does hereby warrant and represent that it has not assigned or pledged, and hereby covenants that it will not assign or pledge, so long as this Indenture shall remain in effect and shall not have been terminated pursuant to Section 14.01 hereof, any of its estate, right, title or interest hereby assigned, to anyone other than the Indenture Trustee, and that, with respect to such right, title and interest hereby assigned, the Owner Trustee will not, except as provided in this Indenture or with respect to Excepted Payments, (i) accept or retain any payment from the Lessee under any Indenture Document, enter into any agreement amending or supplementing any of the Indenture Documents, or execute any waiver or modification of, or consent under, the terms of any of the Indenture Documents, (ii) settle or compromise any claim arising under any of the Indenture Documents or (iii) submit or consent to the submission of any dispute, difference or other matter arising under or in respect of any of the Indenture Documents to arbitration thereunder. For purposes of Section 7.01(e) hereof, this is the fourth paragraph following the Habendum Clause. The Owner Trustee hereby ratifies and confirms the Lease and hereby agrees that, unless otherwise permitted or required hereunder, it will not take any action prohibited, or omit to take any action required, by any Indenture Document, the taking or omission of which might result in an alteration or impairment of any of the Indenture Documents or any of the rights or obligations created by any thereof or the assignment hereunder. Notwithstanding the Granting Clause or any of the preceding paragraphs, there is hereby expressly excluded from the foregoing grant, bargain, sale, assignment, transfer, conveyance, mortgage, pledge, security interest and mortgage all Excepted Payments. Further, nothing in the Granting Clause or any of the preceding paragraphs shall impair in any respect the rights of the Owner Trustee or the Owner Participant under Article VIII hereof. - 5 - IT IS HEREBY COVENANTED AND AGREED by and between the parties hereto as follows: ARTICLE I DEFINITIONS The following terms (except as otherwise expressly provided or unless the context otherwise clearly requires) for all purposes of this Indenture and of any indenture supplemental hereto have the respective meanings specified in this Section. All accounting terms used and not expressly defined herein have the meanings given to them in accordance with generally accepted accounting principles, and the term "generally accepted accounting principles" means such ---------------------------------------- accounting principles which are generally accepted in the United States at the date or time of any computation or otherwise at the date hereof. The words "herein", "hereof" and "hereunder" and other words of similar import refer to ------ --------- this Indenture as a whole and not to any particular Article, Section or other subdivision. The terms defined in this Article include the plural as well as the singular. For all purposes of this Indenture, capitalized terms used but not defined herein have the respective meanings assigned thereto in the Lease or, if not defined therein, in the Participation Agreement. "Business Day" means any day other than Saturday, Sunday or other day on ------------ which banking institutions in the States of New York, Georgia, or Delaware are authorized or required by law to close. "Certificate" or "Certificates" means any Equipment Trust Certificate ----------- ------------ (Delta 1994-1). "Corporate Trust Office" means the corporate trust office of the Indenture ---------------------- Trustee located at 101 Barclay Street, New York, New York 10286, or such other office in the United States at which the Indenture Trustee's corporate trust business shall be administered that the Indenture Trustee shall have specified by notice in writing to the Lessee, the Owner Trustee, the Owner Participant and the Holders. "Dollars" and "$" mean lawful currency of the United States of America. ------- - "EBO Percentage" has the meaning specified in the Participation Agreement. -------------- "Equipment Trust Certificates (Delta 1994-1)" means Certificates issued by ------------------------------------------- the Owner Trustee and authenticated and delivered by the Indenture Trustee pursuant to the terms of this Indenture and any Certificate issued in exchange therefor or replacement thereof pursuant hereto. - 6 - "Excepted Payments" means (i) indemnity payments and interest thereon paid ----------------- or payable by the Lessee to the Owner Participant, the Trust Company or their successors, assigns, directors, officers, agents, representatives and servants pursuant to Section 6 of the Participation Agreement or pursuant to the Indemnity Agreement, (ii) proceeds of public liability insurance (or proceeds of governmental indemnities in lieu thereof) in respect of all or any part of the Aircraft or the use and operation thereof paid or payable as a result of insurance claims made, or losses suffered, by the Trust Company or the Indenture Trustee in their respective individual capacities or by the Owner Participant or their successors, assigns, directors, officers, agents, representatives and servants, (iii) proceeds of insurance (or proceeds of governmental indemnities in lieu thereof) maintained in respect of the Aircraft by or for the benefit of the Owner Participant (either by the Owner Participant directly or through the Owner Trustee) and not maintained by Lessee under, or maintained in satisfaction of Lessee's obligations under, Section 11 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts paid or payable to the Owner Participant or the Trust Company under Section 14 of the Participation Agreement, (v) payments to the Owner Participant by the Owner Trustee pursuant to Section 2(b)(iii) of the Original Participation Agreement or payments to the Owner Participant pursuant to Section 1(b) of the Participation Agreement and (vi) any right of the Owner Participant or any other Person specified in clause (i) above to demand, collect, sue for or otherwise receive and enforce the payment of any amount described in clauses (i) through (v) above (including interest thereon to the extent provided in the applicable provisions of the Operative Documents) and the proceeds thereof (provided, however, that the rights under this clause (vi) shall not include the right to exercise any remedies under the Lease, other than to the extent provided for in Section 8.01 hereof). "Government Obligations" means direct obligations of the United States of ---------------------- America which are not callable, redeemable or payable prior to maturity, in whole or in part, directly or indirectly, by any Person. "Holder" means the registered holder of any Certificate as evidenced on the ------ Register. "Indebtedness" of any Person means at any time, without duplication, (i) ------------ all obligations of such Person for borrowed money or the deferred purchase price of property, or evidenced by bonds, debentures, notes or other similar instruments, or arising under leases that are properly capitalized under generally accepted accounting principles applicable to such Person and (ii) all guarantees by such Person of such obligations described in clause (i) above of third parties. - 7 - "Indenture", "this Indenture" and other like words mean this Trust --------- -------------- Indenture and Security Agreement as the same may be modified, supplemented, restated or amended from time to time in accordance with the provisions hereof and of the Participation Agreement (including, without limitation, as supplemented by each Trust Agreement and Trust Indenture Supplement). "Indenture Default" means an Indenture Event of Default or an event or ----------------- condition that, with the giving of notice or the lapse of time or both, would become an Indenture Event of Default. "Indenture Documents" means the Participation Agreement, the Trust ------------------- Agreement (including any Trust Agreement and Trust Indenture Supplements), the Lease (including any Lease Supplements), this Indenture (including any Trust Agreement and Trust Indenture Supplements), the Certificates, the Purchase Agreement, the Manufacturer's warranty bills of sale referred to in Section 2 of the Purchase Agreement Assignment, the Purchase Agreement Assignment, the Bills of Sale, the Consent and Agreement and the Engine Consent and Agreement. "Indenture Estate" means all estate, right, title and interest of the ---------------- Indenture Trustee in and to any and all of the properties, rights and interests referred to in the Granting Clause of this Indenture, excluding, however, in each case, Excepted Payments. "Indenture Event of Default" has the meaning specified in Section 7.01 -------------------------- hereof. "Indenture Trustee" means The Bank of New York, a New York banking ----------------- corporation, in its capacity as Indenture Trustee under this Indenture, and its successors and assigns as Indenture Trustee hereunder. "Independent Investment Banker" means an independent investment banking ----------------------------- institution of national standing appointed by the Lessee on behalf of the Owner Trustee that is independent in fact, does not have any direct financial interest, or any material indirect financial interest, in the Lessee or any Affiliate of the Lessee, and is not connected with the Lessee or any Affiliate of the Lessee as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, that if the Indenture -------- Trustee shall not have received written notice of such an appointment at least 10 days prior to the Redemption Date or if a Lease Payment Default, Lease Bankruptcy Default or Lease Event of Default shall have occurred and be continuing, "Independent Investment Banker" shall mean such an institution ----------------------------- appointed by the Indenture Trustee. "Interest Payment Date" means each April 11 and October 11 beginning with --------------------- April 11, 1996. - 8 - "Interim Refinancing Loan Certificate" means the Loan Certificate in the ------------------------------------ initial outstanding principal amount of $79,600,000 issued to the Interim Refinancing Loan Participant pursuant to the Original Indenture. "Interim Refinancing Loan Participant" means The Mitsubishi Trust and ------------------------------------ Banking Corporation, New York Branch, its successors and permitted assigns. "Lease" means the Lease Agreement (Delta 1994-1) dated as of April 1, 1994, ----- as amended and restated as of March 1, 1996, between the Owner Trustee and the Lessee, as amended or supplemented from time to time, including as supplemented by the Lease Supplement. "Lease Bankruptcy Default" means any event specified in Section 14(f), ------------------------ 14(g) or 14(h) of the Lease which with the giving of notice or lapse of time or both would constitute a Lease Event of Default. "Lease Default" means any event or condition defined as a "Default" under ------------- the Lease. "Lease Event of Default" means any event or condition defined as an "Event ---------------------- of Default" in Section 14 of the Lease. "Lease Payment Default" means an event which with the giving of notice or --------------------- lapse of time or both would constitute an Event of Default as specified in Section 14(a) or 14(b) of the Lease. "Lessee" means Delta Air Lines, Inc., a Delaware corporation, and its ------ successors and, to the extent permitted by the Participation Agreement, its assigns thereunder. "Lessor" means the Owner Trustee as lessor under the Lease. ------ "Lien" means any mortgage, pledge, lien, charge, claims, disposition of ---- title, encumbrance, lease or security interest. "Majority in Interest of Certificate Holders" means, as of a particular ------------------------------------------- date of determination, the Holder or Holders of more than 50% in aggregate unpaid principal amount of all Outstanding Certificates as of such date (excluding any Certificates held by the Owner Trustee, the Owner Participant, or the Lessee, or any Affiliate of any thereof, or any interests of the Owner Participant therein by reason of subrogation pursuant to Section 8.03 of this Indenture (unless all Certificates then Outstanding shall be held by the Owner Trustee or the Owner Participant or the Lessee or any Affiliate of any thereof)). "Maturity" means, with respect to any Certificate, __________ or -------- ____________ as the case may be. - 9 - "Officers' Certificate" means a certificate signed by a Responsible Officer --------------------- of the Owner Trustee or the Lessee, as the case may be, delivered to the Indenture Trustee. Each such certificate shall include the statements provided for in Section 15.07. "Opinion of Counsel" means a written opinion of legal counsel, who in the ------------------ case of counsel (a) for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions, (ii) King & Spalding or a successor firm or (iii) other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee and (b) for the Owner Trustee, may be (i) Potter Anderson & Corroon or (ii) other counsel designated by the Owner Trustee and reasonably satisfactory to the Indenture Trustee. "Original Indenture" means the Trust Indenture and Security Agreement ------------------ (Delta 1994-1) between the Owner Trustee and the Original Indenture Trustee, as it was originally executed as of April 1, 1994 and delivered by the parties thereto, as amended and supplemented as described in Annex I hereto. "Original Indenture Trustee" means NationsBank of Georgia, National -------------------------- Association. "Original Lease" means the Lease Agreement (Delta 1994-1) between the -------------- Lessor and the Lessee, as it was originally executed as of April 1, 1994 and delivered by the parties thereto, as amended and supplemented as described in Annex I hereto. "Original Participation Agreement" means the Participation Agreement (Delta -------------------------------- 1994-1) as originally executed as of April 1, 1994 and delivered by the parties thereto, as amended by Amendment No. 1 to Participation Agreement (Delta 1994-1) dated as of March 28, 1995. "Original Trust Agreement" means the Trust Agreement (Delta 1994-1) between ------------------------ the Trust Company and the Owner Participant as originally executed as of April 1, 1994, and filed with the FAA on April 12, 1994, as supplemented by the Trust Agreement and Trust Indenture Supplement. "Outstanding" means, when used with respect to Certificates, as of the date ----------- of determination and subject to the provisions of Section 10.04 hereof, all Certificates theretofore executed and delivered under this Indenture, with the exception of the following: (i) Certificates theretofore cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation pursuant to Section 2.08 of this Indenture or otherwise; - 10 - (ii) Certificates for which payment or redemption money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Certificates pursuant to Section 14.01 hereof; provided, that if such Certificates are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Indenture Trustee has been made; and (iii) Certificates in exchange for or in lieu of which other Certificates have been executed, authenticated and delivered pursuant to Article II hereof. "Owner Participant" means the Person who executed the Original ----------------- Participation Agreement as the Owner Participant, and also includes any Person to which such Person (or any successor or permitted assignee) transfers its right, title and interest in and to the Trust Estate in accordance with Section 16 of the Participation Agreement and Section 9.01 of the Trust Agreement. "Owner Trustee" means Wilmington Trust Company, a Delaware banking ------------- corporation, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, and its successors and assigns as trustee thereunder. "Participation Agreement" means the Participation Agreement (Delta 1994-1) ----------------------- dated as of April 1, 1994, as amended and restated as of March 1, 1996, among the Lessee, the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee, as the same may be modified, supplemented or amended from time to time in accordance with the provisions thereof and hereof. "Pass Through Agreement" means the Pass Through Trust Agreement dated as of ---------------------- August 1, 1992, between the Lessee and the Pass Through Trustee, as such Pass Through Agreement may be modified, supplemented or amended from time to time in accordance with the provisions thereof. "Pass Through Trustee" means The Bank of New York, a New York banking -------------------- corporation, in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust, and its successors and assigns as Pass Through Trustee thereunder. "Paying Agent" has the meaning set forth in Section 3.04 hereof. ------------ "Person" means any individual, corporation, partnership, joint venture, ------ association, joint-stock company, trust, nonincorporated organization or government or any agency or political subdivision thereof. "Record Date" means, as used with respect to any Interest Payment Date ----------- (except a date for payment for defaulted interest), March 27 for the April 11 Interest Payment Dates and September 26 - 11 - for the October 11 Interest Payment Dates, whether or not such date is a Business Day. "Redemption Amount" means, with respect to each Certificate to be redeemed ----------------- or purchased pursuant to Sections 6.02(B), 6.02(C) (with respect to Section 8.02(a)(i)), 6.02(D), 6.02(E) or 8.02(a)(i) hereof, an amount determined as of the day before the applicable Redemption Date which an Independent Investment Banker determines to be equal to the greater of (i) the unpaid principal amount of such Certificate and (ii) the present value (computed in accordance with generally accepted accounting principles on a semiannual basis at a discount rate equal to the Treasury Yield) of (A) the payments of interest on such Certificate as required by the terms thereof and of this Indenture which have not been paid (whether or not then due) and which are not payable in connection with such redemption or purchase of the Certificates and (B) the remaining mandatory sinking fund redemption payments of principal on such Certificate including the payment due at the Maturity thereof. The excess, if any, of the amount referred to in clause (ii) of this definition over the amount referred to in clause (i) shall constitute a premium and shall be deemed such in all places in the Indenture Documents that refer to a "premium" payable with respect to any Certificates. "Redemption Date" means (i) in the case of a redemption of the Certificates --------------- pursuant to clause (A) of Section 6.02 hereof, the date on which payment is made pursuant to Section 10(a)(i) of the Lease; (ii) in the case of a redemption of the Certificates pursuant to clause (D) of said Section 6.02, the date of termination of the Lease (including without limitation a Termination Date pursuant to Section 9(a) thereof) or with respect to clauses (B) and (E) of said Section 6.02 a date specified by the Owner Trustee at the direction of the Lessee; and (iii) in the case of a redemption or purchase of the Certificates pursuant to Section 8.02(a), the date designated by the Owner Trustee as the Redemption Date in the notice to the Indenture Trustee of the Owner Participant's election to redeem or purchase the Certificates. "Redemption Price" means the price at which the Certificates are redeemable ---------------- or purchasable on the Redemption Date pursuant to Section 6.02 hereof, provided, -------- that in the case of a redemption or purchase pursuant to clause (B), clause (C) (with respect to Section 8.02(a)(i)), clause (D) or clause (E) of Section 6.02 or pursuant to Section 8.02(a)(i), references to the "Redemption Price" on any date prior to the final determination of the Redemption Amount means an amount equal to the aggregate unpaid principal amount of the Certificates plus interest thereon accrued to but excluding the Redemption Date plus the amount, if any, that the Independent Investment Banker, on the first Business Day immediately preceding the date on which notice of redemption or purchase is mailed to the Holders pursuant to Section 6.03 hereof estimates may be necessary to pay the portion of the Redemption Amount constituting a premium using the same procedure for - 12 - estimating the Redemption Amount as would be used for calculating the Redemption Amount. "Register" has the meaning set forth in Section 3.02 hereof. -------- "Registrar" has the meaning set forth in Section 3.02 hereof. --------- "Remaining Weighted Average Life" shall mean, for any Certificate, as of ------------------------------- any determination date, the number of years obtained by dividing (a) the sum of the products obtained by multiplying (i) the amount of each then remaining mandatory sinking fund redemption payment of principal, including the payment due on the Maturity of such Certificate, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such determination date, and the date on which such mandatory sinking fund redemption payment is scheduled to be made, by (b) the then outstanding principal amount of such Certificate. "Rent" has the meaning specified in the Lease. ---- "Rent Payment Date" means any "Payment Date" under and as defined in the ----------------- Lease. "Replacement Airframe" means any airframe substituted for an Airframe -------------------- pursuant to Section 9.08 hereof. "Replacement Engine" means any engine substituted for an Engine pursuant to ------------------ Section 9.08 hereof. "Responsible Officer" means, with respect to any Person other than the ------------------- Indenture Trustee or the Owner Trustee, the president or any other officer of such Person with authority of at least a vice president; or, in the case of the Indenture Trustee, an officer or assistant officer of the Indenture Trustee in its Corporate Trust Lease Administration department; or, in the case of the Owner Trustee, an officer of the Owner Trustee in its Corporate Trust Administration department. "Securities Act" means the Securities Act of 1933, as amended. -------------- "Treasury Yield" means, with respect to the Redemption Amount of a -------------- Certificate to be redeemed or purchased pursuant to clause (B), clause (D) or clause (E) of Section 6.02 hereof or pursuant to Section 8.02(a)(i) hereof, (i) in the case of a Certificate having a Maturity within one year after the applicable Redemption Date, the average yield to maturity on a government bond equivalent basis of the applicable United States Treasury Bill due the week of Maturity of such Certificate and (ii) in the case of a Certificate having a Maturity one year or more after the applicable Redemption Date, the average yield of the most actively traded United States Treasury Note (as reported by Cantor Fitzgerald Securities Corp. on page 5 of Telerate Systems, Inc., a financial news service, or if such report is not available, a - 13 - source deemed comparable by the Independent Investment Banker selected to determine the Redemption Amount and reasonably acceptable to the Lessee) corresponding in maturity to the Remaining Weighted Average Life of such Certificate (or if there is no maturity corresponding to such Remaining Weighted Average Life, an interpolation of maturities by the Independent Investment Banker), in each case determined by the Independent Investment Banker selected to determine the Redemption Amount based on the bid prices as of 10:00 a.m. and 2:00 p.m., New York time, on the second Business Day preceding the Redemption Date. "Trust Agreement" means the Trust Agreement (Delta 1994-1) dated as of --------------- April 1, 1994, as amended and restated as of March 1, 1996, between the Owner Participant and the Trust Company, as the same may be modified, supplemented or amended from time to time in accordance with the provisions thereof, hereof and of the Participation Agreement. "Trust Agreement and Trust Indenture Supplement" or "Trust Agreement ---------------------------------------------- --------------- Supplement" means the Trust Agreement and Trust Indenture Supplement (Delta - ---------- 1994-1) dated April 12, 1994 (which is incorporated by reference herein), as such Trust Agreement and Trust Indenture Supplement shall be amended or supplemented from time to time and any other supplement to the Trust Agreement and to this Indenture, substantially in the form of Exhibit A to the Original Indenture, which shall particularly describe any Replacement Airframe and/or Replacement Engine included in the Trust Estate and the Indenture Estate. "Trust Company" means Wilmington Trust Company, a Delaware banking ------------- corporation, in its individual capacity and not as Owner Trustee, and its successors under the Trust Agreement, in their respective individual capacities and not as Owner Trustees. ARTICLE II ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES SECTION 2.01. Authentication and Delivery of Certificates. On the ------------------------------------------- Refunding Date pursuant to Section 2 of the Participation Agreement, and from time to time thereafter, Certificates in an aggregate principal amount not in excess of the amount specified in Section 2.04 shall be executed by the Owner Trustee and delivered to the Indenture Trustee for authentication, and the Indenture Trustee shall thereupon authenticate and deliver said Certificates to or upon the oral or written order of the Owner Trustee, signed, if written, by an authorized officer of the Owner Trustee, without any further action by the Owner Trustee. SECTION 2.02. Execution of Certificates. The Certificates shall be signed ------------------------- on behalf of the Owner Trustee by an authorized officer of the Owner Trustee. Such signatures may be the manual - 14 - or facsimile signatures of such officer and minor errors or defects in any reproduction of any such signature shall not affect the validity or enforceability of any Certificate which has been duly authenticated and delivered by the Indenture Trustee. In case any officer of the Owner Trustee who shall have signed any of the Certificates shall cease to be such officer before the Certificate so signed shall be authenticated and delivered by the Indenture Trustee or disposed of by the Owner Trustee, such Certificate nevertheless may be authenticated and delivered or disposed of as though the person who signed such Certificate had not ceased to be such officer of the Owner Trustee; and any Certificate may be signed on behalf of the Owner Trustee by such person or persons as, at the actual date of the execution of such Certificate, shall be the proper officers of the Owner Trustee, although at the date of the execution and delivery of this Indenture any such person was not such officer. SECTION 2.03. Certificate of Authentication. Only such Certificates as ----------------------------- shall bear thereon a certificate of authentication substantially in the form set forth in Exhibit B, executed by the Indenture Trustee by manual signature of one of its authorized officers, shall be entitled to the security and benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Indenture Trustee upon any Certificate executed by the Owner Trustee shall be conclusive evidence that the Certificate so authenticated has been duly authenticated and delivered hereunder and that the Holder, as evidenced on the Register, is entitled to the security and benefits of this Indenture. SECTION 2.04. Form and Terms of Certificates; Payments of Principal, ------------------------------------------------------ Premium and Interest. The Certificates and the Indenture Trustee's certificate - -------------------- of authentication shall be substantially in the form set forth in Exhibit B hereto. The Certificates shall be issuable as registered securities without coupons and shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the Owner Trustee executing the same may determine with the approval of the Indenture Trustee. The aggregate principal amount of Certificates that may be authenticated and delivered under this Indenture, and which may at any time be Outstanding, is limited as provided in the form of Certificate attached as Exhibit B hereto. The Certificates shall be issued in registered form only and in denominations of $1,000 and any integral multiple thereof, shall be dated the date of their authentication, and shall be issued in the Maturities and principal amounts, and shall bear interest at the rates per annum, specified in the form of Certificate set forth in Exhibit B. Any of the Certificates may be issued with appropriate insertions, omissions, substitutions and variations, and may have imprinted or otherwise reproduced thereon such legend or legends, - 15 - not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto, or with the rules of any securities market in which the Certificates are admitted to trading, or to conform to general usage. Each Certificate shall bear interest from the date of issuance thereof or from the most recent date to which interest has been paid and duly provided for, as the case may be, which shall be payable on the dates specified on the face of the form of Certificate set forth in Exhibit B hereto until the principal thereof is paid or made available for payment in accordance herewith. Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. The principal of, and premium (if any) and interest on, the Certificates shall be payable at the Corporate Trust Office of the Indenture Trustee or at any office or agency maintained for such purpose pursuant to Section 3.02 hereof; provided, however, that interest may be payable at the option of the -------- ------- Indenture Trustee or its Paying Agent by mailing checks for such interest payable to or upon the written order of the Holders entitled thereto as they shall appear on the Register; provided further, however, that notwithstanding -------- ------- ------- the foregoing to the contrary, interest payable with respect to Certificates as to which the Pass Through Trustee is the Holder shall be sent by wire transfer of immediately available funds to an account or accounts in the United States previously specified by the Pass Through Trustee to the Indenture Trustee. The Holder at the close of business on any Record Date with respect to any Interest Payment Date shall be entitled to receive the interest, if any, payable on such Interest Payment Date notwithstanding any transfer or exchange of such Certificate subsequent to the Record Date and prior to such Interest Payment Date, except if and to the extent the Owner Trustee shall default in the payment of the interest due on such Interest Payment Date, in which case such defaulted interest shall be paid to the Holder at the close of business on a subsequent Record Date (which shall be not less than five or more than fifteen Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Owner Trustee to the Holders not less than 15 days preceding such subsequent Record Date. SECTION 2.05. Payments from Indenture Estate Only. All payments to be ------------------------------------ made by the Owner Trustee under this Indenture shall be made only from the income and the proceeds from the Trust Estate to the extent included in the Indenture Estate and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Trust Estate to the extent included in the Indenture Estate to enable the Indenture Trustee to make distributions of the amounts due in respect of the Certificates in accordance with the terms hereof and thereof; provided that under -------- - 16 - the Lease, the Lessee is obligated to pay or cause to be paid, to the extent such payments are not required to be made from the assets subject to the Lien of this Indenture or the income and proceeds received by the Indenture Trustee therefrom, any net loss arising from the investment of funds held by the Indenture Trustee which but for a Lease Payment Default, Lease Bankruptcy Default or Lease Event of Default would be payable to Lessee. Each Holder by its acceptance of a Certificate agrees that it will look solely to the income and proceeds from the Indenture Estate to the extent available for distribution to it as provided herein and that neither the Owner Participant, the Owner Trustee, the Trust Company nor the Indenture Trustee is personally liable to such Holder for any amounts payable under this Indenture or such Certificate or for any amounts payable or liability under any Certificate or this Indenture, except as expressly provided herein in the case of the Trust Company, the Owner Trustee or the Indenture Trustee, or in the case of the Owner Participant, except as expressly provided in the Participation Agreement. The Trust Company is not personally liable to any Holder, the Lessee, the Owner Participant or the Indenture Trustee for any amounts payable under this Indenture or for any liability under this Indenture or the Certificates, except as a result of the Owner Trustee's gross negligence or willful misconduct, or as otherwise expressly provided herein, in the Trust Agreement or in the Participation Agreement. If (1) all or any part of the Trust Estate becomes the property of a debtor subject to the reorganization provisions of the Bankruptcy Code, (2) pursuant to such reorganization provisions, including Section 1111(b) of the Bankruptcy Code, the Owner Participant is required, by reason of the Trust Company or the Owner Participant being held to have recourse liability to the Indenture Trustee or any Holder (other than as contemplated by the Operative Documents), directly or indirectly, to make payment on account of any amount payable as principal, premium, interest or other amounts on the Certificates, and (3) the Indenture Trustee actually receives any Excess Amount, as defined below, which reflects any payment by the Owner Participant on account of (2) above, then the Indenture Trustee, to the extent permitted by applicable law, shall promptly refund to the Owner Participant such Excess Amount. The Indenture Trustee hereby waives to the fullest extent permitted by law the benefit of the provisions of Section 1111(b) of the Bankruptcy Code with respect to recourse against the Trust Company and the Owner Participant on account of any amount payable as principal, premium, interest or other amounts pursuant to the Certificates. For purposes of this paragraph, "Excess Amount" means the amount by which such payment exceeds the amount which would have been received by the Indenture Trustee if the Trust Company or the Owner Participant had not become subject to the recourse liability referred to in clause (2) above. Nothing contained in this paragraph shall prevent the Indenture Trustee from enforcing any personal recourse obligation (and retaining the proceeds thereof) of the Owner Participant - 17 - under the Participation Agreement, this Indenture (other than referred to in clause (2) above) or the Trust Agreement (and any exhibits or annexes thereto), or from retaining any amount paid by the Owner Participant under Sections 5.01, 8.02 and 8.03 hereof. Nothing contained herein shall be construed as requiring any Holder to refund any amount distributed to such Holder pursuant to this Indenture. SECTION 2.06. Registration, Transfer and Exchange. The Indenture Trustee ----------------------------------- will keep, on behalf of the Owner Trustee, at each office or agency to be maintained for the purpose as provided in Section 3.02 a Register or Registers on which, subject to such reasonable regulations as it may prescribe, it will register, and will register the transfer of, Certificates as provided in this Article. Such Register shall be in written form in the English language or in any other form capable of being converted into such form within a reasonable time. Upon due presentation for registration of transfer of any Certificate at any such office or agency, the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in the name of the transferee or transferees a new Certificate or Certificates of the same Maturity and interest rate and in authorized denominations for an equal aggregate principal amount. Any Certificate or Certificates may be exchanged for a Certificate or Certificates of the same Maturity and interest rate but in other authorized denominations, in an equal aggregate principal amount. Certificates to be exchanged shall be surrendered at any office or agency to be maintained by the Indenture Trustee for the purpose as provided in Section 3.02, and the Owner Trustee shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor the Certificate or Certificates which the Holder making the exchange shall be entitled to receive, bearing numbers not contemporaneously or previously outstanding. All Certificates presented for registration of transfer, exchange, redemption or payment shall (if so required by the Owner Trustee or the Indenture Trustee) be duly endorsed by, or be accompanied by a written instrument or instruments of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by, the Holder or its attorney duly authorized in writing and (except in the case of transfers pursuant to Section 20 of the Participation Agreement) the Indenture Trustee may require evidence satisfactory to it as to the compliance of any such transfer with the Securities Act. The Owner Trustee or the Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any exchange or registration of transfer of Certificates. No service charge to the Holder shall be made for any such transaction. - 18 - The Indenture Trustee shall not be required to exchange or register a transfer of, nor shall the Owner Trustee be required to exchange, any Certificates (a) for a period of 15 days immediately preceding the first mailing of notice of redemption or purchase of such Certificates or (b) with respect to which notice of redemption or purchase has been given pursuant to Section 6.03 and such notice has not been revoked. All Certificates issued upon any transfer or exchange of Certificates shall be valid obligations of the Owner Trustee, evidencing the same debt, and entitled to the same security and benefits under this Indenture, as the Certificates surrendered upon such transfer or exchange. SECTION 2.07. Mutilated, Defaced, Destroyed, Lost and Stolen Certificates. ----------------------------------------------------------- In case any temporary or definitive Certificate shall become mutilated, defaced or be apparently destroyed, lost or stolen, the Owner Trustee shall, at the written request of the Holder thereof, execute, and upon the oral or written request of any officer of the Owner Trustee, the Indenture Trustee shall authenticate and deliver, a new Certificate of like Maturity, payable in the same principal amount, dated the date of such Certificate, designated as issued under this Indenture, bearing a number not contemporaneously or previously outstanding, in exchange and substitution for the mutilated or defaced Certificate, or in lieu of and substitution for the Certificate so apparently destroyed, lost or stolen. If the Certificate being replaced has been apparently destroyed, lost or stolen, the Holder of such Certificate shall furnish to the Owner Trustee and to the Indenture Trustee and any agent of the Owner Trustee or the Indenture Trustee such security or indemnity as may be reasonably required by them to indemnify and defend and to save each of them harmless from issuance of such substitute Certificate pursuant hereto (in the case of the Pass Through Trustee, a personal agreement to indemnify shall be sufficient for this purpose) and, in every case of destruction, loss or theft, evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Upon the issuance of any substitute Certificate, the Owner Trustee or the Indenture Trustee may require payment from the Holder of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the reasonable fees and expenses of the Indenture Trustee) connected therewith. In case any Certificate which has matured or is about to mature, or has been called for redemption in full, shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Owner Trustee may, instead of issuing a substitute Certificate, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated or defaced Certificate), if, in every case of apparent destruction, loss or theft, the applicant for such payment shall furnish to the Owner Trustee and to the Indenture Trustee such security or indemnity as either of them may - 19 - reasonably require to save each of them harmless from all risks relating to such payment and the applicant shall also furnish to the Owner Trustee and the Indenture Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Certificate and of the ownership thereof. Every substitute Certificate issued pursuant to the provisions of this Section by virtue of the fact that any Certificate is apparently destroyed, lost or stolen shall constitute an original additional contractual obligation of the Owner Trustee, whether or not the apparently destroyed, lost or stolen Certificate shall be enforceable at any time by anyone and shall be entitled to all the security and benefits of (but shall be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Certificates duly authenticated and delivered hereunder. All Certificates shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, defaced, or apparently destroyed, lost or stolen Certificates and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. SECTION 2.08. Cancellation of Certificates; Destruction Thereof. All ------------------------------------------------- Certificates surrendered for payment, redemption, registration of transfer or exchange, if surrendered to the Indenture Trustee, or if surrendered to the Owner Trustee or any agent of the Owner Trustee or the Indenture Trustee, shall be delivered to the Indenture Trustee for cancellation and shall be cancelled by it; and no Certificates shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. The Indenture Trustee shall destroy cancelled Certificates held by it and deliver a certificate of destruction to the Owner Trustee. If the Owner Trustee shall acquire any of the Certificates, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Certificates unless and until the same are delivered to the Indenture Trustee for cancellation. SECTION 2.09. Temporary Certificates. Pending the preparation of ---------------------- definitive Certificates, the Owner Trustee may execute and, upon the oral or written request of an officer of the Owner Trustee, the Indenture Trustee shall authenticate and deliver temporary Certificates (printed, lithographed, typewritten or otherwise reproduced, in each case in form satisfactory to the Indenture Trustee). Temporary Certificates shall be issuable as registered Certificates without coupons, of any authorized denomination, and substantially in the form of the definitive Certificates but with such omissions, insertions and variations as may be appropriate for temporary Certificates, all as may be determined by the Owner Trustee with the concurrence of the - 20 - Indenture Trustee. Temporary Certificates may contain such reference to any provisions of this Indenture as may be appropriate. Every temporary Certificate shall be executed by the Owner Trustee and, upon the oral or written request of an authorized officer of the Owner Trustee, be authenticated by the Indenture Trustee upon the same conditions and in substantially the same manner, and with like effect, as the definitive Certificates. Without unreasonable delay the Owner Trustee shall execute and shall furnish definitive Certificates and thereupon temporary Certificates shall be surrendered in exchange therefor without charge at any office or agency to be maintained by the Indenture Trustee for the purpose pursuant to Section 3.02, and, upon the oral or written request of an authorized officer of the Owner Trustee, the Indenture Trustee shall authenticate and deliver in exchange for such temporary Certificates an equal aggregate principal amount of definitive Certificates of the same Maturities and interest rates and in authorized denominations. Until so exchanged, temporary Certificates shall be entitled to the same security and benefits under this Indenture as definitive Certificates. SECTION 2.10. Termination of Interest in Indenture Estate. A Holder shall ------------------------------------------- not, as such, have any further interest in, or other right with respect to, the Indenture Estate when and if the principal amount of and premium, if any, and interest on and other amounts due under all Certificates held by such Holder and all other sums payable to such Holder hereunder shall have been paid in full. SECTION 2.11. Certificates in Respect of Replacement Airframe or Engine. --------------------------------------------------------- Upon the execution and delivery of a Trust Agreement and Trust Indenture Supplement covering a Replacement Airframe and/or Replacement Engine, as provided in Section 9.09 hereof, each Certificate shall be deemed to have been issued in connection with such Replacement Airframe and/or Replacement Engine and each Certificate issued thereafter upon a transfer or exchange of, or as a replacement for, a Certificate, shall be designated as having been issued in connection with such Replacement Airframe and/or Replacement Engine, but without any other change therein except as provided for in this Article II. ARTICLE III COVENANTS SECTION 3.01. Payment of Principal, Premium and Interest. The Owner ------------------------------------------ Trustee covenants and agrees that it will duly and punctually pay or cause to be paid the principal of, and interest and premium, if any, and all other amounts due on, each of the Certificates hereunder at the place or places, at the respective times and in the manner provided in this Indenture and in the Certificates. - 21 - Principal and interest and other amounts due hereunder or under the Certificates shall be payable in Dollars on the due date thereof, to the Indenture Trustee at the Corporate Trust Office (or such other account at such other financial institution in New York, New York or Atlanta, Georgia as the Indenture Trustee may designate for the purpose). If any amount payable under the Certificates or under this Indenture falls due on a day which is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without additional interest thereon for the period of such extension. SECTION 3.02. Offices for Payments, etc. So long as any of the -------------------------- Certificates remain outstanding, the Indenture Trustee will maintain the following: (a) an office or agency in Atlanta, Georgia where the Certificates may be presented for payment and (b) a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange and for redemption or any other payment as provided in this Indenture (the "Registrar"). The Registrar shall keep a register (the "Register") with respect to the Certificates and their transfer and exchange. The Indenture Trustee may appoint one or more co-registrars ("Co-Registrars") for the Certificates and may terminate any such appointment at any time upon written notice. The term "Registrar" includes any Co-Registrar. The Indenture Trustee shall initially act as Registrar. SECTION 3.03. Appointment to Fill a Vacancy in Office of Indenture ---------------------------------------------------- Trustee. The Owner Trustee, whenever necessary to avoid or fill a vacancy in - -------- the office of Indenture Trustee, will, with the consent of the Lessee, appoint, in the manner provided in Section 12.02, an Indenture Trustee, so that there shall at all times be an Indenture Trustee hereunder. SECTION 3.04. Paying Agents. Whenever the Indenture Trustee in its sole ------------- discretion shall appoint a paying agent (the "Paying Agent"), it will cause the Paying Agent to execute and deliver an instrument in which the Paying Agent shall agree with the Indenture Trustee, subject to the provisions of this Section, (a) that it will hold all sums received by it as such agent for the payment of the principal of, and interest and premium, if any, on the Certificates (whether such sums have been paid to it by the Indenture Trustee or the Owner Trustee) in trust for the benefit of the Holders or of the Indenture Trustee, and (b) that it will give the Indenture Trustee notice of any failure by the Owner Trustee to make any payment of the principal of or interest or premium on the Certificates when the same shall be due and payable. Anything in this Section to the contrary notwithstanding, the Owner Trustee may at any time, for the purpose of obtaining a - 22 - satisfaction and discharge of this Indenture or for any other reason, pay or cause to be paid to the Indenture Trustee all sums held in trust by the Owner Trustee or any paying agent hereunder, such sums to be held by the Indenture Trustee in trust as provided herein. Anything in this Section to the contrary notwithstanding, the agreements to hold sums in trust as provided in this Section are subject to the provisions of Sections 14.03 and 14.04 hereof. SECTION 3.05. Covenants of the Trust Company and the Owner Trustee. ---------------------------------------------------- (a) The Trust Company hereby covenants and agrees as follows: (i) the Trust Company will perform its covenant set forth in Section 7(h) of the Participation Agreement; and (ii) the Trust Company will not directly or indirectly create, incur, assume or suffer to exist any Lessor's Liens in or with respect to the Indenture Estate or any of the properties or assets within the Indenture Estate to the extent resulting from the acts or omissions of or claims against the Trust Company (including, without limitation, the nonpayment of any taxes based on or measured by the revenues or income of the Trust Company). (b) The Owner Trustee hereby covenants and agrees as follows: (i) the Owner Trustee will perform its obligations under the Lease to the extent permitted hereunder; (ii) the Owner Trustee will perform its covenants set forth in Sections 7(h) and 7(i) of the Participation Agreement; (iii) in the event a Responsible Officer of the Owner Trustee shall have actual knowledge of an Indenture Default or an Event of Loss, the Owner Trustee will give prompt written notice of such Indenture Default or Event of Loss to the Indenture Trustee, the Lessee and the Owner Participant; (iv) the Owner Trustee will furnish to the Indenture Trustee, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Owner Trustee under the Lease, including, without limitation, a copy of each report or notice received pursuant to Section 11 of the Lease, to the extent that the same shall not have been furnished to the Indenture Trustee; - 23 - (v) the Owner Trustee will not enter into any business or other activity other than the business of owning the Aircraft, the leasing thereof to the Lessee and the carrying out of the transactions contemplated hereby and by the Lease, the Participation Agreement, the Trust Agreement and the other Indenture Documents; and (vi) the Owner Trustee will not directly or indirectly create, incur, assume or suffer to exist any Lessor's Liens in or with respect to the Indenture Estate or any of the properties or assets within the Indenture Estate resulting from the acts or omissions of or claims against the Owner Trustee (including, without limitation, the nonpayment of any taxes based on or measured by the revenues or income of the Owner Trustee). SECTION 3.06. Intentionally Left Blank. ------------------------ SECTION 3.07. Disposal of Indenture Estate. At any time and from ---------------------------- time to time any part of the Indenture Estate may be sold or disposed of in accordance with the provisions of this Indenture and the Lease. The Indenture Trustee shall, from time to time, release from the Lien of this Indenture any part of the Indenture Estate so sold or disposed of in accordance herewith, or as to which an Event of Loss has occurred (and replacement thereof in accordance herewith) or as to which the Lease has been terminated. In addition, to the extent that such property constitutes an Airframe or Engine, the further requirements of Section 9.08 shall be complied with. SECTION 3.08. No Representations or Warranties as to Aircraft or -------------------------------------------------- Documents. NEITHER THE INDENTURE TRUSTEE NOR THE OWNER TRUSTEE NOR THE TRUST - --------- COMPANY NOR THE OWNER PARTICIPANT MAKES OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN, QUALITY, DURABILITY, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OR FOR A PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY ENGINE, OR ANY OTHER REPRESENTATION OR WARRANTY HEREIN WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE WHATSOEVER, except that the Trust Company warrants that on the Delivery Date (i) the Owner Trustee shall have received whatever title to the Aircraft that was conveyed to it by the Lessee, and (ii) the Aircraft shall be free and clear of Lessor's Liens attributable to the Trust Company. Neither the Trust Company nor the Indenture Trustee makes or shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Indenture, the Trust Agreement, the Certificates or any Indenture Document or as to the correctness of any statement contained in any thereof, except for the representations and warranties of the Trust Company and the Indenture Trustee made in their respective individual capacities under this Indenture or in the Participation Agreement. The Owner Participant makes no representation or warranty hereunder whatsoever. - 24 - SECTION 3.09. Further Assurances; Financing Statements. At any time and ---------------------------------------- from time to time, upon the request of the Indenture Trustee or the Lessee, the Owner Trustee shall promptly and duly execute and deliver, or cause to be executed and delivered, any and all such further instruments and documents as may be specified in such request and as are necessary or desirable to create, perfect, preserve or protect the Liens and assignments created or intended to be created hereby, or to obtain for the Indenture Trustee the full benefit of the specific rights and powers granted herein, including, without limitation, the execution and delivery of Uniform Commercial Code financing statements and continuation statements with respect thereto, or similar instruments relating to the perfection of the Liens or assignments created or intended to be created hereby. ARTICLE IV HOLDER LISTS AND REPORTS BY THE INDENTURE TRUSTEE (a) The Indenture Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Indenture Trustee is not the Registrar, the Owner Trustee will cause the Registrar to furnish to the Indenture Trustee semi- annually not more than 15 days after each Record Date, as of such Record Date, or at such other times as the Indenture Trustee may request in writing, a list, in such form and as of such date as the Indenture Trustee may reasonably require, containing all the information in the possession or control of the Registrar as to the names and addresses of the Holders and the amounts and Maturities of the Certificates held by such Holders. (b) Ownership of the Certificates shall be proved by the Register kept by the Registrar. ARTICLE V RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE INDENTURE ESTATE SECTION 5.01. Basic Rent Distribution. Except as otherwise provided in ----------------------- Section 5.03 hereof, each installment of Basic Rent, any payment of interest on overdue installments of Basic Rent and any payment in respect of the foregoing received by the Indenture Trustee pursuant to Section 8.03 hereof shall be promptly distributed in the following order of priority: first, so much of such ----- installment or payment as shall be required to pay in full the aggregate amount of the payment or payments of principal and interest (as well as any interest on overdue principal and, to the extent permitted by law, on interest) then due under all Certificates shall be distributed to the Holders ratably, without - 25 - priority of one over the other, in the proportion that the amount of such payment or payments then due under each such Certificate bears to the aggregate amount of the payments then due under all such Certificates, and, second, the ------ balance, if any, of such installment or payment remaining thereafter shall be distributed to the Owner Trustee, or as the Owner Trustee may request, for distribution pursuant to the Trust Agreement; provided, however, that if an --------- -------- Indenture Default shall have occurred and be continuing, then such balance shall not be distributed as provided in this clause "second" but shall be held by the ------ Indenture Trustee as part of the Indenture Estate until whichever of the following shall first occur: (i) all Indenture Defaults shall have been cured, in which event such balance shall be distributed as provided in this clause "second", (ii) such Indenture Default shall have continued for a period of 120 days, in which event such balance shall be distributed as provided in this clause "second", or (iii) Section 5.03 hereof shall be applicable, in which event such balance shall be distributed in accordance with the provisions thereof. SECTION 5.02. Event of Loss and Replacement; Redemption or Purchase. (a) ----------------------------------------------------- Except as otherwise provided in Section 5.03 hereof, any payment received by the Indenture Trustee as the result of an Event of Loss with respect to the Aircraft or as the result of redemption or purchase pursuant to Section 6.02 hereof, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, to reimburse the Indenture Trustee for any out-of-pocket costs ----- or expenses reasonably incurred in connection with such prepayment or redemption or purchase, as the case may be, second, as provided in clause "second" of ------ ------ Section 5.03 hereof, and third, as provided in clause "third" of Section 5.03 ----- ----- hereof; provided that if a Replacement Airframe shall be substituted for an -------- Airframe subject to an Event of Loss as provided in Section 10 of the Lease and Section 9.08 hereof, any proceeds which result from such Event of Loss and are paid to the Indenture Trustee shall be held by the Indenture Trustee as part of the Indenture Estate and, unless otherwise applied pursuant to Section 5.01 or 5.03 hereof, such proceeds shall be released to the Owner Trustee or the Lessee at the Owner Trustee's written request upon the release of the replaced Airframe and its replacement as herein provided. (b) Except as otherwise provided in Section 5.03 hereof, any amounts received directly or indirectly from any governmental authority, insurer or other party pursuant to any provision of Section 10 or 11 of the Lease, if and to the extent that such amounts would at the time be required to be paid to the Lessee pursuant to said Section 10 or 11 but for the fact that a Lease Event of Default, a Lease Payment Default or a Lease Bankruptcy Default shall have occurred and be continuing, shall be held by the Indenture Trustee, as assignee of the Owner Trustee, as security for the obligations of the Lessee under the Lease and the Participation Agreement and shall be invested in accordance with the terms of Section 5.08 hereof and at such time as the - 26 - conditions for payment to the Lessee specified in said Section 10 or 11, as the case may be, shall be fulfilled and there shall not be continuing any Lease Event of Default, Lease Payment Default or a Lease Bankruptcy Default, such amount, and the proceeds of any investment thereof (or as reduced by such investment, as the case may be), shall, to the extent not theretofore applied against such obligations or then required to be applied against such obligations pursuant hereto, be paid to the Lessee to the extent provided in the Lease. SECTION 5.03. Payment After Indenture Event of Default, etc. Except as ---------------------------------------------- otherwise provided in Sections 5.04(b), 5.04(c) and 5.05(b) hereof, all payments received and all amounts held or realized by the Indenture Trustee (i) after an Indenture Event of Default shall have occurred and so long as such an Indenture Event of Default shall be continuing, and after the Indenture Trustee has received a request in accordance with Section 7.10 hereof to accelerate the Certificates, (ii) after the Certificates shall have become due and payable as provided in Section 7.02(b) or (c) hereof, or (iii) after the Indenture Trustee shall foreclose under this Indenture, shall be promptly distributed by the Indenture Trustee in the following order of priority: first, so much of such payments or amounts as shall be required to ------ reimburse the Indenture Trustee for any tax, expense, charge or other loss (including, without limitation, all amounts to be expended at the expense of, or charged upon the tolls, rents, revenues, issues, products and profits of, the property included in the Indenture Estate pursuant to Section 7.03(b) hereof) incurred by the Indenture Trustee (to the extent not previously reimbursed) (including, without limitation, the expenses of any sale, taking or other proceeding, attorneys' fees and expenses, court costs, and any other expenditures incurred or expenditures or advances made by the Indenture Trustee) in the protection, exercise or enforcement of any right, power or remedy or any damages sustained by the Indenture Trustee, liquidated or otherwise, upon such Indenture Event of Default shall be applied by the Indenture Trustee in reimbursement of such expenses; second, so much of such payments or amounts as shall be required to pay in ------- full the aggregate unpaid principal amount of all outstanding Certificates, all accrued but unpaid interest thereon to the date of distribution and all other amounts due thereunder (but without premium, except to the extent otherwise payable hereunder), shall be distributed to the Holders, and if the aggregate amount so to be distributed shall be insufficient to pay all such amounts in full as aforesaid, then such amount shall be distributed ratably to Holders of Outstanding Certificates, without priority of one over the other, in the proportion that the aggregate unpaid principal amount of all Outstanding Certificates held by each such Holder, plus the accrued but unpaid interest thereon to the date of distribution and all other amounts due thereunder (but without premium, except to the extent otherwise payable hereunder), bears to the aggregate unpaid principal amount - 27 - of all Outstanding Certificates, plus accrued but unpaid interest thereon to the date of distribution and all other amounts due thereunder (but without premium, except to the extent otherwise payable hereunder); and third, the balance, if any, of such payments or amounts remaining ------ thereafter shall be distributed to the Owner Trustee for distribution pursuant to the Trust Agreement. SECTION 5.04. Certain Payments. (a) Except as otherwise provided in this ---------------- Indenture, any payments received by the Indenture Trustee which are to be applied according to any provision in any other Indenture Document shall be applied thereunder in accordance therewith. (b) The Indenture Trustee will distribute, promptly upon receipt thereof any indemnity or other payment received by it from the Owner Trustee or the Lessee in respect of the Indenture Trustee in its individual capacity pursuant to Section 6 of the Participation Agreement or as Supplemental Rent, directly to the Person (which may include the Indenture Trustee in its individual capacity) entitled thereto. (c) Notwithstanding anything to the contrary contained herein, any sums received by the Indenture Trustee which constitute Excepted Payments shall be distributed promptly upon receipt by the Indenture Trustee directly to the Person or Persons entitled thereto. SECTION 5.05. Other Payments. Any payments received by the Indenture -------------- Trustee for which no provision as to the application thereof is made elsewhere in this Indenture or in any other Indenture Document (including without limitation Section 9 of the Lease) shall be distributed by the Indenture Trustee (a) to the extent received or realized at any time prior to the payment in full of all obligations to the Holders secured by the Lien of this Indenture, in the order of priority specified in Section 5.01 hereof, and (b) to the extent received or realized at any time after payment in full of all obligations to the Holders secured by the Lien of this Indenture, in the following order of priority: first, in the manner provided in clause "first" of Section 5.03 hereof ------ ------- and second, in the manner provided in clause "third" of Section 5.03 hereof. ------- ------- SECTION 5.06. Payments to Owner Trustee. Any amounts distributed ------------------------- hereunder by the Indenture Trustee to the Owner Trustee shall be paid no later than 2:00 p.m. New York time on the date of receipt thereof (so long as such amounts have been received by the Indenture Trustee in accordance with Section 3(d) of the Lease and the time periods specified therein) to the Owner Trustee by wire transfer of immediately available funds of the type received by the Indenture Trustee at such office and to such account or accounts of such entity or entities as shall be designated by notice from the Owner Trustee to the Indenture - 28 - Trustee from time to time. The Owner Trustee hereby notifies the Indenture Trustee that unless and until the Indenture Trustee receives notice to the contrary from the Owner Trustee, all amounts to be distributed to the Owner Trustee hereunder for distribution in accordance with the Trust Agreement shall be distributed by wire transfer of immediately available funds of the type received by the Indenture Trustee to such account of the Owner Participant as may be specified pursuant to Section 5.01 of the Trust Agreement. SECTION 5.07. Application of Payments. Each payment of principal of and ------------------------ interest, premium or other amounts due on each Certificate shall, except as otherwise provided herein, be applied, first, to the payment of interest on such ----- Certificate due and payable to the date of such payment, as provided in such Certificate, as well as any interest on overdue principal and premium (if any) and, to the extent permitted by law, interest and other amounts due thereunder, second, to the payment of any other amount (other than the principal of such - ------ Certificate) due hereunder or under such Certificate to the Holder of such Certificate, third, to the payment of the principal of such Certificate if then ----- due hereunder or under such Certificate, fourth, the balance, if any, remaining ------ thereafter, to the payment of the principal of such Certificate remaining unpaid (provided that such Certificate shall not be subject to prepayment without the consent of the affected Holder except as permitted by Sections 6.02, 6.06 and 8.02 hereof) and, fifth, the balance, if any, remaining thereafter shall be held ----- as additional collateral subject to the Lien of this Indenture. SECTION 5.08. Investment of Amounts Held by Indenture Trustee. Amounts ----------------------------------------------- held by the Indenture Trustee pursuant to the proviso to Section 5.01 hereof, pursuant to Section 5.02 hereof or pursuant to any provision of any Indenture Document providing for investment of sums pursuant to this Section 5.08 shall be invested by the Indenture Trustee from time to time in securities (i) selected by the Lessee on behalf of the Owner Trustee, or if a Lease Event of Default is continuing, by the Owner Trustee and if the Lessee or the Owner Trustee, as the case may be, fail to select the securities to be invested, by the Indenture Trustee and (ii) of the type listed in Section 24 of the Lease, which may include securities or obligations issued by the Indenture Trustee or any of its affiliates. Unless otherwise expressly provided in this Indenture, any income realized as a result of any such investment, net of the Indenture Trustee's reasonable fees and expenses in making such investment, shall be held and applied by the Indenture Trustee in the same manner as the principal amount of such investment is to be applied and any losses, net of earnings and such reasonable fees and expenses, shall be charged against the principal amount invested. The Indenture Trustee shall not be liable for any loss resulting from any investment made by it under this Indenture in accordance with instructions from the Lessee or the Owner Trustee, as the case may be, other than by reason of its willful misconduct or gross negligence, in - 29 - which case the Indenture Trustee will be liable in its individual capacity only, and any such investment may be sold (without regard to its maturity) by the Indenture Trustee without instructions whenever the Indenture Trustee reasonably believes such sale is necessary to make a distribution required by this Indenture. Unless otherwise stated in writing as set forth below, an account statement delivered by the Indenture Trustee to the Owner Trustee (with a copy to the Lessee) shall be deemed written confirmation by the Owner Trustee that the investment transactions identified therein accurately reflect the investment directions given to the Indenture Trustee by or on behalf of the Owner Trustee, unless the Owner Trustee (or the Lessee on its behalf) notifies the Indenture Trustee in writing to the contrary within 30 days of the date of receipt of such statement. SECTION 5.09. Withholding Taxes. The Indenture Trustee shall withhold any ----------------- taxes required to be withheld on payments to any Holder who is not a United States person except to the extent that such Holder has furnished evidence satisfactory to the Indenture Trustee of any exemption from withholding claimed by such Holder. Neither the Indenture Trustee nor Owner Trustee nor the Owner Participant shall have any obligation to make any additional payment to cover such withholding. Such withholding and failure to make any additional payment based thereon shall not constitute an Indenture Event of Default. Notwithstanding any provision to the contrary in Sections 5.01 through 5.05 hereof and subject to Section 6(b) of the Participation Agreement, if the Lessee is required to pay any such withholding tax imposed on payments made by or on behalf of the Owner Trustee to the Indenture Trustee, or any interest or penalty thereon, or to indemnify the Owner Participant or the Owner Trustee with respect thereto pursuant to Section 6(b) of the Participation Agreement, the Lessee shall, after such payment or reimbursement by it, have a claim against any Holder who was subject to such withholding tax for the amount of such withholding tax. After such payment or reimbursement by it, the Lessee shall be entitled to receive, and the Indenture Trustee shall hold for the account of the Lessee, any payments otherwise distributable to the Holder who was subject to such withholding tax pursuant to Sections 5.01 through 5.05 hereof until the foregoing amounts (to the extent recoverable from such Holder pursuant to the express provisions of Section 6(b) of the Participation Agreement) (the "Recoverable Amounts") shall have been recovered in full by the Lessee. In no event will the recoupment described in the preceding sentence result in a reduction in payments otherwise distributable to such Holder by more than the Recoverable Amounts. - 30 - ARTICLE VI REDEMPTION OR PURCHASE OF CERTIFICATES SECTION 6.01. No Redemption Prior to Maturity. Except as provided in ------------------------------- Sections 6.02, 6.06 and 8.02, the Certificates may not be redeemed prior to their respective Maturities. SECTION 6.02. Redemption or Purchase of Certificates. The Outstanding -------------------------------------- Certificates shall without the requirement of any further action on the part of the Owner Trustee, except in the case of a redemption or purchase under Section 6.02(B), 6.02(C) or 6.02(E), be redeemed or purchased: (A) If an Event of Loss occurs with respect to the Aircraft (unless pursuant to Section 10 of the Lease and Section 9.08 hereof a Replacement Airframe (together, if applicable, with a Replacement Engine or Engines) is substituted therefor), other than an Event of Loss deemed to have occurred pursuant to the last paragraph of Section 6(b) of the Participation Agreement, at a price equal to the aggregate unpaid principal amount of such Certificates together with accrued and unpaid interest thereon to but excluding the Redemption Date, but without premium. (B) If the Owner Trustee, at the direction of the Lessee, gives notice of redemption to the Indenture Trustee at any time after the date of initial issuance of the Certificates, or if an Event of Loss with respect to the Aircraft is deemed to have occurred pursuant to the last paragraph of Section 6(b) of the Participation Agreement, at a price equal to the Redemption Amount plus all accrued and unpaid interest on such Certificates to but excluding the Redemption Date. (C) If the Owner Trustee, at the direction of the Owner Participant, at any time gives notice of purchase or redemption to the Indenture Trustee pursuant to Section 8.02(a) hereof, at a price equal to the aggregate unpaid principal amount of such Certificates together with accrued and unpaid interest thereon to but excluding the Redemption Date, but without premium (except in the case of any redemption or purchase pursuant to Section 8.02(a)(i) hereof, in which case the premium shall be payable). (D) Upon any termination of the Lease as provided in Section 9(a) of the Lease, at a price equal to the Redemption Amount plus all accrued and unpaid interest on such Certificates to but excluding the Redemption Date. (E) Upon the Lessee's exercise of its option to purchase the Aircraft as provided in Section 16(b)(i) of the Participation Agreement or Section 5(b) of the Lease, at a price equal to the Redemption Amount together with accrued - 31 - and unpaid interest thereon to but excluding the Redemption Date. SECTION 6.03. Notice of Redemption or Purchase to Holders. In order to ------------------------------------------- effect any redemption or purchase set forth in Section 6.02 hereof, the Indenture Trustee shall give prompt notice by first class mail of redemption or purchase (which notice may be revoked by the Owner Trustee at any time on or before the Redemption Date by prompt notice to the Holders except (i) in the case of a redemption or purchase contemplated by Sections 6.02(C) or 6.02(E) hereof, (ii) any redemption contemplated by Section 6.02(D) hereof unless the notice of termination of the Lease pursuant to Section 9(a) thereof has been revoked or if the Lease otherwise continues in effect in accordance with the pentultemate sentence of the third paragraph of Section 9(a) thereof or (iii) revocation of notice of redemption contemplated by Section 6.02(A) hereof shall not be permitted unless a Replacement Airframe is substituted pursuant to Section 10 of the Lease and Section 9.08 hereof) to each Holder of an Outstanding Certificate. All notices of redemption or purchase shall state: (1) the Redemption Date, (2) the applicable basis for determining the Redemption Price, (3) that on the Redemption Date, subject to the provisions hereof, the Redemption Price will become due and payable upon each such Certificate, and, in the case of a redemption, that interest thereon shall cease to accrue on and after such Redemption Date, and (4) the place or places where such Certificates are to be surrendered for payment. SECTION 6.04. Deposit of Redemption Price. On the Redemption Date or the --------------------------- Sinking Fund Redemption Date (as defined in Section 6.06), the Owner Trustee shall, to the extent an amount equal to the Redemption Price or the Sinking Fund Redemption Price (as defined in Section 6.06), as the case may be, shall not then be held in the Indenture Estate, deposit with the Indenture Trustee in immediately available funds an amount equal to the difference between (a) the amount then held in the Indenture Estate and (b) the Redemption Price or the Sinking Fund Redemption Price, as the case may be. In the case of a redemption, interest shall cease to accrue in respect of all or, in the case of a mandatory sinking fund redemption, the relevant portion of, the Outstanding Certificates on and after the later of (1) deposit of the applicable Redemption Price or Sinking Fund Redemption Price on or prior to a Redemption Date or Sinking Fund Redemption Date and (2) such Redemption Date or such Sinking Fund Redemption Date. - 32 - SECTION 6.05. Certificates Payable on Redemption Date. On the Redemption --------------------------------------- Date, the Outstanding Certificates (other than Certificates being purchased pursuant to Section 8.02(a)) shall (except if the Owner Trustee has revoked such notice of redemption or purchase in accordance with Section 6.03 hereof) become due and payable and, in the case of a redemption, from and after such Redemption Date (unless there shall be a default in the payment of the Redemption Price) such Certificates shall cease to bear interest. Upon surrender of any such Certificate for redemption or purchase in accordance with said notice, such Certificate shall be paid or purchased at the Redemption Price. If any Certificate called for redemption shall not be so paid upon surrender thereof for redemption, the principal shall, until paid, continue to bear interest from the Redemption Date at the interest rate applicable to such Certificate. SECTION 6.06. Mandatory Sinking Fund Redemptions. The Certificates with a ----------------------------------- Maturity of ________________ and the Certificates with a Maturity of _____________ shall also be subject to redemption, at the principal amount thereof plus accrued interest, but without premium, in part on a pro rata basis on each date specified in this Section (a "Sinking Fund Redemption Date"). The Owner Trustee shall deposit funds sufficient to pay for such amount payable on redemption with the Indenture Trustee as provided in Section 6.04. The Indenture Trustee shall pay from the amounts so deposited on each applicable Sinking Fund Redemption Date to the Holders of each Certificate then Outstanding on a pro rata basis the aggregate principal amount set forth below, together with accrued interest to such Sinking Fund Redemption Date, but without premium (the "Sinking Fund Redemption Price"):
Principal Amount ---------------- Sinking Fund Certificates Certificates Redemption Date with a Maturity of with a Maturity of - --------------- ---------------------- ---------------------- $ _________________ ________________ Total $ $
- 33 - ARTICLE VII REMEDIES OF INDENTURE TRUSTEE AND HOLDERS SECTION 7.01. Indenture Event of Default. "Indenture Event of Default" -------------------------- means any of the following events (whatever the reason for such Indenture Event of Default and whether such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) any Lease Event of Default (other than a Lease Event of Default arising by failure to make an Excepted Payment unless the Owner Participant shall acquiesce in the treatment of such failure as an Indenture Event of Default) shall have occurred and be continuing; or (b) the failure of the Owner Trustee other than by reason of a Lease Event of Default to pay to the Indenture Trustee when due any payment of principal of or premium, if any, or interest on any Certificate, or any purchase price therefor, and such failure shall have continued unremedied for ten Business Days, or the failure of the Owner Trustee (other than by reason of a Lease Default or a Lease Event of Default or other than by a failure of the Indenture Trustee to properly pay monies received by it pursuant hereto) to pay when due any other amount due and payable hereunder, or under any Certificate, and such failure shall have continued unremedied for ten days after the Owner Trustee shall receive written demand therefor from the Indenture Trustee or any Holder; or (c) any Lessor's Lien required to be discharged by the Trust Company pursuant hereto or pursuant to the Participation Agreement or by the Owner Trustee pursuant hereto or pursuant to the Participation Agreement or any Owner Participant's Lien required to be discharged by the Owner Participant pursuant to the Participation Agreement shall remain undischarged for a period of 30 days after a Responsible Officer of the Trust Company, the Owner Trustee or the Owner Participant, as the case may be, shall have actual knowledge of such Lien; or (d) any representation or warranty made by the Owner Participant, the Trust Company or the Owner Trustee herein or in the Participation Agreement shall prove to have been false or incorrect when made in any respect material to the Holders, and such falseness or incorrectness is material to such Holders at the time of the notice referred to below, and if capable of remedy, is not remedied for 30 days after there has been given to the Owner Trustee, the Owner Participant or the Trust Company, as the case may be, by registered or - 34 - certified mail, a written notice specifying such breach and requiring it to be remedied and stating that such notice is a "Notice of Indenture Default" hereunder, by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (e) any failure of the Owner Trustee to observe any of its covenants in the fourth paragraph following the Habendum Clause hereof or in Section 3.05(b)(v) hereof or any failure by the Owner Participant to observe or perform any of its respective covenants in Section 8(c) or Section 16(a) of the Participation Agreement; or (f) any failure by the Owner Trustee to observe or perform any other covenant or obligation of the Owner Trustee contained in this Indenture or in the Participation Agreement or any failure by the Owner Participant to observe or perform any other covenant or obligation of the Owner Participant contained in the Participation Agreement which, in either case, is not remedied within a period of 30 days or, if such covenant is capable of cure and such person is diligently proceeding to effect such a cure, 60 days after there has been given to the Owner Trustee and the Owner Participant, by registered or certified mail, a written notice specifying such breach and requiring it to be remedied and stating that such notice is a "Notice of Indenture Default" hereunder, by the Indenture Trustee or by the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates; or (g) either the Trust Estate or the Owner Trustee with respect thereto (and not solely in its individual capacity) or the Owner Participant or any Person guaranteeing any obligations of the Owner Participant under the Operative Documents shall (i) be unable to pay its debts generally as they become due within the meaning of Title 11 of the United States Code, (ii) file, or consent by answer or otherwise to the filing against it of a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, (iii) make an assignment for the benefit of its creditors, (iv) consent to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to itself or with respect to any substantial part of its property, or (v) take corporate or comparable action for the purpose of any of the foregoing; or (h) a court or governmental authority of competent jurisdiction shall enter an order appointing, without consent by the Owner Trustee or the Owner Participant or any Person guaranteeing any obligations of the Owner Participant under the Operative Documents, as the case may be, a custodian, receiver, trustee or other officer with similar powers with respect to the Trust Estate or the Owner Trustee with respect - 35 - thereto (and not solely in its individual capacity) or the Owner Participant or any Person so guaranteeing its obligations, as the case may be, or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Trust Estate or the Owner Trustee with respect thereto (and not solely in its individual capacity) or the Owner Participant or any such Person, as the case may be, and such order shall remain in force undismissed, unstayed or unvacated for a period of 60 days after the date of entry thereof; or (i) any petition for any relief specified in the foregoing paragraph (g) shall be filed against the Trust Estate or the Owner Trustee with respect thereto (and not solely in its individual capacity) or the Owner Participant or any Person guaranteeing any obligations of the Owner Participant under the Operative Documents, as the case may be, and such petition shall not be dismissed within 60 days; or (j) at any time while the Aircraft is registered in the United States, the Owner Trustee, the Trust Company or the Owner Participant shall do or fail to do any act, expressly required by the Operative Documents or shall meet or fail to meet any condition expressly required by the Operative Documents (other than, in any such case, such act or condition that is the responsibility of Lessee under the Indenture Documents), and as a result thereof the Lien of this Indenture shall cease to be a valid first priority perfected Lien on the Indenture Estate. SECTION 7.02. Remedies. (a) If an Indenture Event of Default shall -------- have occurred and be continuing, then and in every such case, the Indenture Trustee may, and when required by the provisions of Article IX or Section 7.02(c) hereof, shall, (i) exercise any or all of the rights and powers and pursue any or all of the remedies pursuant to this Article VII and (ii) in the event such Indenture Event of Default is an Indenture Event of Default referred to in paragraph (a) of Section 7.01 hereof, but subject to the provisions of Section 8.03 hereof, and after the expiration of ten days from the time the Indenture Trustee notifies the Owner Trustee and the Owner Participant that it intends to exercise its remedies (including acceleration of the Certificates) hereunder, exercise any or all of the remedies pursuant to Section 15 of the Lease, and the Indenture Trustee may take possession of all or any part of the properties covered or intended to be covered by the Lien and security interest created hereby or pursuant hereto and may exclude the Owner Participant, the Owner Trustee and the Lessee and all persons claiming under any of them wholly or partly therefrom. In addition, the Indenture Trustee may exercise any - 36 - other right or remedy in lieu of or in addition to the foregoing that may be available to it under applicable law, or proceed by appropriate court action to enforce the terms hereof, of the Lease, or both, or to terminate or rescind the Lease. Without limiting any of the foregoing, but subject to any conditions provided for herein or under applicable law, it is understood and agreed that the Indenture Trustee may exercise any right of sale of the Aircraft available to it, even though it shall not have taken possession of the Aircraft and shall not have possession thereof at the time of such sale. Notwithstanding the foregoing, the Indenture Trustee shall not be entitled to exercise any remedy hereunder as a result of an Indenture Event of Default occurring solely by reason of one or more Lease Events of Default unless the Indenture Trustee shall have declared the Lease to be in default in accordance with Section 15 thereof and shall be attempting in good faith to exercise one or more of the remedies referred to in Section 15 of the Lease; provided, however, that such requirement ------------------ to attempt in good faith to exercise one or more of such remedies under the Lease shall not apply in circumstances where the Indenture Trustee is, and has been for a continuous period in excess of 60 days or such other period as may be specified in Section 1110(a)(1) of the Bankruptcy Code (such 60-day or other period being the "Section 1110 Period"), involuntarily stayed or prohibited by applicable law or court order from exercising such remedies under the Lease (a "Continuous Stay Period"); provided, further, however, that the requirement to attempt in good faith to exercise one or more of such remedies under the Lease shall nonetheless be applicable during a Continuous Stay Period subsequent to the expiration of the Section 1110 Period to the extent that the continuation of such Continuous Stay Period subsequent to the expiration of the Section 1110 Period (A) results from an agreement by the Lessee during the Section 1110 Period with the approval of the relevant court to perform the Lease in accordance with Section 1110(a) of the Bankruptcy Code or (B) is an extension of the Section 1110 Period with the consent of the Indenture Trustee pursuant to Section 1110(b) of the Bankruptcy Code or (C) results from the Lessee's assumption during the Section 1110 Period with the approval of the relevant court of the Lease pursuant to Section 365 of the Bankruptcy Code or (D) is the consequence of the Indenture Trustee's own failure to give any requisite notice to any Person or (E) is pursuant to a judicial stay pending the resolution of litigation with respect to the applicability of Section 1110 of the Bankruptcy Code and there is either no Lease Event of Default other than one arising solely from the Lessee's bankruptcy or any such other Lease Event of Default has been cured; provided, further, however, that the requirement to attempt in good faith --------- -------- -------- to exercise one or more of such remedies under the Lease during a Continuous Stay Period subsequent to the expiration of the Section 1110 Period based upon a judicial stay as provided for in this clause (E) shall in any event cease to be applicable subsequent to the 120th day of such Continuous Stay Period; it being understood and agreed that the Indenture Trustee may take such action and commence such processes as it may determine are necessary or advisable to foreclose on the - 37 - Lien of this Indenture but all such actions and processes shall, during such period, not be completed to effect a foreclosure. If the Indenture Trustee shall acquire the Aircraft pursuant to a foreclosure under this Indenture while such stay is still in effect and consummates a resale of the Aircraft within six months of such acquisition, the net proceeds from such resale in excess of the amounts owed to the Holders of the Certificates will be paid to the Owner Trustee. (b) Notwithstanding Section 7.02(c) hereof, if an Indenture Event of Default referred to in clause (g), (h) or (i) of Section 7.01 hereof shall have occurred, or a Lease Event of Default referred to in clause (f), (g) or (h) of Section 14 of the Lease shall have occurred, then and in every such case the unpaid principal of all Outstanding Certificates, together with interest accrued but unpaid thereon and all other amounts due thereunder and hereunder, but without premium, shall immediately and without further act become due and payable, without presentment, demand, protest or notice, all of which are hereby waived. (c) If any Indenture Event of Default not described in the preceding paragraph (b) shall have occurred and be continuing, then and in every such case, the Indenture Trustee may on its own accord or at the direction of Holders of not less than 25% in aggregate principal amount of Outstanding Certificates, at any time, by written notice or notices to the Owner Trustee and the Lessee, declare the principal of all the Certificates to be due and payable, whereupon the unpaid principal of all Outstanding Certificates, together with accrued but unpaid interest thereon and all other amounts due thereunder, but without premium (except to the extent a premium was theretofore payable by virtue of Section 6.02(B), 6.02(C) (with respect to Section 8.02(a)(i)), 6.02(D) or 6.02(E)), shall immediately become due and payable without presentment, demand, protest or other notice, all of which are hereby waived. At any time after such declaration and prior to the sale or disposition of the Indenture Estate, however, a Majority in Interest of Certificate Holders, by notice to the Indenture Trustee, the Owner Trustee and the Lessee, may rescind such declaration, whether made by the Indenture Trustee on its own accord or as directed, if (x) there has been paid or deposited with the Indenture Trustee a sum sufficient to pay all overdue installments of interest on all Certificates (together, to the extent permitted by law, with interest on such overdue installments of interest), the principal on any Certificates that has become due otherwise than by such declaration of acceleration, all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel, or (y) all Indenture Events of Default (other than the nonpayment of principal that has become due solely because of such acceleration) have been either cured or waived as provided in Section 7.11. No such rescission shall affect any subsequent default or impair any right consequent thereon. - 38 - (d) Each Holder shall be entitled, at any sale pursuant to Section 15 of the Lease, to a credit against any purchase price bid at such sale by such Holder for all or any part of the unpaid obligations owing to such Holder and secured by the Lien of this Indenture. SECTION 7.03. Return of Aircraft, etc. Subject to Section 7.02: (a) ------------------------ If an Indenture Event of Default shall have occurred and be continuing, at the request of the Indenture Trustee, the Owner Trustee shall promptly execute and deliver to the Indenture Trustee such instruments of title and other documents as the Indenture Trustee may deem necessary or advisable to enable the Indenture Trustee or an agent or representative designated by the Indenture Trustee, at such time or times and place or places as the Indenture Trustee may specify, to obtain possession of all or any part of the Indenture Estate to which the Indenture Trustee shall at the time be entitled hereunder. If the Owner Trustee shall for any reason fail to execute and deliver such instruments and documents after such request by the Indenture Trustee, the Indenture Trustee may (i) obtain a judgment conferring on the Indenture Trustee the right to immediate possession and requiring the Owner Trustee to execute and deliver such instruments and documents to the Indenture Trustee, to the entry of which judgment the Owner Trustee hereby specifically consents, and (ii) pursue all or part of the Indenture Estate wherever such Indenture Estate may be found and may, in the name of the Owner Trustee or otherwise, enter any of the premises of the Lessee and search for and take possession of and remove the Indenture Estate. All expenses of obtaining such judgment or of pursuing, searching for and taking such property shall, until paid, be secured by the Lien of this Indenture. (b) Upon every such taking of possession or title, the Indenture Trustee may, from time to time, at the expense of the Indenture Estate, make all such expenditures for maintenance, insurance, repairs, replacements, alterations, additions and improvements to and of the Indenture Estate, as it may deem proper. In each such case, the Indenture Trustee shall have the right to maintain, use, operate, store, lease, control or manage the Indenture Estate and to carry on the business and, without limiting the express provisions of Section 8.01 hereof, to exercise all rights and powers of the Owner Participant and the Owner Trustee relating to the Indenture Estate, as the Indenture Trustee shall deem necessary or appropriate, including the right to enter into any and all such agreements with respect to the maintenance, insurance, use, operation, storage, leasing, control, management or disposition of the Indenture Estate or any part thereof as the Indenture Trustee may determine; and, except for Excepted Payments (other than Excepted Payments payable to the Indenture Trustee), the Indenture Trustee shall be entitled to collect and receive directly all rents (including Rent), revenues, issues, income, products and profits of the Indenture Estate and every part thereof without prejudice to the right of the Indenture Trustee under any provision hereof to collect and receive all cash - 39 - held by, or required to be deposited with, the Indenture Trustee hereunder. Such rents (including Rent), revenues, issues, income, products and profits shall be applied to pay the expenses of the use, operation, storage, leasing, control, management or disposition of the Indenture Estate and of conducting the business thereof, and of all maintenance, repairs, replacements, alterations, additions and improvements, and to make all payments which the Indenture Trustee may be required or may elect to make, if any, for taxes, assessments, insurance or other proper charges upon the Indenture Estate or any part thereof (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Owner Trustee), and all other payments which the Indenture Trustee may be required or authorized to make under any provision of this Indenture, as well as just and reasonable compensation for the services of the Indenture Trustee, and of all persons properly engaged and employed by the Indenture Trustee. (c) If an Indenture Event of Default shall have occurred and be continuing and the Indenture Trustee shall be entitled to exercise remedies hereunder, and subject to Article VIII hereof, the Indenture Trustee, either with or without taking possession, and either before or after taking possession, and without instituting any legal proceedings whatsoever, may sell, assign, transfer and deliver the whole or, from time to time, to the extent permitted by law, any part of the Indenture Estate, or any part thereof, or interest therein, at any private sale or public auction, with or without demand, advertisement or notice, except as expressly provided for below in this Section 7.03(c), for cash or credit or for other property, for immediate or future delivery, and for such price or prices and on such terms as the Indenture Trustee in its sole discretion may determine; provided, that any such action shall be at the time -------- lawful and that all mandatory legal requirements shall be complied with. The Indenture Trustee shall give the Owner Trustee, the Owner Participant and the Lessee at least 20 days' notice of any public or private sale. Such notice, in the case of a public sale, shall state the time and place fixed for such sale. Any such public sale shall be held at such time or times within ordinary business hours as the Indenture Trustee shall fix in the notice of such sale. At any such sale, the Indenture Estate may be sold in one lot as an entirety or in separate lots. The Indenture Trustee shall not be obligated to make any sale pursuant to such notice. The Indenture Trustee may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for such sale, and any such sale may be made at any time or place to which the same may be so adjourned without further notice or publication; provided however, that if ----------------- more than 3 months have elapsed since the most recent notice of any such sale, the Indenture Trustee shall adjourn such sale and the Indenture Trustee shall give notice to the Owner Trustee and the Owner Participant of the time and place fixed for the next subsequent sale at least 10 days prior thereto. The Indenture Trustee may - 40 - exercise such right of sale without possession or production of the Certificates or proof of ownership thereof, and as representative of the Holders may exercise such right without notice to the Holders or without including the Holders as parties to any suit or proceedings relating to the foreclosure of any part of the Indenture Estate. The Owner Trustee shall execute any and all such bills of sale, assignments and other documents, and perform and do all other acts and things requested by the Indenture Trustee in order to permit consummation of any sale of the Indenture Estate in accordance with this Section 7.03(c) and to effectuate the transfer or conveyance referred to in the first sentence of this Section 7.03(c). Notwithstanding any other provision of this Indenture, the Indenture Trustee shall not sell the Indenture Estate or any part thereof unless the Certificates shall have been accelerated or shall have matured. (d) To the extent permitted by applicable law, the Indenture Trustee or any Holder may be a purchaser of the Indenture Estate or any part thereof or any interest therein at any sale thereof, whether pursuant to foreclosure or power of sale or otherwise. The Indenture Trustee may apply against the purchase price therefor the amount then due hereunder or under any of the Certificates secured hereby and any Holder may apply against the purchase price therefor the amount then due to it hereunder, under any other Indenture Document or under the Certificates held by such Holder to the extent that such portion of the purchase price as it would have received had it been entitled to share any distribution thereof. The Indenture Trustee or any Holder or nominee thereof shall, upon any such purchase, acquire good title to the property so purchased, free of the Lien of this Indenture and, to the extent permitted by applicable law, free of all rights of redemption in the Owner Trustee or the Owner Participant in respect of the property so purchased. (e) Subject to Article VIII hereof and if an Indenture Event of Default is continuing, the Owner Trustee hereby irrevocably appoints and constitutes the Indenture Trustee the true and lawful attorney-in-fact of the Owner Trustee in its name and stead and on its behalf, for the purpose of effectuating any sale, assignment, transfer or delivery for the enforcement of the Lien of this Indenture, whether pursuant to foreclosure or power of sale or otherwise, to execute and deliver all such bills of sale, assignments and other instruments as the Indenture Trustee may consider necessary or appropriate, with full power of substitution, and Owner Trustee hereby ratifies and confirms all that such attorney or any substitute shall lawfully do by virtue hereof. Nevertheless, if so requested by the Indenture Trustee or any purchaser, the Owner Trustee shall ratify and confirm any such sale, assignment, transfer or delivery, by executing and delivering to the Indenture Trustee or such purchaser all bills of sale, assignments, releases and other proper instruments to effect such ratification and confirmation as may be designated in any such request. - 41 - (f) The Indenture Trustee shall, as a matter of right, be entitled to the appointment of a receiver (who may be the Indenture Trustee or any successor or nominee) for all or any part of the Indenture Estate, whether such receivership be incidental to a proposed sale of the Indenture Estate or the taking of possession thereof or otherwise, and the Owner Trustee hereby consents to the appointment of such receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Indenture Estate shall be entitled to exercise all of the rights and powers of the Indenture Trustee with respect to the Indenture Estate. (g) Any sale of the Indenture Estate or any part thereof or any interest therein, whether pursuant to foreclosure or power of sale or otherwise hereunder, shall be a perpetual bar against the Owner Trustee after the expiration of the period, if any, during which the Owner Trustee shall have the benefit of redemption laws which may not be waived pursuant to Section 7.13 hereof. SECTION 7.04. Indenture Trustee May Prove Debt. If the Owner Trustee -------------------------------- shall fail to pay any amount payable hereunder or under the Certificates, the Indenture Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any action or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceedings to judgment or final decree, and may enforce any such judgment or final decree against the Owner Trustee and collect in the manner provided by law out of the property of the Owner Trustee wherever situated, the moneys adjudged or decreed to be payable; provided, that any sale of any portion --------- of the Indenture Estate shall be done in accordance with Section 7.03(c). In case there shall be pending proceedings relative to the Trust Estate or the Owner Trustee under the Bankruptcy Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Trust Estate or the Owner Trustee or its property, or in case of any other comparable judicial proceedings relative to the Trust Estate or the Owner Trustee, or to the creditors or property of the Trust Estate or the Owner Trustee, the Indenture Trustee, irrespective of whether the principal of the Certificates shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise: (a) to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Certificates, and to file such other papers or - 42 - documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in any judicial proceedings relative to the Owner Trustee or to the creditors or property of the Owner Trustee, (b) unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or person performing similar functions in comparable proceedings, and (c) to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf; and any trustee, receiver, or liquidator, custodian or other similar official is hereby authorized by each of the Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to the Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or bad faith. Nothing contained herein shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Certificates or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. All rights of action and of asserting claims under this Indenture, or under any of the Certificates, may be prosecuted and enforced by the Indenture Trustee without the possession of any of the Certificates or the production thereof in any trial or other proceedings relative thereto, and any such action or proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders. - 43 - In any proceedings brought by the Indenture Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Indenture Trustee shall be a party) the Indenture Trustee shall be held to represent all the Holders of the Certificates, and it shall not be necessary to make any Holders parties to any such proceedings. SECTION 7.05. Remedies Cumulative. Each and every right, power and remedy ------------------- given to the Indenture Trustee or Holders specifically or otherwise in this Indenture shall be cumulative and shall be in addition to every other right, power and remedy specifically given herein or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically given herein or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Indenture Trustee or the Holders, and the exercise or the beginning of the exercise of any power or remedy shall not constitute or be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. No delay or omission by the Indenture Trustee or of any Holder in the exercise of any right, remedy or power or in the pursuance of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Owner Trustee, the Owner Participant or the Lessee or to be an acquiescence therein. SECTION 7.06. Suits for Enforcement. If an Indenture Event of Default has --------------------- occurred, has not been waived and is continuing, the Indenture Trustee may in its discretion and subject to its rights of appropriate indemnification under Sections 7.08 and 9.03 and Article XI hereof proceed to protect and enforce its rights and rights of the Holders by such appropriate judicial proceedings as the Indenture Trustee shall deem most effectual to protect and enforce any of such rights, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture or to enforce any other legal or equitable right vested in the Indenture Trustee or the Holders by this Indenture or by law; provided, that any sale of any portion -------- of the Indenture Estate shall be done in accordance with Section 7.03(c). SECTION 7.07. Discontinuance of Proceedings. In case the Indenture ----------------------------- Trustee or any Holder shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been finally determined adversely to the Indenture Trustee or such Holder, then and in every such case the Owner Trustee, the Indenture Trustee, the Holders and the Lessee shall, subject to any such determination in such proceeding, be restored to their former positions and rights hereunder with respect to the Indenture Estate, and all rights, remedies and powers of the - 44 - Indenture Trustee and the Holders shall continue as if no such proceeding had been instituted. SECTION 7.08. Limitations on Suits by Holders. No Holder of any ------------------------------- Certificate shall have any right by virtue or by availing of any provision of this Indenture to institute any action or proceeding at law or in equity or in bankruptcy or otherwise upon or under or with respect to this Indenture, or for the appointment of a trustee, receiver, liquidator, custodian or other similar official or for any other remedy hereunder, unless such Holder previously shall have given to the Indenture Trustee written notice of an Indenture Default and of the continuance thereof, as hereinbefore provided, and the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates shall have made written request upon the Indenture Trustee to institute such action or proceedings in its own name or as trustee hereunder and shall have offered to the Indenture Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby and the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action or proceedings and no direction inconsistent with such written request shall have been given to the Indenture Trustee pursuant to Section 7.10; it being understood and intended, and being expressly covenanted by the Holder of each Certificate with every other Holder of each other Certificate and the Indenture Trustee, that no one or more Holders shall have any right in any manner whatever to affect, disturb or prejudice the rights of any other Holder or the Lien of this Indenture or any part of the Indenture Estate or to obtain or seek to obtain priority over or preference to any other such Holder or to enforce any right under this Indenture, except in the manner provided herein and for the equal, ratable and common benefit of all Holders. For the protection and enforcement of the provisions of this Section, each and every Holder and the Indenture Trustee shall be entitled to such relief as can be given either at law or in equity. SECTION 7.09. Unconditional Right of Holders to Receive Principal, ---------------------------------------------------- Interest and Premium, and to Institute Certain Suits. Notwithstanding any other - ---------------------------------------------------- provision in this Indenture and any provision of any Certificate, the right of any Holder to receive payment of the principal of and interest and premium (if any) on such Certificate on or after the respective due dates and in the manner expressed in such Certificate, or, subject to Section 7.08, to institute suit for the enforcement of any such payment on or after such respective dates as provided herein, shall not be impaired or affected without the consent of such Holder. SECTION 7.10. Control by Holders. A Majority in Interest of Certificate ------------------ Holders shall have the right to direct the Indenture Trustee as to the time, method, and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on the Indenture Trustee by this Indenture; provided that such direction shall not be -------- - 45 - otherwise than in accordance with law and the provisions of this Indenture and the Indenture Trustee shall have received, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, such reasonable indemnification as it may require against the costs, expenses and liabilities to be incurred by the Indenture Trustee and provided further that (subject to the provisions of ---------------- Section 9.02) the Indenture Trustee shall have the right to decline to follow any such direction if the Indenture Trustee, being advised by counsel, shall determine that the action or proceeding so directed may not lawfully be taken or if the Indenture Trustee in good faith by its board of directors, the executive committee, or a trust committee of directors or Responsible Officers of the Indenture Trustee shall determine that the action or proceedings so directed would impose upon the Indenture Trustee personal liability or if the Indenture Trustee in good faith shall so determine that the actions or forbearances specified in or pursuant to such direction shall be unduly prejudicial to the interests of Holders not joining in the giving of said direction, it being understood that (subject to Section 9.02) the Indenture Trustee shall have no duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders. Nothing in this Indenture shall impair the right of the Indenture Trustee in its discretion to take any action deemed proper by the Indenture Trustee and which is not inconsistent with such direction by Holders. SECTION 7.11. Waiver of Past Indenture Defaults. Upon written --------------------------------- instructions from a Majority in Interest of Certificate Holders, the Indenture Trustee shall waive any past Indenture Default and its consequences and upon any such waiver such Indenture Default shall cease to exist and any Indenture Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Indenture Default or impair any right consequent thereon; provided, however, ------------------ that in the absence of written instructions from all Holders, the Indenture Trustee shall not waive any Indenture Default (i) in the payment of the principal of, or premium (if any) or interest on, or other amounts due under, any Certificate then Outstanding, or (ii) in respect of a covenant or provision hereof which, under Article XIII hereof, cannot be modified or amended without the consent of each Holder and provided, further, that the Indenture Trustee ------------------ shall not waive any Indenture Default to the extent arising under Section 7.01(a) hereof because of the failure of the Lessee to pay any Excepted Payments without the consent of the Owner Participant, or in the case of an Excepted Payment owing to the Trust Company or the Indenture Trustee such party, and shall waive any such Indenture Default upon the express written instructions of the Owner Participant, or in the case of an Excepted Payment owing to the Trust Company or the Indenture Trustee, such party, unless the Indenture Trustee or the Holders would be adversely affected by such waiver. - 46 - SECTION 7.12. Notice of Indenture Defaults. The Indenture Trustee shall ---------------------------- transmit to the Owner Trustee, the Holders and to the Owner Participant notice of all Indenture Defaults actually known to a Responsible Officer of the Indenture Trustee, such notice to be transmitted by mail to the Holders within 90 days, and to the Owner Trustee and the Owner Participant promptly (within one Business Day after a failure to pay Basic Rent), after the occurrence thereof, unless such Indenture Default shall have been cured before the giving of such notice; provided that under no circumstances shall the Indenture Trustee give -------- such notice to the Holders until the earlier of the time at which such Indenture Default becomes an Indenture Event of Default or the expiration of a period of 60 days from the occurrence of such Indenture Default; and provided further ---------------- that, except in the case of default in the payment of the principal of or interest on or any other amount due under any of the Certificates, the Indenture Trustee shall be protected in withholding such notice to the Holders if and so long as the board of directors, the executive committee, or a trust committee of directors or trustees and/or Responsible Officers of the Indenture Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. SECTION 7.13. Waiver of Appraisement, etc.; Laws. The Owner Trustee ---------------------------------- covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any appraisement, valuation, stay, extension or redemption law wherever enacted, now or at any time hereafter in force, in order to prevent or hinder the enforcement of this Indenture or the execution of any power granted herein to the Indenture Trustee, or the absolute sale of the Indenture Estate, or any part thereof, or the possession thereof by any purchaser at any sale under this Article VII; and the Owner Trustee for itself and all who may claim under it, so far as it or any of them now or hereafter lawfully may, hereby waives the benefit of all such laws. The Owner Trustee for itself and all who may claim under it waives, to the extent that it lawfully may, all right to have the property in the Indenture Estate marshalled upon any foreclosure hereof, and agrees that any court having jurisdiction to foreclose this Indenture may order the sale of the Indenture Estate as an entirety. If any law referred to in this Section 7.13 and now in force, of which the Owner Trustee or its successors might take advantage despite this Section 7.13, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to constitute any part of the contract herein contained or to preclude the application of this Section 7.13. - 47 - ARTICLE VIII RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT SECTION 8.01. Certain Rights of Owner Trustee and Owner Participant. ----------------------------------------------------- Notwithstanding any other provision of this Indenture, including the Granting Clause, the following rights shall be reserved to the Owner Trustee or the Owner Participant, as the case may be (as separate and independent rights), to the extent described herein: (a) at all times the Owner Trustee shall have the right, together with the Indenture Trustee, (i) to receive from the Lessee all notices, certificates, reports, filings, opinions of counsel and other documents and all information which the Lessee is permitted or required to give or furnish to the Owner Trustee or the Lessor pursuant to any Indenture Document, (ii) to exercise inspection rights pursuant to Section 12 of the Lease; (iii) to exercise, to the extent permitted under Section 8.03 hereof, the rights of Lessor under Section 16 of the Lease; (iv) to retain all rights with respect to insurance maintained for its own account and not required pursuant to Section 11 of the Lease; and (v) separately, but not to the exclusion of the Indenture Trustee, to give notice pursuant to Section 14 of the Lease of a Lease Default or Lease Event of Default thereunder; (b) so long as no Indenture Event of Default shall have occurred and be continuing, the Owner Trustee shall have the right (i) to the exclusion of the Indenture Trustee, but subject to the provisions of Sections 13.07(a) and 13.07(c) hereof, (A) except as specified in clause (ii) below, to exercise the rights, elections and options of the Lessor to make any decision or determination and to give any notice, consent, waiver or approval with respect to any adjustments of Basic Rent, Stipulated Loss Value, Termination Value and EBO Percentage under Section 3(c) and 3(e) of the Lease or with respect to renewal or purchase options or the return condition of the Aircraft after the Term or any Renewal Term under Section 5 of the Lease and (B) to exercise all rights of the Lessor with respect to solicitations of bids pursuant to Section 9 of the Lease, (ii) together with the Indenture Trustee, to require the Lessee to take any action and execute and deliver such documents and assurances as the "Lessor" may from time to time reasonably request pursuant to Section 18 of the Lease and (iii) together with the Indenture Trustee (agreement of both being required in the case of (A), (B)(w) (with respect to additions to Exhibit B to the Lease), and (C) below), (A) to grant such consents as may be requested under the Lease, (B) to exercise (w) rights to accept or reject changes to Exhibit B to the Lease, (x) rights to make bids on the Aircraft, (y) rights to exercise discretion on Lessee's option to substitute a Replacement Airframe - 48 - (together, if applicable, with a Replacement Engine or Engines) after an Event of Loss pursuant to Section 10(a)(ii) of the Lease and (z) inspection rights, pursuant to Sections 7(b), 9(a), 10(a) and 12 of the Lease, respectively, and (C) to approve as satisfactory any accountants, engineers or counsel to render services for or issue opinions to the Owner Trustee pursuant to express provisions of the Indenture Documents; (c) the Owner Trustee shall have the right, as the Lessor, to seek specific performance of the covenants of the Lessee under the Lease relating to the protection, insurance and maintenance of the Aircraft and to maintain separate insurance with respect to the Aircraft pursuant to Section 11 of the Lease; (d) at all times and whether or not an Indenture Event of Default has occurred and is continuing, each of the Owner Trustee, the Trust Company and the Owner Participant shall have the right, to the exclusion of the Indenture Trustee, to demand, collect, sue for or otherwise receive and enforce the payment of Excepted Payments due and payable to it and, unless the Lien of this Indenture shall have been foreclosed upon, to grant or withhold its consent to amendments or supplements to Indenture Documents required in accordance with Section 13.01 and 13.02 hereof; and (e) at all times prior to the foreclosure of the Liens of this Indenture the consent of the Owner Trustee shall be required to amend, modify or supplement, directly or indirectly, Sections 1 (if any modification of a definition contained therein would result in a modification of the Lease not permitted by this clause (e)), 3, 4, 5, 6 (to the extent such action would reduce the Lessee's obligations), 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 19, 20 or 21 of the Lease, or any other section of the Lease (to the extent any amendment or supplement to, or modification of, any such other section would, directly or indirectly, affect the amount or timing of any amounts payable by the Lessee under the Lease (as such Lease may have been modified with the consent of the Owner Trustee) which amounts, absent the occurrence and continuance of an Indenture Event of Default, will be distributable to the Owner Trustee hereunder). SECTION 8.02. Owner Participant's Right to Elect to Redeem or Purchase the ------------------------------------------------------------ Certificates, and to Provide for Payment. (a) If at any time after a Lease - ---------------------------------------- Event of Default has occurred and has continued for a period of (i) not more than 180 days or (ii) at least 180 days, and provided that (A) no Indenture Event of Default (that does not arise out of a Lease Event of Default) has occurred and is continuing and (B) the Certificates shall not have become due and payable as provided in Section 7.02(b) or 7.02(c) hereof, the Owner Participant may, but shall be under no obligation to, direct the Owner Trustee to cause the redemption or - 49 - purchase of all but not less than all of the Certificates then Outstanding by notifying the Indenture Trustee of such election, which notice in order to be effective shall state that it is irrevocable and shall designate the Redemption Date on which the Owner Trustee shall, in the manner provided for in Section 6.04 hereof, deposit with the Indenture Trustee the sum of the amounts contemplated by paragraph "first" under Section 5.03 plus (x) in the case of a ------- redemption or purchase pursuant to clause (a)(i) above the aggregate Redemption Amount of all the Certificates plus interest thereon accrued to, but excluding, the Redemption Date or (y) in the case of a redemption or purchase pursuant to clause (a)(ii) above the aggregate Redemption Price of all the Certificates. The Indenture Trustee shall notify each Holder of such redemption or purchase in the manner provided for in Section 6.03 hereof. (b) At any time while the Certificates shall have become due and payable as provided in Section 7.02(b) or 7.02(c) hereof, the Owner Participant may, but shall be under no obligation to, direct the Owner Trustee to pay to the Indenture Trustee for distribution to the Holders in the manner provided for in Section 5.01 hereof an amount equal to the sum of (i) amounts contemplated by paragraph "first" under Section 5.03, (ii) the aggregate unpaid principal amount ------- of all Outstanding Certificates, (iii) all accrued but unpaid interest thereon to the date of payment and (iv) all other amounts due thereunder, but without premium. The Owner Trustee shall give written notice of such payment to the Indenture Trustee, which notice, in order to be effective, shall state that it is irrevocable and shall designate a date not more than fourteen days thereafter as the payment date. The Owner Trustee may in such notice elect to treat such payment as a purchase of the Certificates by the Owner Participant. The Indenture Trustee shall promptly notify each Holder of an Outstanding Certificate of such payment. In the event of a redemption, (i) the Certificates shall cease to accrue interest after the later of (1) such payment by the Owner Trustee to the Indenture Trustee and (2) the Redemption Date; and (ii) after distribution of such payment to the Holders, the Indenture Trustee shall release the Indenture Estate from the Lien of this Indenture. (c) In the event of a redemption, from and after the payment by the Owner Trustee to the Indenture Trustee of the amount specified in Section 8.02(a) or 8.02(b), as the case may be, the Owner Trustee shall be entitled to exercise all remedies of the Indenture Trustee under Article VII hereof as well as of the Lessor under the Lease. (d) If the Owner Trustee elects to purchase the Certificates under Section 8.02(a) or (b) hereof, (i) nothing herein, including use of the terms "Redemption Amount", "Redemption Price" and "Redemption Date" shall be deemed to result in a redemption of the Certificates so purchased and (ii) no Holder shall be liable to the Owner Trustee or Owner Participant - 50 - as a result of such purchase except to the extent such Holder would have been liable if such purchase had been a redemption. SECTION 8.03. Certain Rights of Owner Participant. If the Lessee shall ----------------------------------- fail to make any payment of Basic Rent under the Lease within ten Business Days after the same shall become due, and if such failure of the Lessee to make such payment of Basic Rent shall not constitute the fourth or subsequent consecutive such failure or the seventh or subsequent cumulative such failure, then as long as no Indenture Event of Default (other than arising from such failure to pay Basic Rent or any other Lease Event of Default) shall have occurred and be continuing, the Owner Participant or the Owner Trustee may (but need not) pay to the Indenture Trustee, at any time prior to the expiration of a period of 15 days after the expiration of ten Business Days after notice from the Indenture Trustee to the Owner Trustee of such failure of Lessee to make payment of Basic Rent (the "15-Day Period") (prior to the expiration of which 15-Day Period the Indenture Trustee shall not declare the Lease in default pursuant to Section 15 thereof or exercise any of the rights, powers or remedies pursuant to such Section 15 or Article VII hereof based solely on such failure to pay Basic Rent), an amount equal to the full amount of such payment of Basic Rent, together with any interest due thereon on account of the delayed payment thereof, and such payment by the Owner Participant or the Owner Trustee shall be deemed to cure any Indenture Event of Default which arose solely from such failure of the Lessee to make a payment of Basic Rent (including the failure of Lessee to pay such interest in respect of the delayed payment of Basic Rent from and after the date the cure payment is made) (but such cure shall not relieve the Lessee of any of its obligations). If the Lessee shall fail to perform or observe any other covenant, condition or agreement to be performed or observed by it under the Lease, and if (but only if) the performance or observance thereof can be effected by the payment of money alone (it being understood that actions such as the obtaining of insurance and the procurement of maintenance services can be so effected), then as long as no other Indenture Event of Default shall have occurred and be continuing (other than arising solely from such failure by the Lessee which is being cured hereunder or from any other Lease Event of Default), the Owner Participant or the Owner Trustee may (but need not) pay to the Indenture Trustee (or to such other person as may be entitled to receive the same), at any time prior to the expiration of a period of 15 days after (i) in the case of a Lease Event of Default the grace period for which was commenced by notice from the Holders or the Indenture Trustee, receipt by the Owner Trustee or the Owner Participant of notice of such Lease Event of Default, and (ii) in the case of any other Lease Event of Default, the expiration of the grace period, if any, provided with respect to such failure on the part of the Lessee in Section 14 of the Lease (prior to the expiration of which 15-day period or, in the case of a Recently Cured Default (as defined below), a five Business Day period in lieu thereof, the Indenture Trustee shall not declare the Lease in default pursuant to Section 15 thereof or exercise any of the rights, - 51 - powers or remedies pursuant to such Section 15 or Article VII hereof based solely on such failure by the Lessee), all sums necessary to effect the performance or observance of such covenant or agreement of the Lessee, together with any interest due thereon on account of the delayed payment thereof, and such payment by the Owner Participant or the Owner Trustee shall be deemed to cure any Indenture Event of Default which arose solely from such failure of the Lessee (but such cure shall not relieve the Lessee of any of its obligations); provided, however, that if the Owner Trustee or the Owner Participant cures a - ------------------ Lease Default or Lease Event of Default under Section 14(d) or 14(i) of the Lease at any time prior to the earliest of any of a termination of the Lease, a payment to the Indenture Trustee of any amount in excess of the amount then overdue with respect to the Certificates (other than as a result of acceleration) and a sale of any part of the Indenture Estate pursuant to Article VII hereof, then upon such cure, if no other Indenture Event of Default shall be continuing, any acceleration of the Certificates pursuant to Section 7.02(b) or (c) hereof based solely on such cured Lease Default or Lease Event of Default shall be automatically rescinded; provided, further, that the Indenture Trustee agrees that it shall give the Owner Trustee and the Owner Participant not less than 10 days notice prior to termination of the Lease following acceleration where the immediately preceding proviso would otherwise be in effect. Upon any payment of Basic Rent by the Owner Participant or the Owner Trustee in accordance with the first sentence of this Section 8.03, or upon any payment of any other sums by the Owner Participant or the Owner Trustee in accordance with the second sentence of this Section 8.03, the Owner Participant or the Owner Trustee shall, to the extent of their respective payments, be subrogated, in the case of any such payment in accordance with such first sentence, to the rights of the Indenture Trustee, as assignee hereunder of the Owner Trustee, or, in the case of any such payment in accordance with such second sentence, to the rights of the Indenture Trustee or such other person, as the case may be, which actually received such payment, to receive such payment of Basic Rent or such other payment, as the case may be (and any interest due thereon on account of the delayed payment thereof), and shall be entitled to receive such payment upon its receipt by the Indenture Trustee or such other person, as aforesaid (but in each case only after all amounts of principal of, premium, if any, and interest at the time due and payable on, or with respect to, the Certificates, together with interest thereon on account of the delayed payment thereof shall have been paid in full); provided that neither the Owner Participant nor the Owner Trustee -------- shall attempt to recover any such amount paid by it on behalf of the Lessee pursuant to this Section 8.03 except (i) by demanding of the Lessee payment of such amount, (ii) by commencing an action against the Lessee to require the payment of such amount pursuant to Section 15(e), but only said Section 15(e), of the Lease or (iii) by realizing on a security interest in assets of the Lessee (the fair market value of the security interest in such assets not to exceed 110% of the amount so paid) to secure Lessee's reimbursement obligation of such payment or by - 52 - commencing an action at law and obtaining and enforcing a judgment against the Lessee for the payment of such amount; and provided further that at no time ---------------- while an Indenture Event of Default shall have occurred and be continuing shall any such demand be made or shall any such action be commenced (or continued) or any collateral security taken be realized upon, and any amounts nevertheless received by the Owner Trustee or Owner Participant in respect thereof shall be held in trust for the benefit of, and promptly paid to, the Indenture Trustee for distribution as provided in Section 5.03 hereof. A "Recently Cured Failure" means any failure by the Lessee which constitutes a Lease Event of Default under Section 14(d) or 14(i) of the Lease if (i) within the preceding 12 month period there shall have occurred a Lease Event of Default under the same Section of the Lease and (ii) such Lease Event of Default referred to in clause (i) was cured by the Owner Participant or the Owner Trustee later than during the 15-Day period (or 5 Business Day period, as the case may be) after such failure became a Lease Event of Default, which cure has lapsed without the Lessee then performing its obligation to which the cured failure related. ARTICLE IX CONCERNING THE INDENTURE TRUSTEE SECTION 9.01. Acceptance of Trusts. The Indenture Trustee hereby accepts -------------------- the trusts imposed upon it by this Indenture, and covenants and agrees to perform the same as expressed herein and agrees to receive and disburse all moneys constituting part of the Indenture Estate in accordance with the terms hereof. SECTION 9.02. Duties and Responsibilities of the Indenture Trustee; During ------------------------------------------------------------ an Indenture Default; Prior to an Indenture Default. (a) The Indenture Trustee, - --------------------------------------------------- prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Indenture Event of Default has occurred (which has not been cured or waived) the Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. No provision of this Indenture shall be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of an Indenture Event of Default and after the curing or waiving of all Indenture Events of Default which may have occurred: - 53 - (x) the duties and obligations of the Indenture Trustee shall be determined solely by the express provisions of this Indenture, and the Indenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee; and (y) in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any statements, certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; but in the case of any such statements, certificates or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture; (ii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Indenture Trustee, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and (iii) the Indenture Trustee shall not be liable with respect to any action taken or not taken by it in good faith in accordance with the direction of a Majority in Interest of Certificate Holders relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Indenture. None of the provisions contained in this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Indenture Trustee shall have determined in good faith that the repayment of such funds or adequate indemnity against such liability is not reasonably assured to it. The Indenture Trustee will execute and the Owner Trustee will file or cause to be filed such continuation statements with respect to financing statements relating to the security interest created hereunder in the Indenture Estate as may be specified from time to time in written instructions of the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates (which instructions may, by their terms, be operative only at a future date and which shall be accompanied by the execution form of such continuation statement so to be filed); provided that, -------- - 54 - notwithstanding the foregoing, the Indenture Trustee may execute and file or cause to be filed any financing statement which it from time to time deems appropriate. (b) If any Lease Event of Default shall have occurred and be continuing and Section 8.03 hereof shall either not apply or shall have ceased to apply with respect thereto, on request of the Holders of not less than 25% in aggregate principal amount of Outstanding Certificates and subject to indemnification, to the extent provided in Sections 7.08 and 9.03 and Article XI hereof, as it may require against the costs, expenses and liabilities to be incurred, the Indenture Trustee shall exercise such remedies under Section 15 of the Lease as shall be specified in such request. (c) The Indenture Trustee agrees that it will, in its individual capacity and at its own cost and expense (but without any right of indemnity in respect of any such cost or expense under Article XI hereof) promptly take such action as may be necessary to duly discharge all Liens on any part of the Indenture Estate which result from claims against it in its individual capacity not related to the administration of the Indenture Estate or any other transaction pursuant to this Indenture or any document included in the Indenture Estate. (d) The Indenture Trustee will execute and deliver to the Lessee for filing in accordance with Section 18 of the Lease any properly presented document, instrument or financing or continuation statement specified in any opinion delivered pursuant to Section 12 of the Participation Agreement. The Indenture Trustee may rely on the act of presentation of any such document, instrument, financing or continuation statement as evidencing the fact that it is properly prepared and presented, provided that the Indenture Trustee shall -------- promptly correct any error in any such document, instrument, financing or continuation statement of which a Responsible Officer of the Indenture Trustee has actual knowledge. SECTION 9.03. Certain Rights of the Indenture Trustee. Subject to Section --------------------------------------- 9.02: (a) the Indenture Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officers' Certificate or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, security or other paper or document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request, direction, order or demand of the Owner Trustee mentioned herein shall be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed) upon - 55 - which the Indenture Trustee may rely to prove or establish a matter set forth therein; (c) the Indenture Trustee may consult with counsel and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or Opinion of Counsel; (d) the Indenture Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Indenture Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred therein or thereby; (e) the Indenture Trustee shall not be liable for any action taken or omitted by it without gross negligence and in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; (f) prior to the occurrence of an Indenture Event of Default hereunder and after the curing or waiving of all Indenture Events of Default, the Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing to do so by a Majority in Interest of Certificate Holders; provided that, if the payment within a reasonable time -------- to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture, the Indenture Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by the Owner Trustee or, if paid by the Indenture Trustee or any predecessor trustee, shall be repaid by the Owner Trustee upon demand; and (g) the Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. SECTION 9.04. Indenture Trustee Not Responsible for Recitals, Disposition ----------------------------------------------------------- of Certificates or Application of Proceeds - ------------------------------------------ - 56 - Thereof. The Indenture Trustee assumes no responsibility for the correctness of - ------- the recitals contained herein and in the Certificates, except the Indenture Trustee's certificates of authentication. The Indenture Trustee makes no representation as to the validity or sufficiency of this Indenture or of the Certificates. The Indenture Trustee shall not be accountable for the use or application by the Owner Trustee of any of the Certificates or of the proceeds thereof. SECTION 9.05. Indenture Trustee and Agents May Hold Certificates; --------------------------------------------------- Collections, etc. The Indenture Trustee or any agent of the Owner Trustee or - ----------------- the Indenture Trustee, in its individual or any other capacity, may become the owner or pledgee of Certificates with the same rights it would have if it were not the Indenture Trustee or such agent and may otherwise deal with the Owner Trustee and receive, collect, hold and retain collections from the Owner Trustee with the same rights it would have if it were not the Indenture Trustee or such agent. SECTION 9.06. Moneys Held by Indenture Trustee. Subject to Sections 5.08 -------------------------------- and 14.04 hereof, all moneys received by the Indenture Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by mandatory provisions of law. Neither the Owner Trustee nor, subject to Section 5.08, the Indenture Trustee nor any agent thereof shall be under any liability for interest on any moneys received by it hereunder. SECTION 9.07. Right of Indenture Trustee to Rely on Officers' Certificate, ------------------------------------------------------------ etc. Subject to Sections 9.02 and 9.03, whenever in the administration of the - ---- trusts of this Indenture the Indenture Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering or omitting any action hereunder, such matter (unless other evidence in respect thereof be specifically prescribed herein) may, in the absence of bad faith on the part of the Indenture Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Indenture Trustee, and such certificate, in the absence of bad faith on the part of the Indenture Trustee, shall be full warrant to the Indenture Trustee for any action taken, suffered or omitted by it under the provisions of this Indenture upon the faith thereof. SECTION 9.08. Replacement Airframes and Replacement Engines. At any time --------------------------------------------- and from time to time any Airframe or Engine which has been subject to an Event of Loss (or is treated as such pursuant to Section 9(b) of the Lease) and may, or is required to, be replaced under Section 9(b), 10(a) or 10(b) of the Lease by a Replacement Airframe or Replacement Engine, as the case may be, shall be replaced in accordance with the provisions of this Section 9.08 and the provisions of said Sections of the Lease, and the Owner Trustee shall, from time to time, direct the Indenture Trustee to execute and deliver to or as directed in writing by the - 57 - Owner Trustee an appropriate instrument releasing such Airframe and/or Engine as appropriate from the Lien of this Indenture and the Indenture Trustee shall execute and deliver such instrument as aforesaid without recourse or warranty, but only upon receipt by or deposit with the Indenture Trustee of the following: (1) A written request from the Owner Trustee requesting such release and specifically describing the Airframe and/or Engine(s) to be so released. (2) A certificate signed by a duly authorized officer of the Lessee stating the following: A. With respect to the replacement of any Airframe: (i) a description of the Airframe including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (ii) a description of the Replacement Airframe, including the manufacturer, model, FAA registration number (or other applicable registration information) and manufacturer's serial number; (iii) that on the date of the Trust Agreement and Trust Indenture Supplement relating to the Replacement Airframe the Owner Trustee will be the legal owner of such Replacement Airframe free and clear of all Liens except Permitted Liens, that such Replacement Airframe will on such date be in at least as good operating condition and repair as required by the terms of the Lease, and that such Replacement Airframe has been or, substantially concurrently with such replacement, will be duly registered in the name of the Owner Trustee under the Act or under the law then applicable to the registration of the Airframe and that an airworthiness certificate has been duly issued under the Act (or such other applicable law) with respect to such Replacement Airframe and that such registration and certificate is, or will be, in full force and effect, and that the Lessee will have the full right and authority to use such Replacement Airframe; (iv) that the insurance required by Section 11 of the Lease is in full force and effect with respect to such Replacement Airframe and all premiums then due thereon have been paid in full; (v) that the replacement Airframe is of the same or an improved make or model as the Airframe requested to be released from this Indenture; (vi) that the value and useful life of the Replacement Airframe as of the date of such certificate is not less than the value and useful life of the Airframe - 58 - requested to be released (assuming such Airframe was in the condition and repair required to be maintained under the Lease); (vii) that no Lease Event of Default, Lease Payment Default or Lease Bankruptcy Default has occurred and is continuing or would result from the making and granting of the request for release and the addition of a Replacement Airframe; (viii) that the release of the Airframe subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (ix) that upon such replacement, the Lien of this Indenture will apply to the Replacement Airframe and will constitute a first perfected Lien thereon; and (x) that each of the conditions specified in Section 10 of the Lease with respect to such Replacement Airframe has been satisfied. B. With respect to the replacement of any Engine: (i) a description of the Engine including the manufacturer's serial number; (ii) a description of the Replacement Engine including the manufacturer's name, the engine model and serial number; (iii) that on the date of the Trust Agreement and Trust Indenture Supplement relating to the Replacement Engine the Owner Trustee will be the legal owner of such Replacement Engine free and clear of all Liens except Permitted Liens, and that such Replacement Engine will on such date be in at least as good operating condition and repair as required by the terms of the Lease; (iv) that the value of the Replacement Engine as of the date of such certificate is not less than the value of the Engine to be released (assuming such Engine was in the condition and repair required to be maintained under the Lease); (v) that the release of the Engine subject to the Event of Loss will not impair the security of the Indenture in contravention of any of the provisions of this Indenture; (vi) that upon such replacement, the Lien of this Indenture will apply to the Replacement Engine and will constitute a first perfected Lien thereon; and - 59 - (vii) that each of the conditions specified in Section 10 of the Lease with respect to such Replacement Engine has been satisfied. (3) The appropriate instruments (i) transferring to the Owner Trustee title to the Replacement Airframe or Replacement Engine to be received as consideration for the Airframe or Engine to be released and (ii) assigning to the Owner Trustee the benefit of all manufacturer's and vendor's warranties, if any, generally available with respect to such Replacement Airframe or Replacement Engine, and a Trust Agreement and Trust Indenture Supplement subjecting such Replacement Airframe or Replacement Engine to the Trust Agreement and to the Lien of this Indenture. (4) A certificate from a firm of independent aircraft appraisers of national standing satisfactory to the Indenture Trustee and the Owner Trustee confirming the accuracy of the information set forth in clause (2)A.(vi) of this Section 9.08. (5) The opinion of Messrs. King & Spalding, special counsel to the Lessee, or other counsel reasonably satisfactory to the Indenture Trustee, stating that: (i) the certificates, opinions and other instruments and/or property which have been or are therewith delivered to and deposited with the Indenture Trustee conform to the requirements of this Indenture and the Lease and, upon the basis of such application, the property so sold or disposed of may be properly released from the Lien of this Indenture and all conditions precedent herein provided for relating to such release have been complied with; and (ii) the Replacement Airframe or Replacement Engine has been validly subjected to the Lien of this Indenture and covered by the Lease, the instruments subjecting such Replacement Airframe or Replacement Engine to the Lease and to the Lien of this Indenture, as the case may be, have been duly filed for recordation pursuant to the Act or any other law then applicable to the registration of the Aircraft, and no further action, filing or recording of any document is necessary or advisable in order to establish and perfect the title of the Owner Trustee to and the Lien of this Indenture on such Replacement Airframe or Replacement Engine. SECTION 9.09. Trust Agreement and Trust Indenture Supplements for --------------------------------------------------- Replacements. In the event of the substitution of a Replacement Airframe - ------------ or a Replacement Engine as contemplated by Section 10 of the Lease, the Owner Trustee and the Indenture Trustee agree for the benefit of the Holders and the Lessee, subject to fulfillment of the conditions precedent and compliance by the Lessee with its obligations set forth in Section 9(b) or 10 of the Lease, to execute and deliver a Trust Agreement and Trust Indenture Supplement as contemplated by Section 9.08(3) hereof and, provided no Lease Event of Default shall have occurred and be - 60 - continuing, execute and deliver to the Lessee an appropriate instrument releasing the Airframe or Engine being replaced from the Lien of this Indenture. SECTION 9.10. Effect of Replacement. In the event of the substitution of --------------------- a Replacement Airframe or a Replacement Engine as contemplated by Section 9(b) or 10 of the Lease and Section 9.08 hereof, all provisions of this Indenture relating to the Airframe or Engine or Engines being replaced shall be applicable to such Replacement Airframe or Replacement Engine or Engines with the same force and effect as if such Replacement Airframe or Replacement Engine or Engines were the same airframe or engine or engines, as the case may be, as the Airframe or Engine or Engines being replaced but for the Event of Loss with respect to the Airframe or Engine or Engines being replaced. SECTION 9.11. Compensation. The Owner Trustee covenants and ------------ agrees to pay, and the Indenture Trustee shall be entitled to receive, reasonable compensation and payment or reimbursement for its reasonable advances, expenses and disbursements (including the reasonable compensation and expenses and disbursements of its counsel, agents and other persons not regularly in its employ) in connection with its services rendered hereunder or in any way relating to or arising out of the administration of the Indenture Estate and shall have a priority claim on the Indenture Estate for the payment of such compensation, advances, expenses and disbursements to the extent that such compensation, advances, expenses and disbursements shall not be paid by the Lessee on behalf of the Owner Trustee as Supplemental Rent, and shall have the right to use or apply any moneys held by it hereunder in the Indenture Estate toward such payments; provided that, so long as the Lease is in effect, the -------- Indenture Trustee shall not make any claim for payment under this Section 9.11 against the Owner Trustee without first making demand on the Lessee for payment of such claim unless stayed from so doing in a bankruptcy proceeding. The Indenture Trustee agrees that it shall have no right against any Holder, the Trust Company, in its individual capacity, or the Owner Participant for any fee as compensation for its services as trustee under this Indenture. ARTICLE X CONCERNING THE HOLDERS SECTION 10.01. Evidence of Action Taken by Holders. (a) Any ----------------------------------- request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing, and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, if expressly required herein, to the Owner - 61 - Trustee. Proof of execution of any instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Sections 9.02 and 9.03) conclusive in favor of the Indenture Trustee and the Owner Trustee, if made in the manner provided in this Article. (b) For the purpose of determining the Holders entitled to vote or consent to any direction, waiver or other action of such Holders under Section 7.11 or 7.12, the Indenture Trustee may set a record date for such vote or consent. Such record date shall be a date not more than 15 days prior to the first solicitation of such vote or consent. SECTION 10.02. Proof of Execution of Instruments and of Holding of --------------------------------------------------- Certificates. Subject to Sections 9.02 and 9.03, the execution of any - ------------ instrument by a Holder or his agent or proxy may be proved in accordance with such reasonable rules and regulations as may be prescribed by the Indenture Trustee. The holding of Certificates shall be proved by the Register or by a certificate of the Registrar. SECTION 10.03. Holders to Be Treated as Owners. Prior to due presentment ------------------------------- for registration of transfer of any Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the Person in whose name such Certificate shall be registered upon the Register as the absolute owner of such Certificate (whether or not such Certificate shall be overdue and notwithstanding any notation of ownership or other writing thereon) for the purpose of receiving payment of or on account of the principal of and, subject to the provisions of this Indenture, interest on such Certificate and for all other purposes; and neither the Owner Trustee nor the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee) nor the Paying Agent, if any, nor the Registrar nor the Lessee shall be affected by any notice to the contrary. All such payments so made to any such person, or upon his order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Certificate. SECTION 10.04. Certificates Owned by Owner Trustee and the Lessee Deemed --------------------------------------------------------- Not Outstanding. In determining whether the Holders of the requisite aggregate - ---------------- principal amount of Certificates have concurred in any direction, consent or waiver under this Indenture, Certificates which are owned by the Owner Trustee, the Owner Participant, the Lessee or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant or the Lessee shall be disregarded and deemed not to be Outstanding for the purpose of any such determination; provided -------- that for the purpose of determining whether the Indenture Trustee shall be protected in relying on any such direction, consent or waiver, only if a Responsible Officer of the Indenture Trustee has - 62 - actual knowledge that certain Certificates are so owned shall such Certificates be so disregarded; and provided further that if all Certificates which would be ------- deemed Outstanding in the absence of the foregoing provision are owned by the Owner Trustee, the Owner Participant or the Lessee or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee, the Owner Participant or the Lessee, then such Certificates shall be deemed Outstanding for the purpose of any such determination. Certificates so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Owner Trustee, the Owner Participant or the Lessee or any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Owner Trustee or the Lessee. In case of a dispute as to such right, the advice of counsel shall be full protection in respect of any decision made by the Indenture Trustee in accordance with such advice. Upon request of the Indenture Trustee, the Owner Trustee, the Owner Participant and the Lessee shall furnish to the Indenture Trustee promptly an Officers' Certificate listing and identifying all Certificates, if any, known by the Owner Trustee, the Owner Participant or the Lessee to be owned or held by or for the account of any of the above-described persons; and, subject to Sections 9.02 and 9.03, the Indenture Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts set forth therein and of the fact that all Certificates not listed therein are outstanding for the purpose of any such determination. SECTION 10.05. Right of Revocation of Action Taken. At any time prior ----------------------------------- to (but not after) the evidencing to the Indenture Trustee, as provided in Section 10.01, of the taking of any action by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action, any Holder of a Certificate, the serial number of which is shown by the evidence to be included among the serial numbers of the Certificates the Holders of which have consented to such action, may, by filing written notice at the Corporate Trust Office and upon proof of holding as provided in this Article, revoke such action so far as concerns such Certificate. Except as aforesaid, any such action taken by the Holder shall be conclusive and binding upon such Holder and upon all future Holders and owners of such Certificate and of any Certificates issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Certificate or otherwise. Any action taken by the Holders of the percentage in aggregate principal amount of the Certificates specified in this Indenture in connection with such action shall be conclusively binding upon the Owner Trustee, the Indenture Trustee and the Holders of all the Certificates. SECTION 10.06. ERISA Plan Prohibition. No employee benefit plan subject ---------------------- to Title I of the Employee Retirement Income Security - 63 - Act of 1974, as amended ("ERISA"), or individual retirement account or employee benefit plan subject to Section 4975 of the Internal Revenue Code of 1986, as amended, (hereinafter collectively referred to as an "ERISA Plan") may acquire or hold any of the Certificates. The purchase by any person of any Certificate constitutes a representation by such person to the Lessee, the Owner Participant, the Owner Trustee and the Indenture Trustee that such person is not an ERISA Plan and that such person is not acquiring, and has not acquired, such Certificate with assets of an ERISA Plan. ARTICLE XI INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE The Owner Trustee, not individually but solely in its capacity as Owner Trustee under the Trust Agreement, hereby agrees, whether or not any of the transactions contemplated hereby shall be consummated, to assume liability for, and does hereby indemnify, protect, save and keep harmless the Indenture Trustee, in its individual capacity, and its successors, assigns, agents and servants solely from the Trust Estate, with respect to the claims of the Indenture Trustee for payment or reimbursement under Section 9.11 hereof and from and against any and all liabilities, obligations, losses, damages, penalties, taxes (excluding any taxes payable by the Indenture Trustee on or measured by any compensation received by the Indenture Trustee for its services under this Indenture), claims, actions, suits, costs, expenses or disbursements (including legal fees and expenses) of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Indenture Trustee in its individual capacity (whether or not also agreed to be indemnified against by any other person under any other document) in any way relating to or arising out of this Indenture, or any other Indenture Documents or the enforcement of any of the terms of any thereof, or in any way relating to or arising out of the manufacture, design, purchase, acceptance, nonacceptance, rejection, ownership, registration, re-registration, delivery, redelivery, lease, possession, use, operation, condition, sale, return or other disposition of the Aircraft or any Engine (including, without limitation, latent and other defects, whether or not discoverable, and any claim for patent, trademark or copyright infringement), or in any way relating to or arising out of the administration of the Indenture Estate or the action or inaction of the Indenture Trustee hereunder, except only (i) in the case of willful misconduct or gross negligence of the Indenture Trustee in the performance of its duties hereunder, (ii) as may result from the inaccuracy of any representation or warranty of the Indenture Trustee in the Participation Agreement, (iii) as otherwise provided in Section 9.02(c) hereof or (iv) as otherwise excluded by the terms of Section 6(b) or 6(c) of the Participation Agreement from the Lessee's general indemnity to the Indenture Trustee under said - 64 - Section; provided that so long as the Lease is in effect, the Indenture Trustee -------- shall not make any claim under this Article XI for any claim or expense indemnified by the Lessee under the Participation Agreement without first making demand on the Lessee for payment of such claim or expense unless the Indenture Trustee is enjoined or is otherwise prevented by law from making such demand. The Indenture Trustee in its individual capacity shall be entitled to indemnification, from the Indenture Estate, for any liability, obligation, loss, damage, penalty, claim, action, suit, cost, expense or disbursement indemnified against pursuant to this Article XI to the extent not reimbursed by the Lessee or others, but without releasing any of them from their respective agreements of reimbursement; and to secure the same the Indenture Trustee shall have a prior Lien on the Indenture Estate. The indemnities contained in this Article XI shall survive the termination of this Indenture and the resignation or removal of the Indenture Trustee. Upon payment in full by the Owner Trustee of any indemnity pursuant to this Article XI, the Owner Trustee shall be subrogated to the rights of the Indenture Trustee, if any, in respect of the matter as to which the indemnity was paid. ARTICLE XII SUCCESSOR TRUSTEES SECTION 12.01. Notice of Successor Owner Trustee. In the case of any --------------------------------- appointment of a successor to the Owner Trustee pursuant to the Trust Agreement or any merger, conversion, consolidation or sale of substantially all of the corporate trust business of the Owner Trustee pursuant to the Trust Agreement, the successor Owner Trustee shall give prompt written notice thereof to the Indenture Trustee. SECTION 12.02. Resignation and Removal of Indenture Trustee; Appointment --------------------------------------------------------- of Successor. (a) The Indenture Trustee or any successor thereto may resign at - ------------ any time without cause by giving at least 30 days' prior written notice to the Owner Trustee, the Owner Participant, the Lessee and each Holder, such resignation to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In addition, a Majority in Interest of Certificate Holders, or the Owner Trustee, with the consent of the Lessee (so long as no Lease Default is then continuing) and a Majority in Interest of Certificate Holders, may at any time remove the Inde nture Trusteewithout cause by an instrument in writing delivered to the Lessee, the Owner Trustee, the Owner Participant, and the Indenture Trustee, and the Indenture Trustee shall promptly notify each Holder thereof in writing, such removal to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In the case of the resignation or removal of the Indenture Trustee, a Majority in Interest of Certificate Holders, or the Owner Trustee, with the consent of the Lessee (so long as no Lease Default is then continuing) and a Majority in Interest of Certificate Holders may appoint a - 65 - successor Indenture Trustee by an instrument signed by such Holders. If a successor Indenture Trustee shall not have been appointed within 90 days after such notice of resignation or removal, the Indenture Trustee, the Owner Trustee, the Lessee, the Owner Participant, or any Holder may apply to any court of competent jurisdiction to appoint a successor Indenture Trustee to act until such time, if any, as a successor shall have been appointed as provided above. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above within one year from the date of the appointment by such court. (b) In case at any time any of the following shall occur: (i) the Indenture Trustee shall cease to be eligible in accordance with the provisions of Section 12.03 and shall fail to resign after written request therefor by the Owner Trustee or by any such Holder; or (ii) the Indenture Trustee shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver or liquidator of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then the Owner Trustee may remove the Indenture Trustee and, with the consent of the Lessee (so long as no Lease Default is then continuing), appoint a successor trustee by written instrument, in duplicate, executed by a Responsible Officer of the Owner Trustee, one copy of which instrument shall be delivered to the Indenture Trustee so removed and one copy to the successor trustee, or any Holder who has been a bona fide Holder for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Indenture Trustee and appoint a successor trustee, which removal and appointment shall become effective upon acceptance of appointment by the successor trustee as provided in Section 12.04. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as provided above within one year from the date of appointment by such court. SECTION 12.03. Persons Eligible for Appointment as Indenture --------------------------------------------- Trustee. There shall at all times be an Indenture Trustee - ------- hereunder which shall be a corporation organized and doing business under the laws of the United States of America or of any State or the District of Columbia having a combined capital and - 66 - surplus of at least $100,000,000, or a direct or indirect subsidiary of such a corporation, or a member of a bank holding company group, having a combined capital and surplus of at least $100,000,000 in either case the obligations of which under the Operative Documents are fully and unconditionally guaranteed by a corporation organized and existing under the laws of the United States of America or of any State or the District of Columbia having a combined capital and surplus of at least $100,000,000 and such subsidiary or member itself having a capital and surplus of at least $75,000,000, if there is such an institution willing, able and legally qualified to perform the duties of the Indenture Trustee hereunder upon reasonable and customary terms. Such corporate trustee shall be a citizen of the United States as defined in Section 101(16) of the Act, and shall be authorized under such laws to exercise corporate trust powers and shall be subject to supervision of examination by Federal, State or District of Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section, the Indenture Trustee shall resign immediately in the manner and with the effect specified in Section 12.02. SECTION 12.04. Acceptance of Appointment by Successor Trustee. Any ---------------------------------------------- successor trustee appointed as provided in Section 12.02 shall execute and deliver to the Owner Trustee, the Lessee, and to its predecessor trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as trustee herein; but, nevertheless, on the written request of the Owner Trustee or of the successor trustee, upon payment of its charges then unpaid, the trustee ceasing to act shall, subject to Section 14.04, pay over to the successor trustee all moneys at the time held by it hereunder and shall execute and deliver an instrument transferring to such successor trustee all such rights, powers, duties and obligations. Upon request of any such successor trustee, the Owner Trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. Any trustee ceasing to act shall, nevertheless, retain a prior claim upon all property or funds held or collected by such trustee to secure any amounts then due it pursuant to the provisions of Article XI. No successor trustee shall accept appointment as provided in this Section 12.04 unless at the time of such acceptance such - 67 - successor trustee shall be eligible under the provisions of Section 12.03. Upon acceptance of appointment by a successor trustee as provided in this Section 12.04, the successor trustee shall mail notice thereof by first-class mail to the Holders at their last addresses as they shall appear in the Register, and shall mail a copy of such notice to the Lessee and the Owner Trustee. If the acceptance of appointment is substantially contemporaneous with the resignation, then the notice called for by the preceding sentence may be combined with the notice called for by Section 12.02. SECTION 12.05. Merger, Conversion, Consolidation or Succession to Business ----------------------------------------------------------- of Indenture Trustee. Any corporation into which the Indenture Trustee may be - -------------------- merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation succeeding to the corporate trust business of the Indenture Trustee, shall be the successor to the Indenture Trustee hereunder, provided that, anything herein to the contrary notwithstanding, such corporation shall be eligible under the provisions of Section 12.03, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case at the time such successor to the Indenture Trustee shall succeed to the trusts created by this Indenture any of the Certificates shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor Indenture Trustee and deliver such Certificates so authenticated; and, in case at that time any of the Certificates shall not have been authenticated, any successor to the Indenture Trustee may authenticate such Certificates either in the name of any predecessor hereunder or in the name of the successor Indenture Trustee; and in all such cases such certificate shall have the full force which it is anywhere in the Certificates or in this Indenture provided that the certificate of the Indenture Trustee shall have; provided, that the right to adopt the certificate of --------- authentication of any predecessor Indenture Trustee or to authenticate Certificates in the name of any predecessor Indenture Trustee shall apply only to its successor or successors by merger, conversion or consolidation. SECTION 12.06. Appointment of Separate Trustees. (a) At any time or -------------------------------- times, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Indenture Estate may at the time be located or in which any action of the Indenture Trustee may be required to be performed or taken, the Indenture Trustee, by an instrument in writing signed by it, may appoint one or more individuals or corporations to act as separate trustee or separate trustees or co-trustee, acting jointly with the Indenture Trustee, of all or any part of the Indenture Estate, to the full - 68 - extent that local law makes it necessary for such separate trustee or separate trustees or co-trustee acting jointly with the Indenture Trustee to act. (b) The Indenture Trustee and, at the request of the Indenture Trustee, the Owner Trustee, shall execute, acknowledge and deliver all such instruments as may be required by the legal requirements of any jurisdiction or by any such separate trustee or separate trustees or co-trustee for the purpose of more fully confirming such title, rights or duties to such separate trustee or separate trustees or co-trustee. Upon the acceptance in writing of such appointment by any such separate trustee or separate trustees or co-trustee, it, he or they shall be vested with such title to the Indenture Estate or any part thereof, and with such rights, powers, duties and obligations, as shall be specified in the instrument of appointment, and such rights, powers, duties and obligations shall be conferred or imposed upon and exercised or performed by the Indenture Trustee, or the Indenture Trustee and such separate trustee or separate trustees or co-trustee jointly with the Indenture Trustee subject to all the terms of this Indenture, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such separate trustee or separate trustees or co- trustee, as the case may be. Any separate trustee or separate trustees or co- trustee may, at any time by an instrument in writing, constitute the Indenture Trustee its or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its or his behalf and in its or his name. In case any such separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, the title to the Indenture Estate and all assets, property, rights, powers, duties and obligations and duties of such separate trustee or co-trustee shall, so far as permitted by law, vest in and be exercised by the Indenture Trustee, without the appointment of a successor to such separate trustee or co-trustee unless and until a successor is appointed. (c) All provisions of this Indenture which are for the benefit of the Indenture Trustee (including without limitation Article XI hereof) shall extend to and apply to each separate trustee or co-trustee appointed pursuant to the foregoing provisions of this Section 12.06. (d) Every additional trustee and separate trustee hereunder shall, to the extent permitted by law, be appointed and act and the Indenture Trustee shall act, subject to the following provisions and conditions: (i) all powers, duties, obligations and rights conferred upon the Indenture Trustee in respect of the - 69 - receipt, custody, investment and payment of moneys shall be exercised solely by the Indenture Trustee; (ii) all other rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed and exercised or performed by the Indenture Trustee and such additional trustee or trustees and separate trustee or trustees jointly except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Indenture Estate in any such jurisdiction) shall be exercised and performed by such additional trustee or trustees or separate trustee or trustees; (iii) no power hereby given to, or exercisable by, any such additional trustee or separate trustee shall be exercised hereunder by such additional trustee or separate trustee except jointly with, or with the consent of, the Indenture Trustee; and (iv) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder. If at any time the Indenture Trustee shall deem it no longer necessary or prudent in order to conform to any such law, the Indenture Trustee shall execute and deliver an indenture supplemental hereto and all other instruments and agreements necessary or proper to remove any additional trustee or separate trustee. (e) Any request, approval or consent in writing by the Indenture Trustee to any additional trustee or separate trustee shall be sufficient warrant to such additional trustee or separate trustee, as the case may be, to take such action as may be so requested, approved or consented to. (f) Notwithstanding any other provision of this Section 12.06, the powers of any additional trustee or separate trustee shall not exceed those of the Indenture Trustee hereunder. ARTICLE XIII SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER DOCUMENTS SECTION 13.01. Supplemental Indentures Without Consent of Holders. The -------------------------------------------------- Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee (without the consent of any - 70 - Holder) may enter into an indenture or indentures supplemental hereto for one or more of the following purposes: (a) to convey, transfer, assign, mortgage or pledge any property or assets to the Indenture Trustee as security for the Certificates; (b) to evidence the succession of another corporation to the Owner Trustee or successive successions, and the assumption by the successor corporation of the covenants, agreements and obligations of the Owner Trustee herein and in the Certificates; (c) to add to the covenants of the Owner Trustee such further covenants, restrictions, conditions or provisions as consented to by the Owner Participant and as they and the Indenture Trustee shall consider to be for the protection of the Holders, and to make the occurrence, or the occurrence and continuance, of a default in any such additional covenants, restrictions, conditions or provisions an Indenture Event of Default permitting the enforcement of all or any of the several remedies provided herein; provided, that in respect of any such additional covenant, -------- restriction, condition or provision such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such an Indenture Event of Default or may limit the remedies available to the Indenture Trustee upon such an Indenture Event of Default or may limit the right of the Holders of not less than a majority in aggregate principal amount of the Certificates to waive such an Indenture Event of Default; (d) to surrender any rights or power conferred herein upon the Owner Trustee or the Owner Participant; (e) to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture; or to make such other provisions in regard to matters or questions arising under this Indenture or under any supplemental indenture as the Owner Trustee may deem necessary or desirable and which shall not adversely affect the interests of the Holders; (f) to correct or amplify the description of any property at any time subject to the Lien of this Indenture or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subject to the Lien of this Indenture or to subject Replacement Airframes or Replacement Engines to the Lien of this Indenture in accordance with the provisions hereof or with the Lease or to - 71 - release from the Lien of this Indenture property that has been substituted on or removed from the Aircraft as contemplated in Section 3.07 hereof; provided that supplements to this Indenture entered into for the purpose of -------- subjecting Replacement Airframes or Replacement Engines to the Lien of this Indenture need only be executed by the Owner Trustee and the Indenture Trustee; (g) to effect the re-registration of the Aircraft pursuant to Section 19 of the Participation Agreement; and (h) to add, eliminate or change any provision hereunder so long as such action shall not adversely affect the interests of the Holders. The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be contained therein and to accept the conveyance, transfer, assignment, mortgage or pledge of any property thereunder, but the Indenture Trustee shall not be obligated to enter into any such supplemental indenture which adversely affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise, whether in its trust or individual capacity. SECTION 13.02. Supplemental Indentures With Consent of Holders. With the ----------------------------------------------- consent (evidenced as provided in Article X) of a Majority in Interest of Certificate Holders, the Owner Trustee (when authorized by the Owner Participant) and the Indenture Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders; provided, however, that, without the ----------------- consent of each Holder, no such amendment of or supplement to this Indenture or any indenture supplemental hereto, or modification of the terms of, or consent under, any thereof, shall (a) modify any of the provisions of Section 7.11 or this Section 13.02, (b) reduce the amount or extend the time of payment of any amount owing or payable under any Certificate or reduce the interest payable on any Certificate (except that only the consent of the Holder shall be required for any decrease in any amounts of or the rate of interest payable on such Certificate or any extension for the time of payment of any amount payable under such Certificate), or alter or modify the provisions of Article V hereof with respect to the order of priorities in which distributions thereunder shall be made as between the Holder and the Owner Trustee or the Owner Participant or with respect to the amount or time of payment of any such distribution, or alter or modify the circumstances under which a premium shall be payable, or alter the currency in which any amount payable under any Certificate is to be paid, or impair the right of any Holder to commence legal proceedings to enforce a right to receive payment hereunder, (c) reduce, modify or amend - 72 - any indemnities in favor of any Holder or in favor of or to be paid by the Owner Trustee (except as consented to by each Person adversely affected thereby), or (d) create or permit the creation of any Lien on the Indenture Estate or any part thereof prior to or pari passu with the Lien of this Indenture, except as expressly permitted herein, or deprive any Holder of the benefit of the Lien of this Indenture on the Indenture Estate, except as provided in Section 7.02 hereof or in connection with the exercise of remedies under Article VII. This Section 13.02 shall not apply to any indenture or indentures supplemental hereto permitted by, and complying with the terms of, Section 13.06 hereof. Upon the request of the Owner Trustee (at the direction of the Owner Participant) and upon the filing with the Indenture Trustee of evidence of the consent of Holders and other documents, if any, required by Section 10.01, the Indenture Trustee shall join with the Owner Trustee in the execution of such supplemental indenture unless such supplemental indenture affects the Indenture Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Indenture Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Owner Trustee and the Indenture Trustee of any supplemental indenture pursuant to the provisions of this Section, the Indenture Trustee shall mail a notice thereof by first-class mail to the Holders at their addresses as they shall appear on the registry books of the Registrar, setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 13.03. Effect of Supplemental Indenture. Upon the execution of -------------------------------- any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Indenture Trustee, the Owner Trustee, the Lessee and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes. SECTION 13.04. Documents to Be Given to Indenture Trustee. The Indenture ------------------------------------------ Trustee, subject to the provisions of Sections 9.02 - 73 - and 9.03, may receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any such supplemental indenture complies with the applicable provisions of this Indenture. SECTION 13.05. Notation on Certificates in Respect of Supplemental --------------------------------------------------- Indentures. Certificates authenticated and delivered after the execution of any - ---------- supplemental indenture pursuant to the provisions of this Article may bear a notation in form approved by the Indenture Trustee as to any matter provided for by such supplemental indenture. If the Owner Trustee or the Indenture Trustee shall so determine, new Certificates so modified as to conform, in the opinion of the Owner Trustee and the Indenture Trustee, to any modification of this Indenture contained in any such supplemental indenture may be prepared by the Owner Trustee, authenticated by the Indenture Trustee and delivered in exchange for the Outstanding Certificates. SECTION 13.06. No Request Necessary for Lease Supplement or Trust -------------------------------------------------- Agreement and Trust Indenture Supplement. Notwithstanding anything contained in - ---------------------------------------- Section 13.02 hereof, no written request or consent of the Indenture Trustee, any Holder or the Owner Participant pursuant to Section 13.02 hereof shall be required to enable the Owner Trustee to enter into any supplement to the Lease with the Lessee pursuant to the terms of the Lease to subject an Aircraft or other property thereto. SECTION 13.07. Amendments, Waivers, etc. of Other Indenture Documents. ------------------------------------------------------ (a) Without the consent of a Majority in Interest of Certificate Holders, the respective parties to the Participation Agreement, the Lease and the Trust Agreement may not modify, amend or supplement any of said agreements, or give any consent, waiver, authorization or approval thereunder, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder; provided, however, that the actions specified in subsection ----------------- (b) of this Section 13.07 may be taken without the consent of any Holder. (b) The Participation Agreement, the Lease and the Trust Agreement may, at any time and from time to time, be amended or supplemented without the consent of any Holder: (i) to effect any modification, amendment, addition or deletion expressly provided for in the Lease, the Participation Agreement or the Trust Agreement (including, without limitation, Section 3 of the Lease but excluding any provisions describing the manner in which such Operative Document may be amended or modified); (ii) to effect any modification or amendment of, addition to or deletion from the Lease, the Participation Agreement or the Trust Agreement if, as reflected in an Opinion of Counsel pursuant to Section 13.07(d) to the party - 74 - requesting such action addressed to the other parties to the applicable agreement, such modification, amendment, addition or deletion shall not adversely affect the interests of Holders; or (iii) for the purpose of adding any provisions to or changing in any matter or eliminating any of the provisions thereof or of modifying in any manner the rights of the respective parties thereunder, with respect to the following provisions of the Lease: Section 3(a) solely with respect to modifying the length of the Term of the Lease (except if the result thereof would be to shorten the Term of the Lease to a period shorter than the period ending with the date of Maturity of the Certificates) and Section 3(a) solely with respect to modifying Basic Rent (but only to the extent such Section relates to amounts payable (whether directly or pursuant to the Indenture) to Persons other than Holders and the Indenture Trustee), Section 3(d) (but only insofar as it relates to the address or account information of the Owner Trustee or the Indenture Trustee) (as to modifications to Sections 3(a) and 3(d), including as such Sections 3(a) and 3(d) may be amended pursuant to Section 3(c) of the Lease), Sections 5, 12 and 16 (but only in order to increase the Lessee's liabilities or change the Lessor's rights under such Sections in a manner that either enhances the Lessor's rights or does not otherwise adversely affect the rights of the Lessor or of the Holders), Sections 7, 8, 10, 18 and 19 (but only that additional requirements may be imposed under such Sections on the Lessee), Section 9 (but only that further restrictions may be imposed on the Lessee), Section 11 (but only (i) with respect to insurance maintained by Lessor or Owner Participant and (ii) that additional insurance requirements may be imposed on the Lessee), Section 13 (but only in the case of an assignment by the Lessor in circumstances where the Aircraft shall remain registrable under the Act), Section 14 (but only to impose additional or more stringent Lease Events of Default), Section 15 (but only to impose additional remedies) and any definition of terms used in the Lease (whether appearing in Section 1 or elsewhere in the Lease), but only to the extent that any modification of such definition is required by or would result in a modification of the Lease permitted pursuant to this subsection (b). The Indenture Trustee may, without the consent of any Holder, give any consent, waiver, authorization or approval under any Indenture Document, whether or not provided for therein, if, as reflected in an Opinion of Counsel referred to in Section 13.07(d), such consent, waiver, authorization or approval does not adversely affect the interests of Holders. The consent of the Indenture Trustee shall not be required for any amendment or supplement to the Lease necessary to adjust the percentages for Basic Rent, Stipulated Loss Value, Termination - 75 - Value or EBO Percentage pursuant to Section 3(c) of the Lease (as long as such amounts as adjusted comply with Section 3(c) of the Lease). (c) No modification, amendment, supplement, consent, waiver, authorization or approval with respect to the Lease, whether effected pursuant to subsection (a) or pursuant to subsection (b) of this Section 13.07 and anything in such subsections or elsewhere in this Indenture to the contrary notwithstanding, shall, without the consent of the Holder of each Outstanding Certificate directly or indirectly affected thereby, reduce the amount of, or change the timing of payment of, any payment of Basic Rent, Supplemental Rent, Stipulated Loss Value, Termination Value or the EBO Percentage, as the case may be, below the amount required to pay as and when due (i) all principal, premium (if any) and interest payable on the Certificates and (ii) any other amounts required to be paid pursuant thereto or hereto, at any time or from time to time. (d) Upon receipt of an Officers' Certificate and an Opinion of Counsel (which Opinion, in the case of the Lessee, shall be by counsel other than an employee of the Lessee unless the related modification, amendment, addition or deletion effects a change that relates solely to the period after there are no longer any Certificates Outstanding) from the Lessee or the Owner Trustee, the Indenture Trustee shall consent and evidence its consent to any action permitted by this Section 13.07 and the Indenture Trustee shall be fully protected in relying on such Officers' Certificate and Opinion of Counsel. ARTICLE XIV SATISFACTION AND DISCHARGE OF INDENTURE; UNCLAIMED MONEYS SECTION 14.01. Satisfaction and Discharge of Indenture; Termination of ------------------------------------------------------- Indenture. If at any time after (a) the Owner Trustee shall have paid or caused - --------- to be paid the principal of and interest and premium, if any, on all the Certificates outstanding hereunder, as and when the same shall have become due and payable, or (b) the Owner Trustee shall have delivered to the Indenture Trustee for cancellation all Certificates theretofore authenticated (other than any Certificates which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.07) or (c) (i) all such Certificates not theretofore delivered to the Indenture Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Indenture Trustee for the giving of notice of redemption by the Indenture Trustee in the name and at the expense of the Owner Trustee, and (ii) the Owner Trustee shall have irrevocably deposited or caused to be deposited with the Indenture - 76 - Trustee as trust funds the entire amount in cash (other than moneys repaid by the Indenture Trustee or any paying agent to the Owner Trustee in accordance with Section 14.04) or Government Obligations maturing as to principal, premium, if any, and interest in such amounts and at such times as will insure the availability of cash sufficient to pay at maturity all such Certificates not theretofore delivered to the Indenture Trustee for cancellation, including principal, premium, if any, and interest due or to become due to such date of maturity as the case may be, and if, in any such case, the Owner Trustee shall also pay or cause to be paid all other sums then payable hereunder by the Owner Trustee, then this Indenture shall cease to be of further effect (except as to (i) rights of registration of transfer and exchange, and the Owner Trustee's right of optional redemption pursuant to Section 6.02(B), (ii) substitution of mutilated, defaced, destroyed, lost or stolen Certificates, (iii) rights of Holders to receive payments of principal thereof and interest thereon, upon the original stated due dates therefor (but not upon acceleration), (iv) the rights, obligations, indemnities and immunities of the Indenture Trustee hereunder and (v) the rights of the Holders as beneficiaries hereof with respect to the property so deposited with the Indenture Trustee payable to all or any of them), and the Indenture Trustee, on demand of the Owner Trustee accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Owner Trustee, shall execute proper instruments acknowledging such satisfaction of and discharging this Indenture. The Owner Trustee agrees to reimburse and indemnify the Indenture Trustee for any costs or expenses thereafter reasonably and properly incurred and to compensate the Indenture Trustee for any services thereafter reasonably and properly rendered by the Indenture Trustee in connection with this Indenture or the Certificates. Upon (or at any time after) payment in full to the Indenture Trustee, as trust funds, of the principal of and interest on and premium, if any, and all other amounts due under all Certificates and provided that there shall then be -------- no other amounts due to the Holders and the Indenture Trustee hereunder or under the Participation Agreement or otherwise secured hereby, the Owner Trustee shall direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing the Aircraft from the Lien of this Indenture and releasing the Indenture Documents from the assignment thereof hereunder, and the Indenture Trustee shall execute and deliver such instrument as aforesaid and, at the Owner Trustee's expense, will execute and deliver such other instruments or documents as may be reasonably requested by the Owner Trustee to give effect to such release; provided, however, that this ----------------- Indenture and the trusts created hereby shall terminate earlier and this Indenture shall be of no further force or effect upon any sale or other final disposition by the Indenture Trustee of all property forming a part of the Indenture Estate and the final distribution by the Indenture Trustee of all moneys or other property or proceeds constituting part of the Indenture Estate in accordance with the - 77 - terms hereof. Except as aforesaid otherwise provided, this Indenture and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. SECTION 14.02. Application by Indenture Trustee of Funds Deposited for ------------------------------------------------------- Payment of Certificates. Subject to Section 14.04, all moneys deposited with - ----------------------- the Indenture Trustee pursuant to Section 14.01 shall be held in trust and applied by it to the prompt payment, either directly or through any paying agent (including the Indenture Trustee acting as its own paying agent), to the Holders of the particular Certificates for the payment or redemption of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, interest and premium; but such money need not be segregated from other funds except to the extent required by law. SECTION 14.03. Repayment of Moneys Held by Paying Agent. Upon the ---------------------------------------- satisfaction and discharge of this Indenture all moneys then held by any Paying Agent under the provisions of this Indenture, other than funds deposited under Section 14.01(c)(ii) hereof to the extent not distributed to the Holders, shall, upon demand of the Owner Trustee, be repaid to it or paid to the Indenture Trustee and thereupon such Paying Agent shall be released from all further liability with respect to such moneys. SECTION 14.04. Transfer of Moneys Held by Indenture Trustee and Paying ------------------------------------------------------- Agent Unclaimed for Two Years and Eleven Months. Any moneys deposited with or - ----------------------------------------------- paid to the Indenture Trustee or any Paying Agent for the payment of the principal of or interest or premium on any Certificate and not applied but remaining unclaimed for two years and eleven months after the date upon which such principal, interest or premium shall have become due and payable, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, be paid to the Owner Trustee by the Indenture Trustee or such Paying Agent and the Holder of such Certificate, as a general unsecured creditor, shall, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property laws, thereafter look only to the Owner Trustee for any payment which such Holder may be entitled to collect, and all liability of the Indenture Trustee, or any Paying Agent with respect to such moneys shall thereupon cease. ARTICLE XV MISCELLANEOUS SECTION 15.01. Capacity in Which Acting. Each of Trust ------------------------ Company (or its permitted successors or assigns) and the Indenture Trustee acts hereunder not in its individual capacity but solely as trustee except as expressly provided herein and in the other Operative Documents, and, in the case of Trust Company (or its permitted successors or assigns), in the Trust Agreement. - 78 - SECTION 15.02. No Legal Title to Indenture Estate in Holders. No Holder --------------------------------------------- shall have legal title to any part of the Indenture Estate. No transfer, by operation of law or otherwise, of any Certificate or other right, title and interest of any Holder in and to the Indenture Estate or hereunder shall operate to terminate this Indenture or entitle such Holder or any successor or transferee of such Holder to an accounting or to the transfer to it of legal title to any part of the Indenture Estate. SECTION 15.03. Sale of Indenture Estate by Indenture Trustee is Binding. -------------------------------------------------------- Any sale or other conveyance of all or any part of the Indenture Estate by the Indenture Trustee made pursuant to the terms of this Indenture or of the Lease shall bind the Lessee, the Owner Trustee, the Holders and the Owner Participant and shall be effective to transfer or convey all right, title and interest of the Indenture Trustee, the Owner Trustee, the Owner Participant and such Holders therein and thereto. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or conveyance or as to the application of any sale or other proceeds with respect thereto by the Indenture Trustee. SECTION 15.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, --------------------------------------------------------- Owner Participant and Holders. Nothing in this Indenture, whether express or - ----------------------------- implied, shall be construed to give to any person other than the Trust Company, the Owner Trustee, the Lessee, the Indenture Trustee, as trustee and in its individual capacity, the Owner Participant, and the Holders any legal or equitable right, remedy or claim under or in respect of this Indenture. SECTION 15.05. No Action Contrary to the Lessee's Rights Under the Lease. --------------------------------------------------------- Notwithstanding any of the provisions of this Indenture or the Trust Agreement to the contrary, so long as no Lease Event of Default shall have occurred and be continuing, neither the Indenture Trustee nor the Owner Trustee will take any affirmative acts contrary to the terms of the Lease that interfere with the peaceful and quiet possession and enjoyment of the Aircraft by the Lessee. SECTION 15.06. Notices. Unless otherwise expressly specified or permitted ------- by the terms hereof, all notices, requests, demands, authorizations, directions, consents, waivers or documents provided or permitted by this Indenture to be made, given, furnished or filed shall be in writing, sent by express delivery service, postage prepaid, or by confirmed telex or telecopy, and (i) if to the Owner Trustee, addressed to it at its office at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration (telecopier (302) 651-8882) (with a copy to the Owner Participant at the address provided for notice pursuant to Section 15(b) of the Participation Agreement), (ii) if to the Indenture Trustee, addressed to it at its office at 101 Barclay Street, New York, New York 10286, Attention: Corporate Trust - - 79 - Corporate Finance Group (telecopier (212) 815-5915), with a copy to it c/o BNY Business Center Inc., 100 Ashford Center North, Suite 520, Atlanta, Georgia 30338, Attention: Corporate Trust Lease Administration (telecopier (707) 698- 5195), (iii) if to the Owner Participant or the Lessee, addressed to such party at such address as such party shall have furnished by notice to the Owner Trustee and the Indenture Trustee, or, until an address is so furnished, addressed to the address of such party (if any) set forth on Annex II of the Participation Agreement or (iv) if to the Pass Through Trustee, to the address set forth on Annex II of the Participation Agreement with a copy to the Indenture Trustee at the address set out in clause (ii) above. Any party hereto may change the address to which notices to such party will be sent by giving notice of such change to the other parties to this Indenture. Where this Indenture provides for notice to Holders, such notice shall be sufficiently given (unless otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to each Holder entitled thereto, at his last address as it appears in the Register. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of or irregularities in regular express delivery service, it shall be impracticable to send notice to the Owner Trustee by express delivery service and Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. SECTION 15.07. Officers' Certificates and Opinions of Counsel; Statements ---------------------------------------------------------- to Be Contained Therein. Upon any application or demand by the Lessee or the - ----------------------- Owner Trustee to the Indenture Trustee to take any action under any of the provisions of this Indenture, the Lessee or the Owner Trustee, as the case may be, shall furnish to the Indenture Trustee upon request (i) an Officers' Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with and that the proposed action is in conformity with the requirements of this Indenture, and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or demand as to which the furnishing of such documents is specifically required by any - 80 - provision of this Indenture relating to such particular application or demand, no additional certificate or opinion need be furnished. Any certificate, statement or opinion of an officer of the Owner Trustee may be based, insofar as it relates to legal matters, upon a certificate or opinion of or representations by counsel, unless such officer knows that the certificate or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of counsel may be based, insofar as it relates to factual matters information with respect to which is in the possession of the Lessee or the Owner Trustee, upon the certificate, statement or opinion of or representations by an officer or officers of the Lessee or the Owner Trustee, as the case may be, unless such counsel knows that the certificate, statement or opinion or representations with respect to the matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate, statement or opinion of an officer of the Lessee or the Owner Trustee or of counsel thereto may be based, insofar as it relates to accounting matters, upon a certificate or opinion of or representations by an accountant or firm of accountants employed by the Lessee or the Owner Trustee, as the case may be, unless such officer or counsel, as the case may be, knows that the certificate or opinion or representations with respect to the accounting matters upon which his certificate, statement or opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should know that the same are erroneous. Any certificate or opinion of any independent firm of public accountants filed with the Indenture Trustee shall contain a statement that such firm is independent. SECTION 15.08. Severability. Any provision of this Indenture which is ------------ prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 15.09. No Oral Modifications or Continuing Waivers. No terms or ------------------------------------------- provisions of this Indenture or the Certificates may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party or other person against whom enforcement of the change, waiver, discharge or termination is sought; and any waiver of the terms - 81 - hereof or of any Certificate shall be effective only in the specific instance and for the specific purpose given. SECTION 15.10. Successors and Assigns. All covenants and agreements ---------------------- contained herein shall be binding upon, and inure to the benefit of, each of the parties hereto and the successors and assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Holder shall bind the successors and assigns of such Holder. This Indenture and the Indenture Estate shall not be affected by any amendment or supplement to the Trust Agreement or by any other action taken under or in respect of the Trust Agreement, except that each reference in this Indenture to the Trust Agreement shall mean the Trust Agreement as amended and supplemented from time to time to the extent permitted hereby and thereby. SECTION 15.11. Headings. The headings of the various Articles and -------- Sections herein and in the table of contents hereto are for the convenience of reference only and shall not define or limit any of the terms or provisions hereof. SECTION 15.12. Normal Commercial Relations. Anything contained in this --------------------------- Indenture to the contrary notwithstanding, the Owner Participant, the Trust Company, the Indenture Trustee and any Holder, or any bank or other affiliate of any such party, may conduct any banking or other financial transactions, and have banking or other commercial relationships, with the Lessee fully to the same extent as if this Indenture were not in effect, including without limitation the making of loans or other extensions of credit to the Lessee for any purpose whatsoever, whether related to any of the transactions contemplated hereby or otherwise. SECTION 15.13. Governing Law; Counterpart Form. THIS INDENTURE AND EACH ------------------------------- CERTIFICATE SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PROVISIONS THEREOF. This Indenture may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. - 82 - IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written, and acknowledge that this Indenture has been made and delivered in the city of New York, and this Indenture having become effective only upon such execution and delivery. WILMINGTON TRUST COMPANY, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By:_____________________________ Title: THE BANK OF NEW YORK, not in its individual capacity, except as otherwise expressly provided herein, but solely as Indenture Trustee By:_________________________ Title: - 83 - Exhibit A to Trust Indenture and Security Agreement (Delta 1994-1) [Intentionally Left Blank] A-1 Exhibit B to Trust Indenture and Security Agreement (Delta 1994-1) [Form of Face of Certificate] THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR OFFERED FOR SALE IN CONTRAVENTION OF SAID ACT No.________ $___________________ EQUIPMENT TRUST CERTIFICATE (DELTA 1994-1) WILMINGTON TRUST COMPANY, not in its individual capacity but solely as OWNER TRUSTEE UNDER TRUST AGREEMENT (DELTA 1994-1) DATED AS OF APRIL 1, 1994, AS AMENDED AND RESTATED AS OF MARCH 1, 1996 Interest Rate Maturity - ------------- -------- Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee (herein in such capacity called the "Owner Trustee") under that certain Trust Agreement (Delta 1994-1) dated as of April 1, 1994, as amended and restated as of March 1, 1996, between the Owner Participant named therein and Wilmington Trust Company (herein as such Trust Agreement may be amended or supplemented from time to time called the "Trust Agreement"), hereby promises to pay to ______________ or registered assigns, the principal sum of __________ Dollars, payable as set forth on the reverse hereof for the Maturity specified above, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest on the principal outstanding B-1 from time to time, semiannually on each __________ and ____________, on said principal sum in like coin or currency at the rate per annum set forth above from the ________ or the ____________ as the case may be, next preceding the date of this Certificate to which interest on the Certificates has been paid or duly provided for, unless the date hereof is a date to which interest on the Certificates has been paid or duly provided for, in which case from the date of this Certificate. Notwithstanding the foregoing, if the date hereof is after any __________ or ____________ and before the following __________ or __________, as the case may be, this Certificate shall bear interest from such ________ or ___________; provided that, if the Owner Trustee shall default in the payment of -------- interest due on such or ___________, then this Certificate shall bear interest from the next preceding __________ or to which interest on the Certificate has been paid or duly provided for. The interest so payable on any ___________ or _________ will, except as otherwise provided in the Indenture referred to on the reverse hereof, be paid to the person in whose name this Certificate is registered at the close of business on the _________ or ___________ preceding such or __________ whether or not such day is a Business Day. Principal and interest and other amounts due hereunder shall be payable at the office or agency of The Bank of New York (the "Indenture Trustee"), for such purpose; provided that, at the option of the Indenture Trustee, interest may be -------- paid by mailing a check therefor payable to the registered holder entitled thereto at his last address as it appears on the Register. If any amount payable under this Certificate, or under the Indenture, falls due on a day that is not a Business Day, then such sum shall be payable on the next succeeding Business Day, without additional interest thereon for the period of such extension. NO EMPLOYEE BENEFIT PLAN SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR INDIVIDUAL RETIREMENT ACCOUNT OR EMPLOYEE BENEFIT PLAN SUBJECT TO SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (HEREINAFTER COLLECTIVELY REFERRED TO AS AN "ERISA PLAN"), MAY ACQUIRE OR HOLD ANY OF THE CERTIFICATES. THE ACQUIRING BY ANY PERSON OF ANY CERTIFICATE SHALL BE DEEMED TO CONSTITUTE A REPRESENTATION BY SUCH PERSON TO DELTA AIR LINES, INC. AS THE LESSEE, THE OWNER PARTICIPANT, THE OWNER TRUSTEE AND THE INDENTURE TRUSTEE OR THEIR RESPECTIVE SUCCESSORS, AS THE CASE MAY BE, THAT SUCH PERSON IS NOT AN ERISA PLAN AND THAT SUCH PERSON IS NOT ACQUIRING, AND HAS NOT ACQUIRED, SUCH CERTIFICATE WITH ASSETS OF AN ERISA PLAN. Wilmington Trust Company and The Bank of New York, are not acting individually hereunder, but solely as Owner Trustee and Indenture Trustee, respectively. Reference is made to the further provisions set forth on the reverse hereof. Such provisions shall for all purposes have the same effect as though fully set forth at this place. B-2 This Certificate shall not be secured by or be entitled to any benefit under the Indenture or be valid or obligatory for any purpose unless authenticated by the Indenture Trustee as evidenced by the manual signature of one of its authorized officers on the certificate below. IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Trust Certificate (Delta 1994-1) to be duly executed in its corporate name by its officer thereunto duly authorized. Dated: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee By:___________________________ Authorized Officer B-3 [FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Equipment Trust Certificates (Delta 1994-1) referred to in the within-mentioned Indenture. Dated: THE BANK OF NEW YORK, not in its individual capacity but solely as Indenture Trustee By:___________________________ Authorized Signatory B-4 [Form of Reverse of Certificate] This Certificate is one of a duly authorized issue of Certificates issued and to be issued under the Trust Indenture and Security Agreement (Delta 1994-1) dated as of April 1, 1994, as amended and restated as of March 1, 1996 (herein as amended, supplemented or modified from time to time called the "Indenture"; terms defined in the Indenture are used herein with the same meanings) between the Owner Trustee and the Indenture Trustee, designated as Equipment Trust Certificates (Delta 1994-1) limited in aggregate outstanding principal amount to consisting of the following aggregate principal amounts of Certificates with the interest rates per annum and maturities shown: Principal Maturity Amount Interest Rate - -------- --------- ------------- Reference is made to the Indenture and all supplements and amendments thereto (a copy of which is on file with the Indenture Trustee at its principal corporate trust office) for a more complete statement of the terms and provisions thereof, including a statement of the properties conveyed, pledged and assigned thereby, the nature and extent of the security, the respective rights of the Owner Trustee, the Lessee, the Indenture Trustee and the Holders, and the terms upon which the Certificates are, and are to be, executed and delivered, to all of which terms and conditions in the Indenture each Holder hereof agrees by its acceptance of this Certificate. The principal amount of the Certificates is payable as follows. The Certificates with a Maturity of _____________ are subject to redemption in part, pro rata, commencing on ____________ and the Certificates with a Maturity of ___________________ are subject to redemption in part, pro rata, commencing on ______________ in each case through mandatory sinking fund redemptions providing for the redemption on the sinking fund redemption dates of the aggregate principal amounts set forth below, together with interest accrued thereon to the applicable sinking fund redemption date, but without premium. The mandatory sinking fund redemptions will retire, as of the respective Maturities, the full principal amount of the Certificates subject to mandatory redemption. B-5 Principal Amount Sinking Fund Certificates Certificates Redemption Date with a Maturity of with a Maturity of - --------------- ------------------ ------------------ _____________ _____________ Total _____________ _____________ All payments of principal, premium (if any) and interest and other amounts to be made to the Holder hereof by or at the behest of the Owner Trustee hereunder or under the Indenture shall be made only from the income and proceeds from the Trust Estate to the extent included in the Indenture Estate and only to the extent that the Owner Trustee shall have sufficient income or proceeds from the Trust Estate to the extent included in the Indenture Estate to enable the Indenture Trustee to make such distributions in accordance with the terms of the Indenture; provided that under the Lease, the Lessee is obligated to pay or -------- cause to be paid, to the extent such payments are not required to be made from the assets subject to the Lien of this Indenture or the income and proceeds received by the Indenture Trustee therefrom, any net loss arising from the investment of funds held by the Indenture Trustee which but for a Payment Default or Lease Event of Default would be payable to Lessee, and each Holder hereof, by its acceptance of this Certificate, agrees that it will look solely to the income and proceeds from the Indenture Estate to the extent available for distribution to the Holder hereof as provided above and that none of the Owner Participant, Wilmington Trust Company or the Indenture Trustee is personally liable to the Holder hereof for any amounts payable or any liability under this Certificate or under the Indenture, except as expressly provided in the Indenture (in the case of Wilmington Trust Company, the Owner Trustee and the Indenture Trustee) or as expressly provided in the Participation Agreement (in the case of the Owner Participant). The Certificates are subject to redemption or purchase in the following circumstances at the price determined as set forth below: (A) if an Event of Loss occurs with respect to the Aircraft (unless pursuant to Section 10 of the Lease and Section 9.08 of the Indenture a Replacement Airframe (together, if applicable, with a Replacement Engine or Engines) is substituted therefor), other than an Event of Loss deemed to have occurred pursuant to the last paragraph of Section 6(b) of the Participation Agreement, at a price equal to the aggregate unpaid principal amount of such Certificates together with accrued and unpaid interest thereon to but excluding the Redemption Date, but without premium; B-6 (B) if the Owner Trustee, at the direction of the Lessee, gives notice of redemption to the Indenture Trustee at any time after the date hereof, or if an Event of Loss with respect to the Aircraft is deemed to have occurred pursuant to the last paragraph of Section 6(b) of the Participation Agreement, at a price equal to the Redemption Amount plus all accrued and unpaid interest on such Certificates to but excluding the Redemption Date; (C) if the Owner Trustee, at the direction of the Owner Participant, at any time gives notice of redemption or purchase to the Indenture Trustee pursuant to Section 8.02(a) of the Indenture, at a price equal to the aggregate unpaid principal amount of such Certificates together with accrued and unpaid interest thereon to but excluding the Redemption Date, but without premium (except any premium due pursuant to Section 8.02(a)(i) of the Indenture); (D) upon any termination of the Lease as provided in Section 9(a) of the Lease, at a price equal to the Redemption Amount plus all accrued and unpaid interest on such Certificates to but excluding the Redemption Date; or (E) upon the Lessee's exercise of its option to purchase the Aircraft as provided in Section 16(b)(i) of the Participation Agreement or in Section 5(b) of the Lease, at a price equal to the Redemption Amount together with accrued and unpaid interest thereon to but excluding the Redemption Date. The Indenture Trustee shall give prompt notice of any such redemption or purchase by first-class mail to Holders (which notice may be revoked by the Owner Trustee at any time on or before the Redemption Date except (i) in the case of a redemption or purchase contemplated by Section 6.02(C) or Section 6.02(E) of the Indenture or (ii) any redemption contemplated by Section 6.02(D) of the Indenture unless the notice of termination of the Lease pursuant to Section 9(a) thereof has been revoked), stating the Redemption Date, the basis for determining the Redemption Price and the place or places where the Certificates may be surrendered. The Redemption Price of each Certificate shall be equal to the outstanding principal amount of such Certificate together with interest accrued thereon to the Redemption Date; plus, solely with regard to a redemption under subparagraphs (B), (C) (with respect to Section 8.02(a)(i) of the Indenture) or (D) above, a premium, if any, calculated by an Independent Investment Banker, equal to the amount necessary to preserve the pretax coupon yield to maturity of this Certificate if the principal amount of this Certificate were reinvested in U.S. Treasury securities corresponding in maturity to the remaining weighted average life of this Certificate. B-7 If an Indenture Event of Default under the Indenture shall occur and be continuing, the principal of the Certificates may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture provides that in certain events such declaration and its consequences may be waived by the Holders of at least 50% in aggregate principal amount of Outstanding Certificates. Any such consent or waiver by the Holder of this Certificate shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Certificate and any Certificate that may be issued in exchange or substitution therefor, whether or not any notation thereof is made upon this Certificate or such other Certificates. Moreover, if, and only if, a Lease Event of Default shall occur, the Indenture Trustee may declare the Lease to be in default, and may, to the exclusion of the Owner Trustee, exercise one or more of the remedies of the Owner Trustee provided in the Lease. The Owner Trustee or the Owner Participant may cure a default by the Lessee under the Lease arising from the failure of the Lessee to make any Basic Rent payments under the Lease if such failure of the Lessee to make such payment of Basic Rent shall not constitute the fourth consecutive such failure or the seventh or subsequent cumulative such failure. The Owner Trustee or the Owner Participant may cure any other default by the Lessee in the performance of its obligations under the Lease which can be cured by the payment of money by making such payment on behalf of the Lessee. At any time while the Certificates have become immediately due and payable as provided in the Indenture, the Owner Participant may direct the Owner Trustee to pay to the Indenture Trustee for distribution to the Holders an amount equal to the aggregate unpaid principal amount of all Outstanding Certificates plus all accrued but unpaid interest thereon to the date of payment and all other amounts due hereunder, but without premium. Upon such payment, the Certificates shall cease to accrue interest thereafter. By acceptance of this Certificate, the Holder hereof waives to the fullest extent permitted by law the benefit of the provisions of Section 1111(b) of the Bankruptcy Code with respect to recourse against the Trust Company and the Owner Participant on account of any amount payable as principal, premium, interest or other amounts pursuant to this Certificate. The right of the Holder hereof to institute action for any remedy under the Indenture is subject to certain restrictions specified in the Indenture, except that the right of the Holder of this Certificate to receive payment of the principal of and interest on this Certificate on or after the respective due dates, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such Holder. B-8 The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 and integral multiples thereof. So long as any of the Certificates remain Outstanding, the Indenture Trustee will maintain (i) an office or agency in Atlanta, Georgia where the Certificates may be presented for payment and (ii) a facility or agency in New York, New York where the Certificates may be presented for registration of transfer and for exchange as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein, this Certificate is transferable, and upon surrender of this Certificate for registration of transfer at the principal corporate trust office of the Indenture Trustee, or at the office or agency maintained for such purposes, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Owner Trustee and the Indenture Trustee duly executed by, the Holder or his attorney duly authorized in writing, one or more new Certificates of the same Maturity and interest rate and of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. As provided in the Indenture and subject to certain limitations therein, the Certificates are exchangeable for an equal aggregate principal amount of Certificates of the same Maturity and interest rate and of authorized denominations, as requested by the Holder surrendering the same, upon presentation thereof for such purpose at the principal corporate trust office of the Indenture Trustee, or at an office or agency maintained for such purpose. No service charge to the Holder shall be made for any such registration of transfer or exchange, but the Owner Trustee or the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to the due presentment for registration of transfer of this Certificate, the Owner Trustee, the Indenture Trustee, any agent of the Owner Trustee or the Indenture Trustee, the Paying Agent, if any, the Registrar and the Lessee may deem and treat the person in whose name this Certificate is registered as the absolute owner hereof for all purposes whether or not this Certificate is overdue, and neither the Owner Trustee, the Indenture Trustee (nor any agent of the Owner Trustee or the Indenture Trustee), nor the Paying Agent, if any, the Registrar nor the Lessee shall be affected by notice to the contrary. As provided in the Indenture, the Indenture and the Certificates shall be construed in accordance with and governed by the laws of the State of New York, without giving effect to the conflicts of laws provisions thereof. B-9 EX-4.(D) 4 FORMS OF PARTICIPATION King & Spalding Draft 2/28/96 ================================================================================ PARTICIPATION AGREEMENT (DELTA 1994-1) dated as of April 1, 1994 Amended and Restated as of March 1, 1996 among DELTA AIR LINES, INC., as Lessee, and ________________________, as Owner Participant, and THE MITSUBISHI TRUST AND BANKING CORPORATION, NEW YORK BRANCH as Interim Refinancing Loan Participant, and WILMINGTON TRUST COMPANY, as Owner Trustee, and THE BANK OF NEW YORK, as Indenture Trustee and THE BANK OF NEW YORK, as Pass Through Trustee ____________________________ SALE AND LEASEBACK OF ONE MCDONNELL DOUGLAS MD-11 AIRCRAFT ================================================================================ TABLE OF CONTENTS
Page ---- SECTION 1. Issuance of Pass Through Certificates; Refunding of the Original Loan Certificate................... 10 SECTION 2. Certificates................................................. 13 SECTION 3. Conditions Precedent......................................... 13 SECTION 4. Extent of Interest of Interim Refinancing Loan Participant............................................. 21 SECTION 5. Intentionally Left Blank..................................... 21 SECTION 6. Lessee's Representations, Warranties and Indemnities.................................................. 21 SECTION 7. Representations, Warranties and Covenants.................................................... 43 SECTION 8. Other Documents.............................................. 52 SECTION 9. Benefits of Certain Obligations.............................. 54 SECTION 10. Intentionally Left Blank..................................... 54 SECTION 11. Liabilities of the Owner Participant and the Indenture Trustee........................................ 54 SECTION 12. Covenants of the Lessee...................................... 55 SECTION 13. Owner for All Purposes....................................... 59 SECTION 14. Expenses..................................................... 59 SECTION 15. Miscellaneous................................................ 61 SECTION 16. Assignment By Owner Participant.............................. 66 SECTION 17. Confidentiality.............................................. 69 SECTION 18. Certain Obligations of the Owner Participant.................................................. 70 SECTION 19. Change of Registration of the Aircraft....................... 70 SECTION 20. Refinancing.................................................. 73 SECTION 21. Section 1110 Compliance...................................... 75
SECTION 22. Certain Investments.......................................... 75 SCHEDULE A - Owner Participant Information SCHEDULE B - Notice and Payment Instructions Relating to Owner Participant SCHEDULE C - Pass Through Certificate Information ANNEX I - Description of Trust Indenture and Security Agreement and Lease Agreement, as Previously Entered Into ANNEX II - Notice Addresses
PARTICIPATION AGREEMENT (DELTA 1994-1) This PARTICIPATION AGREEMENT (DELTA 1994-1) is entered into as of April 1, 1994, as amended and restated as of March 1, 1996 (the "Participation Agreement" or "Agreement"), by and among DELTA AIR LINES, INC., as Lessee, ________________________, as Owner Participant, THE MITSUBISHI TRUST AND BANKING CORPORATION, NEW YORK BRANCH, as Interim Refinancing Loan Participant, WILMINGTON TRUST COMPANY, not in its individual capacity except as otherwise expressly provided herein, but solely as owner trustee, as Owner Trustee, THE BANK OF NEW YORK, not in its individual capacity, except as otherwise provided herein, but solely as indenture trustee, as Indenture Trustee and THE BANK OF NEW YORK, not in its individual capacity, except as otherwise provided herein, but solely as Pass Through Trustee: W I T N E S S E T H: - - - - - - - - - - WHEREAS, capitalized terms used but not defined in the Recitals shall have the respective meanings set forth or referred to below; WHEREAS, the Lessee, the Owner Participant, The Sumitomo Bank Limited, Atlanta Agency, as Original Loan Participant (the "Original Loan Participant"), the Owner Trustee and the Original Indenture Trustee entered into a Participation Agreement, dated as of April 1, 1994 (as amended, as described below, the "Original Participation Agreement"), providing for the sale and leaseback of the Aircraft that was delivered on the Delivery Date; WHEREAS, the Lessee, the Owner Participant, the Original Loan Participant, the Owner Trustee, the Original Indenture Trustee and the Interim Refinancing Loan Participant entered into Amendment No. 1 to Participation Agreement (Delta 1994-1), dated as of March 28, 1995 (the "First Amendment to Participation Agreement"), pursuant to which the Owner Trustee issued the Interim Refinancing Loan Certificate to the Interim Refinancing Loan Participant; WHEREAS, concurrently with the execution and delivery of the Original Participation Agreement, the Owner Participant entered into a Trust Agreement relating to the Aircraft, dated as of April 1, 1994 (the "Original Trust Agreement"), with Wilmington Trust Company in its individual capacity, pursuant to which the Owner Trustee agreed, among other things, to hold the Trust Estate (as defined in the Trust Agreement) in trust for the benefit of the Owner Participant; WHEREAS, concurrently with the execution and delivery of the Original Participation Agreement, the Owner Trustee and the Original Indenture Trustee entered into a Trust Indenture and Security Agreement relating to the Aircraft, dated as of April 1, 1994 (as amended, as described below, the "Original Indenture"), for the benefit of the Original Loan Participant, pursuant to which the Owner Trustee issued to the Original Loan Participant a certificate as evidence of the loan made by the Original Loan Participant to the Owner Trustee, the proceeds of which were used to pay a portion of Lessor's Cost (the "Original Loan Certificate"); WHEREAS, the Owner Trustee and the Original Indenture Trustee executed and delivered the First Amendment to Trust Indenture and Security Agreement (Delta 1994-1) dated as of November 16, 1994, to amend a definition contained in the Original Indenture, which amendment was not filed for recordation with the FAA; WHEREAS, concurrently with the execution and delivery of the First Amendment to Participation Agreement, the Owner Trustee and the Original Indenture Trustee entered into Amendment No. 2 to Trust Indenture and Security Agreement (Delta 1994-1), dated as of March 28, 1995, for the purpose of authorizing a replacement Loan Certificate in the principal amount of $79,600,000 (the "Interim Refinancing Loan Certificate"); WHEREAS, concurrently with the execution and delivery of the Original Participation Agreement, the Owner Trustee and the Lessee entered into a Lease Agreement relating to the Aircraft, dated as of April 1, 1994 (as amended, as described below, the "Original Lease"), whereby, subject to the terms and conditions set forth therein, the Owner Trustee agreed to lease the Aircraft to the Lessee, and the Lessee agreed to lease the Aircraft from the Owner Trustee, such leasing of the Aircraft being evidenced by the execution and delivery of the Lease Supplement; WHEREAS, concurrently with the execution and delivery of the First Amendment to Participation Agreement, the Owner Trustee and the Lessee entered into Amendment No. 1 to Lease Agreement (Delta 1994-1), dated as of March 28, 1995, for the purpose of setting forth adjustments to percentages for Basic Rent, EBO Percentage, Stipulated Loss Value and Termination Value, as set forth in the Original Lease to reflect the issuance of the Interim Refinancing Loan Certificate; WHEREAS, The Bank of New York, a New York banking corporation, acquired the corporate trust businesses of NationsBank of Georgia, National Association, and NationsBank of South Carolina, National Association, as of December 4, 1995, whereupon it became the successor to the Original Indenture Trustee and Pass Through Trustee in accordance with the terms of the Original Indenture and the Pass Through Agreement; -2- WHEREAS, Section 20 of the Original Participation Agreement permits the prepayment of the Interim Refinancing Loan Certificate pursuant to the Original Indenture in connection with any refinancing of such Interim Refinancing Loan Certificate and Section 3(c) of the Original Lease contemplates the adjustment of the percentages for Basic Rent, Stipulated Loss Value, Termination Value and the EBO Percentage in the event of such a refinancing, and the Lessee has requested the Owner Trustee, and the Owner Trustee as directed by the Owner Participant has agreed, to effect such a refinancing, repayment and adjustment; WHEREAS, in order to facilitate such refinancing, the Lessee is concurrently entering into an Underwriting Agreement, which relates to, among other things, two Series of Pass Through Certificates to be issued by two Pass Through Trusts each of which is formed to acquire the Certificates bearing a particular interest rate and having a particular Maturity that will be issued under the Indenture; WHEREAS, on the Pass Through Closing Date, a closing will occur with respect to the public offering of the Pass Through Certificates issued by each Pass Through Trust, the proceeds from which will be used, in part, by the Pass Through Trustee to purchase for each such Pass Through Trust the Certificates of the interest rate and Maturity applicable thereto, which proceeds in turn will be applied to the prepayment in full of the outstanding principal amount of the Interim Refinancing Loan Certificate; WHEREAS, the Lessee has requested that, concurrently with the refinancing to be effected pursuant to this Participation Agreement, the percentages for Basic Rent, Stipulated Loss Value, Termination Value and the EBO Percentage set forth in the Original Lease be adjusted; WHEREAS, the Lessee, the Owner Participant, the Owner Trustee, the Interim Refinancing Loan Participant and the Indenture Trustee have agreed to amend and restate, and to add the Pass Through Trustee as a party to, the Original Participation Agreement; WHEREAS, the Lessee, the Owner Participant, the Owner Trustee, the Interim Refinancing Loan Participant and the Indenture Trustee have agreed, to the extent they are a party thereto, to amend and restate the Original Indenture, to amend and restate the Original Lease, to amend and restate the Original Indemnity Agreement and to amend and restate the Original Trust Agreement, each such amendment and restatement to be executed and delivered simultaneously with the purchase of the Certificates by the Pass Through Trustee for the Pass Through Trusts; and WHEREAS, FSC is an Affiliate of the Owner Participant and is a foreign sales corporation, as defined in Section 922 of the Code, acting as a commission agent on behalf of the Owner Participant with respect to the Lease. -3- NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto agree that the Original Participation Agreement be and the same hereby is amended and restated in its entirety as follows: For the purposes hereof, the following terms shall have the following meanings when used herein (which definitions are used herein in their singular or plural form as the context may require): "Act" has the meaning specified in the Lease. --- "Affiliate" has the meaning specified in the Lease. --------- "Aircraft" has the meaning specified in the Lease. -------- "Airframe" has the meaning specified in the Lease. -------- "Bankruptcy Default" has the meaning specified in the Lease. ------------------ "Basic Rent" has the meaning specified in the Lease. ---------- "Basic Term" has the meaning specified in the Lease. ---------- "Basic Term Commencement Date" has the meaning specified in the Lease. ---------------------------- "Bills of Sale" means, collectively, the full warranty bill of sale ------------- for the Aircraft, executed by the Lessee in favor of the Owner Trustee, dated the Delivery Date and specifically referring to each Engine, as well as to the Airframe, constituting a part of such Aircraft and the AC Form 8050-2 Bill of Sale for the Aircraft, executed by the Lessee in favor of the Owner Trustee and dated the Delivery Date. "Break Cost" has the meaning specified in the Original Indenture. ---------- "Business Day" has the meaning specified in the Lease. ------------ "Certificates" means the Equipment Trust Certificates (Delta 1994-1), ------------ issued by the Owner Trustee pursuant to the Indenture and any certificate issued in exchange therefor or replacement thereof pursuant to the Indenture. "Citizen of the United States" has the meaning specified in the Lease. ---------------------------- "Closings" has the meaning specified in Section 1(f) hereof. -------- -4- "Code" means the Internal Revenue Code of 1986, as amended from time ---- to time. "Commitment" means the amount of the participation by the Owner ---------- Participant and the Indenture Trustee (on behalf of the Holders) in the financing of the Owner Trustee's payment of Lessor's Cost with respect to the Aircraft, as specified in Item 1 and Item 2 of Schedule A hereto. "Cut-off Date" means the Pass Through Closing Date. ------------ "Debt Rate" means the weighted average rate of interest payable on the --------- Certificates issued pursuant to the Indenture on the Refunding Date. "Default" has the meaning specified in the Lease. ------- "Delayed Delivery Notice" means a certificate signed by a Responsible ----------------------- Officer of the Lessee (i) requesting that the Pass Through Trustee temporarily delay purchase of the Certificates to a date later than the Pass Through Closing Date, (ii) stating the amount of the purchase price of each such Certificate and the aggregate purchase price of all such Certificates, (iii) stating the reasons for such delay and (iv) either (1) setting or resetting the Refunding Date (which shall be on or prior to the Cut-off Date), or (2) indicating that such Refunding Date will be set by subsequent written notice not less than three Business Days prior to such new Refunding Date (which shall be on or prior to the Cut-off Date). "Delivery Date" has the meaning specified in the Lease. ------------- "EBO Date" has the meaning specified in Item 5 of Schedule A hereto. -------- "EBO Percentage" has the meaning specified in Item 6 of Schedule A -------------- hereto. "Engine" has the meaning specified in the Lease. ------ "Engine Manufacturer" has the meaning specified in the Lease. ------------------- "ERISA" means the Employee Retirement Income Security Act of 1974, as ----- amended from time to time. "Estimated Expense Amount" has the meaning specified in Section 14 ------------------------ hereof. "Event of Default" has the meaning specified in the Lease. ---------------- "Event of Loss" has the meaning specified in the Lease. ------------- -5- "Exchange Act" means the Securities Exchange Act of 1934, as amended. ------------ "FAA" means the Federal Aviation Administration or its successors. --- "FSC" means Larkspur International Sales, Inc., a Virgin Islands --- foreign sales corporation. "Holder" has the meaning specified in the Indenture. ------ "Indemnitee" has the meaning specified in Section 6(b) of this ---------- Agreement. "Indemnity Agreement" means the Indemnity Agreement (Delta 1994-1) ------------------- dated as of April 1, 1994 between the Lessee and the Owner Participant, as amended and restated as of March 28, 1995 and as amended and restated as of March 1, 1996, as amended and supplemented from time to time. "Indenture" means the Trust Indenture and Security Agreement (Delta --------- 1994-1) dated as of April 1, 1994, as amended and restated as of March 1, 1996, between the Indenture Trustee and the Owner Trustee, in their respective individual capacities only as expressly provided therein and otherwise solely as trustees, as amended and supplemented from time to time, including as supplemented by the Trust Agreement and Trust Indenture Supplement. "Indenture Estate" has the meaning specified in the Indenture. ---------------- "Indenture Event of Default" has the meaning specified in the -------------------------- Indenture. "Indenture Trustee" means The Bank of New York, a New York banking ----------------- corporation, not in its individual capacity but solely in its capacity as Indenture Trustee under the Indenture, unless expressly stated herein or therein, and its permitted successors and assigns as trustee thereunder. "Indenture Trustee's Lien" has the meaning specified in the Lease. ------------------------ "Interim Refinancing Loan Certificate" has the meaning specified in ------------------------------------ the seventh recital hereto. "Interim Refinancing Loan Participant" means The Mitsubishi Trust and ------------------------------------ Banking Corporation, New York Branch. "Lease" means the Lease Agreement (Delta 1994-1) dated as of April 1, ----- 1994, as amended by Amendment No. 1 to Lease Agreement (Delta 1994-1), dated as of March 28, 1995, and as amended and restated as of March 1, 1996, between the Owner -6- Trustee and the Lessee, as amended and supplemented from time to time, including as supplemented by the Lease Supplement. "Lease Supplement" has the meaning specified in the Lease. ---------------- "Lessee" means Delta Air Lines, Inc., a Delaware corporation, and its ------ permitted successors and assigns. "Lessor" has the meaning specified in the Lease. ------ "Lessor's Cost" means the amount set forth in Item 4 of Schedule A ------------- hereto. "Lessor's Lien" has the meaning specified in the Lease. ------------- "Lien" has the meaning specified in the Lease. ---- "Manufacturer" means McDonnell Douglas Corporation, a Maryland ------------ corporation, and its successors and assigns. "Maturity" has the meaning specified in the Indenture. -------- "Net Economic Return" has the meaning specified in the Lease. ------------------- "Operative Documents" has the meaning specified in the Lease. ------------------- "Original Documents" has the meaning specified in the Lease. ------------------ "Original Indemnity Agreement" means the Indemnity Agreement (Delta ---------------------------- 1994-1) between the Lessee and the Owner Participant dated as of April 1, 1994, as amended and restated as of March 28, 1995. "Original Indenture" has the meaning specified in the fifth recital ------------------ hereto, as described in Annex I hereto. "Original Indenture Trustee" means NationsBank of Georgia, National -------------------------- Association, a national banking association. "Original Lease" has the meaning specified in the eighth recital -------------- hereto, as described in Annex I hereto. "Original Loan Certificate" has the meaning specified in the fifth ------------------------- recital hereto. "Original Participation Agreement" has the meaning specified in the -------------------------------- second recital hereto. "Original Trust Agreement" has the meaning specified in the fourth ------------------------ recital hereto. -7- "Owner Participant" means ________________________, a California ----------------- corporation, and each permitted successor and assign thereof pursuant to Section 16 hereof and Section 9.01 of the Trust Agreement. "Owner Participant's Lien" has the meaning specified in the Lease. ------------------------ "Owner Trustee" means Wilmington Trust Company, a Delaware banking ------------- corporation, not in its individual capacity, except as expressly stated in the Operative Documents to which it is a party, but solely in its capacity as Owner Trustee under the Trust Agreement, and its successors and assigns as trustee thereunder. "Parts" has the meaning specified in the Lease. ----- "Pass Through Agreement" means the Pass Through Trust Agreement dated ---------------------- as of August 1, 1992, between the Lessee and the Pass Through Trustee, as such Pass Through Agreement may be modified, supplemented or amended from time to time in accordance with the provisions thereof. "Pass Through Certificate" means any of the 1996 Pass Through ------------------------ Certificates, Series A1 or 1996 Pass Through Certificates, Series A2, in each case as issued by the related Pass Through Trust; and "Pass Through Certificates" means all of the Pass Through Certificates issued by each of the Pass Through Trusts. "Pass Through Closing Date" means the Business Day on which the sale ------------------------- of the Pass Through Certificates to the Underwriters pursuant to the Underwriting Agreement takes place. "Pass Through Trust" means Delta Air Lines Pass Through Trust, 1996-A1 ------------------ or Delta Air Lines Pass Through Trust, 1996-A2, in each case formed pursuant to the related Series Supplement in accordance with the Pass Through Agreement; and "Pass Through Trusts" means both of such Pass Through Trusts. "Pass Through Trustee" means The Bank of New York, a New York banking -------------------- corporation, not in its individual capacity, except as expressly otherwise provided herein, but solely in its capacity as Pass Through Trustee under the Pass Through Agreement and each Pass Through Trust, and its successors and permitted assigns as Pass Through Trustee thereunder. "Past Due Rate" has the meaning specified in the Lease. ------------- "Payment Default" has the meaning specified in the Lease. --------------- "Permitted Lien" has the meaning specified in the Lease. -------------- -8- "Plan" means an employee benefit plan (within the meaning of Section ---- 3(3) of ERISA and including any multi-employer plan within the meaning of Section 3(37) (A) of ERISA) which has been established or maintained, or to which contributions are or have been made, by the Lessee or an Affiliate in which the Lessee has a beneficial ownership interest of at least 50%. "Purchase Agreement" has the meaning specified in the Purchase ------------------ Agreement Assignment. "Purchase Agreement Assignment" has the meaning specified in the ----------------------------- Lease. "Recapture Period" has the meaning specified in the Lease. ---------------- "Refunding Date" means a Business Day on or prior to the Cut-off Date -------------- on which the refunding of the Interim Refinancing Loan Certificate occurs, the expected date thereof specified by the Lessee in a written or telephone notice given to the parties hereto and the Underwriters at least two Business Days prior to such expected Refunding Date. "Refunding Certificates" has the meaning specified in Section 20(c) of ---------------------- this Agreement. "Renewal Term" has the meaning specified in the Lease. ------------ "Responsible Officer" means the president or any other officer with ------------------- authority of at least a vice president; or, in the case of the Indenture Trustee, an officer or assistant officer of the Indenture Trustee in its Corporate Trust Lease Administration Department; or, in the case of the Owner Trustee, an officer of the Owner Trustee in its Corporate Trust Administration department, except for the purposes of Section 15(i)(E) hereof where "Responsible Officer" means the president or any other officer with authority of at least a vice president. "SEC" means the Securities and Exchange Commission. --- "Securities Act" means the Securities Act of 1933, as amended. -------------- "Seller" means The Victoria MD-11 Trust, a Delaware business trust. ------ "Series Supplement" means the Series Supplement 1996-A1 to be executed ----------------- and delivered by the Lessee and the Pass Through Trustee or the Series Supplement 1996-A2 to be executed and delivered by the Lessee and the Pass Through Trustee in each case as amended and supplemented from time to time; and "Series Supplements" means both of such Series Supplements. -9- "Stipulated Loss Value" has the meaning specified in the Lease. --------------------- "Supplemental Rent" has the meaning specified in the Lease. ----------------- "Term" has the meaning specified in the Lease. ---- "Termination Value" has the meaning specified in the Lease. ----------------- "Trust Agreement" means the Trust Agreement (Delta 1994-1) dated as of --------------- April 1, 1994, as amended and restated as of March 1, 1996, between Wilmington Trust Company and the Owner Participant, as amended and supplemented from time to time, including as supplemented by the Trust Agreement and Trust Indenture Supplement. "Trust Agreement and Trust Indenture Supplement" has the meaning ---------------------------------------------- specified in the Lease. "Trust Estate" has the meaning specified in the Trust Agreement. ------------ "Trust Indenture Act" means the Trust Indenture Act of 1939, as ------------------- amended. "UCC" has the meaning specified in Section 3(b) hereof. --- "Underwriters" means the several Underwriters named in the ------------ Underwriting Agreement. "Underwriting Agreement" means the Pricing Agreement among the Lessee, ---------------------- Merrill Lynch, Pierce, Fenner & Smith Incorporated and Goldman, Sachs & Co. dated ________ __, 1996 incorporating the Underwriting Agreement Standard Terms relating to the purchase by such Underwriters of the Pass Through Certificates on the Pass Through Closing Date. Section 1. Issuance of Pass Through Certificates; Refunding of the ------------------------------------------------------- Interim Refinancing Loan Certificate. In order to effect the agreed upon - ------------------------------------ refunding: (a) On or before the Pass Through Closing Date, the Pass Through Trustee and the Lessee, in accordance with the Pass Through Agreement, shall enter into the Series Supplements, and, subject to the terms and conditions set forth herein and therein, on the Pass Through Closing Date (i) the Lessee shall direct the Underwriters to execute a wire transfer or intra-bank transfer to the Pass Through Trustee in the amount of the total proceeds payable pursuant to the Underwriting Agreement with respect to the Pass Through Certificates and (ii) the Pass Through Trustee shall deliver the Pass Through Certificates to the Underwriters upon receipt by the Pass Through Trustee of such proceeds. -10- If the Pass Through Closing Date is not the Refunding Date, the Pass Through Trustee shall transfer the proceeds received from the Underwriters to be applied to the purchase of the Certificates in accordance with the procedures set forth or incorporated in the Series Supplements. On the Refunding Date, upon the satisfaction or waiver of the conditions set forth herein and in accordance with this Section 1, the Pass Through Trustee, on behalf of each Pass Through Trust, shall purchase the Certificates of the Maturity and having the interest rate that relates to such Pass Through Trust and the Indenture Trustee shall deliver such Certificates to the Pass Through Trustee. (b) Subject to the satisfaction or waiver of the conditions set forth herein, on the Refunding Date: (i) for each Pass Through Trust, from the proceeds of the sale of the related Pass Through Certificates, the Pass Through Trustee shall pay on behalf of the Owner Trustee in the manner specified in subsection (ii) below, an amount equal to the principal amount of the Certificate of the Maturity and having the interest rate that relates to such Pass Through Trust, which amounts in the aggregate shall equal the aggregate principal amount of the Certificates as specified in Section 2.04 of the Indenture; (ii) the aggregate amount payable by the Pass Through Trustee pursuant to subsection (i) above shall be payable by wire transfer or intra-bank transfer in favor of the Indenture Trustee on behalf of the Owner Trustee in the amount of the principal amount of the Interim Refinancing Loan Certificate, plus accrued and unpaid interest thereon to but excluding the Refunding Date; (iii) the Lessee shall on behalf of the Owner Trustee execute a wire transfer or intra-bank transfer in favor of the Indenture Trustee as a payment of Supplemental Rent any Break Cost required to be paid pursuant to Section 2.11(c) of the Original Indenture; (iv) the Indenture Trustee shall apply the amounts received by it under Section 1(b)(ii)(A) above and Section 1(b)(iii) above to prepay the Interim Refinancing Loan Certificate in accordance with Sections 2.11 and 2.12 of the Original Indenture; and (v) the Owner Trustee shall cause the Certificates to be delivered to the Pass Through Trustee in accordance with Section 2 hereof. -11- On or prior to the Refunding Date, the parties hereto shall execute and deliver, to the extent they are parties thereto, and consent to the execution and delivery of (if they are not a party thereto), the Indenture, the Lease, the Indemnity Agreement and the Trust Agreement, and the Owner Trustee shall execute and deliver to the Indenture Trustee for authentication, and the Indenture Trustee shall authenticate and deliver to the Pass Through Trustee, upon the request of the Owner Trustee, the Certificates as provided in Section 2 hereof. The Owner Participant hereby requests and directs the Owner Trustee to execute and deliver this Agreement and, subject to the terms hereof, to take the actions specified in Sections 1 and 2 hereof to be taken on the Refunding Date. The Interim Refinancing Loan Participant by its execution and delivery hereof, requests and directs the Indenture Trustee to execute and deliver this Agreement and, subject to the terms hereof, to take the actions contemplated herein. The Interim Refinancing Loan Participant confirms that, as provided in Section 2.07 of the Original Indenture, upon payment in full of the principal amount, Break Cost, if any, and interest on and all other amounts due under the Interim Refinancing Loan Certificate and all other sums then payable to the Interim Refinancing Loan Participant under the Original Documents, it shall have no further interest in, or other right with respect to, the Indenture Estate and, accordingly, has no obligation to, and will not attempt to direct any future actions of the Indenture Trustee with respect to the Indenture Estate, provided that the rights and obligations of the Interim Refinancing Loan Participant shall, until the payment of such amounts on the Refunding Date, be governed by the Original Participation Agreement and the other Operative Documents contemplated thereby or in effect immediately prior to the effectiveness of this Agreement and shall, upon such payment and thereafter, be governed by this Agreement. The Lessee hereby consents to the foregoing. (c) Not less than two Business Days prior to the Refunding Date, the Interim Refinancing Loan Participant shall give notice in writing to the parties hereto of the principal amount, Break Cost, if any, and interest on and all other amounts due on the Refunding Date under the Interim Refinancing Loan Certificate and all other sums payable on the Refunding Date to the Interim Refinancing Loan Participant under the Original Documents, such notice to be deemed final and binding on the Interim Refinancing Loan Participant when given; provided that the expected Refunding Date, at the time such notice is given, is the same as the Refunding Date. (d) On the Refunding Date, subject to (i) the giving of at least three Business Days' prior written notice to the Indenture Trustee and the Interim Refinancing Loan Participant pursuant to Section 2.12(a) of the Original Indenture, (ii) the receipt by the Interim Refinancing Loan Participant of the funds referred to in Section 1(b) above and (iii) compliance with the provisions of Sections 2.11 and 2.12 of the Original Indenture, -12- the Interim Refinancing Loan Participant shall deliver the Interim Refinancing Loan Certificate to the Indenture Trustee for cancellation and delivery to the Owner Trustee, which delivery by the Interim Refinancing Loan Participant will constitute an acknowledgment by the Interim Refinancing Loan Participant that it has no further interest in, or right with respect to, the Indenture Estate. (e) If, on or prior to the Pass Through Closing Date, the Lessee delivers to the Pass Through Trustee, the Indenture Trustee, the Owner Trustee and the Owner Participant a Delayed Delivery Notice relating to the Certificates, the Refunding Date shall be postponed to the Business Day specified in or to be specified in accordance with such Delayed Delivery Notice. On such later Refunding Date, the refunding of the Interim Refinancing Loan Certificate shall occur in accordance with the requirements of this Section 1, and the Lessee shall, on the Initial Regular Distribution Date (as such term is defined in the related Series Supplement) for each Pass Through Trust, pay in immediately available funds to the Pass Through Trustee for each such Pass Through Trust an amount equal to the interest that would have accrued on the Certificates purchased by such Pass Through Trust after the Pass Through Closing Date if such Certificates had been issued and purchased on such Pass Through Closing Date, from such Pass Through Closing Date to, but not including, the Refunding Date on which such Certificates were so purchased. (f) The closing with respect to the acquisition of the Pass Through Certificates by the Underwriters and the closing with respect to the refunding of the Interim Refinancing Loan Certificate (together, the "Closings") shall take place at the offices of King & Spalding, 120 West 45th Street, New York, New York. (g) All payments pursuant to this Section 1 shall be made in immediately available funds. Section 2. Certificates. On the Refunding Date, the Owner Trustee ------------- shall execute and deliver to the Indenture Trustee, and the Indenture Trustee shall authenticate and deliver, upon the request of the Owner Trustee, to the Pass Through Trustee for each Pass Through Trust, the Certificate specified for such Pass Through Trust on Schedule C attached hereto, which (i) shall be issued in the principal amount and in the Maturity set forth for such Certificate in Schedule C hereto, (ii) shall bear interest at the interest rate set forth for such Certificate in Schedule C hereto, (iii) shall be issued in such form and on such terms as are specified in the Indenture, (iv) shall be dated and authenticated as of the Refunding Date and shall bear interest therefrom and (v) shall be registered in the name of the Pass Through Trustee on behalf of such Pass Through Trust. -13- Section 3. Conditions Precedent. The obligations of the Owner --------------------- Trustee, the Owner Participant, the Lessee, the Indenture Trustee and the Pass Through Trustee on behalf of each Pass Through Trust to participate in the transactions contemplated hereby on the Refunding Date are subject to the fulfillment, prior to or on the Refunding Date, of the following conditions precedent: (a) The following documents shall have been duly authorized, executed and delivered by the respective party or parties thereto and shall be in full force and effect, and executed counterparts of each thereof shall have been delivered in sufficient numbers for each party hereto and each of their respective special counsel (the sole executed original Lease having been delivered to the Indenture Trustee); provided that only the Owner Participant -------- and the Lessee shall receive the Indemnity Agreement or any copies thereof: (i) this Agreement; (ii) the Lease; (iii) the Trust Agreement; (iv) the Indenture; (v) the Indemnity Agreement. (b) Uniform Commercial Code ("UCC") financing statements to amend each financing statement referred to in Section 4(c) of the Original Participation Agreement shall have been duly executed and filed in all places, and all other actions shall have been taken, which in the opinion of special counsel for the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Underwriters are necessary or desirable. (c) The Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Owner Participant, the Lessee and the Interim Refinancing Loan Participant (other than the delivering party) shall have received the following, in each case in form and substance satisfactory to it (except as the same relates to it): (i) a copy of the certificate of incorporation and by-laws of the Lessee and resolutions of the Board of Directors of the Lessee or the executive committee thereof, certified by the Secretary or an Assistant Secretary of the Lessee as of the Refunding Date, duly authorizing the execution, delivery and performance by the Lessee of the Original Documents to which it is a party, this Agreement, the Lease, the Indemnity Agreement, the Pass Through Agreement, the Series Supplements and any other documents executed by or on behalf of the Lessee in connection with the transactions contemplated hereby, together with an -14- incumbency certificate as to the person or persons authorized to execute and deliver such documents on behalf of the Lessee; (ii) a copy of the certificate of incorporation and by-laws of the Owner Participant, each certified by the Secretary and an Assistant Secretary of the Owner Participant as of the Refunding Date, and a certification of such person as to the due authorization by the Board of Directors of the Owner Participant of the purchase by the Owner Participant of its interest in the Trust Estate and the execution, delivery and performance by the Owner Participant of the Original Documents to which it is a party, this Agreement, the Trust Agreement and the Indemnity Agreement and any other documents executed by or on behalf of the Owner Participant in connection with the transactions contemplated hereby, together with an incumbency certificate as to the person or persons authorized to execute and deliver such documents on behalf of the Owner Participant; (iii) a copy of the charter and by-laws of the Owner Trustee, and resolutions of the Board of Directors of the Owner Trustee or the executive committee thereof, each certified as of the Refunding Date by the Secretary or an Assistant Secretary of the Owner Trustee as of the Delivery Date, duly authorizing the execution, delivery and performance by the Owner Trustee of the Original Documents to which it is a party, this Agreement, the Indenture, the Lease, the Trust Agreement, the Certificates and any other documents executed by or on behalf of the Owner Trustee in connection with the transactions contemplated hereby, together with an incumbency certificate as to the person or persons authorized to execute and deliver such documents on behalf of the Owner Trustee; (iv) a copy of the articles of incorporation and by-laws of the Indenture Trustee certified by the Secretary or an Assistant Secretary of the Indenture Trustee as of the Refunding Date, which by-laws include a provision duly authorizing the execution, delivery and performance by the Indenture Trustee of the Original Documents to which it is a party, this Agreement, the Indenture and any other document executed by or on behalf of the Indenture Trustee in connection with the transactions contemplated hereby, together with an incumbency certificate as to the person or persons authorized to execute and deliver such documents on behalf of the Indenture Trustee; -15- (v) a copy of the articles of incorporation and by-laws of the Pass Through Trustee certified by the Secretary or an Assistant Secretary of the Pass Through Trustee as of the Refunding Date, which by-laws include a provision duly authorizing the execution, delivery and performance by the Pass Through Trustee of this Agreement, the Pass Through Agreement, each Series Supplement, the Pass Through Certificates, and any other document executed or authenticated by or on behalf of the Pass Through Trustee in connection with the transactions contemplated hereby, together with an incumbency certificate as to the person or persons authorized to execute and deliver such documents on behalf of the Pass Through Trustee; and (vi) such other documents and evidence as the Interim Refinancing Loan Participant, the Indenture Trustee, the Owner Participant, the Pass Through Trustee or the Lessee may reasonably request in order to establish the consummation of the transactions contemplated by this Agreement, the proper taking of all appropriate corporate proceedings in connection therewith and compliance with the conditions set forth in this Section 3. (d) On the Refunding Date, there shall have been duly issued and delivered by the Owner Trustee and authenticated by the Indenture Trustee to the Pass Through Trustee for each Pass Through Trust, against payment therefor, a Certificate substantially in the form set forth in Exhibit B to the Indenture, dated the Refunding Date and registered in the name of the Pass Through Trustee on behalf of such Pass Through Trust, in the principal amount, Maturity and interest rate set forth therefor in Schedule C hereto and otherwise as provided in Section 2.04 of the Indenture. (e) On the Refunding Date, no fact or condition shall exist under applicable law or regulations thereunder or interpretations thereof by appropriate regulatory authorities which, in the reasonable opinion of the Owner Participant, the Indenture Trustee, the Pass Through Trustee or their respective counsel, would make the transactions contemplated hereby illegal for such party. (f) On the Refunding Date, the Owner Participant, the Owner Trustee, the Indenture Trustee, the Underwriters and the Pass Through Trustee shall have received a report, with insurance certificates attached, dated the Refunding Date and each in form and substance satisfactory to the recipients, from the Lessee's independent aircraft insurance broker as to the due compliance with the terms of Section 11 of the Lease (relating to insurance). -19- (g) (i) On the Refunding Date, the Owner Trustee shall have good and marketable title to the Aircraft and the Engines which are part thereof, free and clear of Liens, except the rights of the Lessee under the Lease, the Lien created by the Indenture and the Trust Agreement and Trust Indenture Supplement pursuant to the Granting Clause of the Indenture and the beneficial interest of the Owner Participant created by the Trust Agreement and the Trust Agreement and Trust Indenture Supplement and no Event of Loss, Event of Default or event which, with notice or passage of time, or both, would constitute an Event of Loss or Event of Default shall have occurred and be continuing; (ii) on the Refunding Date, the Aircraft shall possess a valid certificate of airworthiness in accordance with the terms of the Lease; (iii) on the Refunding Date, the Aircraft shall be duly registered in the name of the Owner Trustee with the FAA and the Lessee shall have permanent authority to operate the Aircraft as contemplated by the Lease; (iv) on the Refunding Date, the Lease, the Trust Agreement and the Indenture shall have been duly filed for recordation with the FAA pursuant to the Act; (v) on the Refunding Date, the Indenture Trustee, on behalf of the Holders, shall have a duly perfected first priority security interest in the Indenture Estate (subject only to Permitted Liens other than Lessor's Liens, Owner Participant's Liens and Indenture Trustee's Liens); and (vi) on the Refunding Date, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Owner Participant shall have received evidence satisfactory to it with respect to the matters covered by this paragraph (g). (h) On the Refunding Date, the statements set forth in this paragraph shall be true and the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Owner Participant and its special counsel shall have received a certificate signed by a duly authorized officer of the Lessee, dated the Refunding Date, stating that (i) the representations and warranties of the Lessee contained in Section 6 hereof are made to such parties and are true and accurate on and as of such date as though made on and as of such date (except to the extent that such representations and warranties expressly relate solely to a specified earlier date, in which case such representations and warranties shall have been true and accurate on and as of such earlier date); (ii) there has been no material adverse change in the consolidated financial condition of the Lessee and its consolidated subsidiaries since -17- June 30, 1994, except as disclosed in any public filing by the Lessee with the SEC under Sections 13 or 15(d) of the Exchange Act since that date and on or prior to the date of its execution and delivery of this Agreement; and (iii) no event has occurred and is continuing which constitutes, or with notice or lapse of time or both would constitute, an Event of Default or Event of Loss. (i) The Interim Refinancing Loan Certificate shall have been duly delivered by the Interim Refinancing Loan Participant to the Indenture Trustee for cancellation. (j) The Lessee and the Pass Through Trustee shall have entered into the Pass Through Agreement and the Series Supplements, all conditions to the effectiveness of each thereof shall have been satisfied or waived and the Pass Through Certificates shall have been duly executed, authenticated, issued and delivered pursuant to such Series Supplements. The Lessee shall have entered into the Underwriting Agreement, all conditions to the effectiveness thereof shall have been satisfied or waived, and the Pass Through Certificates shall have been delivered pursuant to the Underwriting Agreement. (k) Each party hereto and the Underwriters shall have received from Joan Repetti, Senior Attorney of the Lessee, a favorable opinion, addressed to it and dated the Refunding Date, in form and substance satisfactory to the recipients. (l) Each party hereto and the Underwriters shall have received from King & Spalding, special counsel to the Lessee, a favorable opinion, addressed to it, and dated the Refunding Date, in form and substance satisfactory to the recipients. (m) Each party hereto and the Underwriters shall have received from Potter Anderson & Corroon, counsel for the Owner Trustee, a favorable opinion, addressed to it, and dated the Refunding Date, in form and substance satisfactory to the recipients. (n) (i) Each party hereto and the Underwriters shall have received from Dewey Ballantine, special counsel to the Owner Participant, a favorable opinion, addressed to it, and dated the Refunding Date, in form and substance satisfactory to the recipients; and (ii) Each party hereto and the Underwriters shall have received from David K. Thompson, Vice President-Assistant General Counsel of ____________________ and special counsel for the Owner Participant, a favorable opinion, addressed to it, and dated the Refunding Date, in form and substance satisfactory to the recipients. -18- (o) Each party hereto and the Underwriters shall have received from Powell, Goldstein, Frazer & Murphy, counsel for the Indenture Trustee, a favorable opinion, addressed to it, and dated the Refunding Date, in form and substance satisfactory to the recipients. (p) Each party hereto and the Underwriters shall have received from Powell, Goldstein, Frazer & Murphy, counsel for the Pass Through Trustee, a favorable opinion, addressed to it, and dated the Refunding Date, in form and substance satisfactory to the recipients. (q) On the Refunding Date, each party hereto and the Underwriters shall have received from Daugherty, Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma, a favorable opinion, dated the Refunding Date, band addressed to it, in form and substance satisfactory to the recipients. (r) No action or proceeding shall have been instituted nor shall governmental action be threatened before any court or governmental agency, nor shall any order, judgment or decree have been issued or proposed to be issued by any court or governmental agency at the time of the Refunding Date to set aside, restrain, enjoin or prevent the completion and consummation of this Agreement or any other Operative Document or the transactions contemplated hereby or thereby. (s) On the Refunding Date, the statements set forth in this paragraph shall be true and correct and the Indenture Trustee, the Owner Trustee, the Pass Through Trustee and the Lessee each shall have received a certificate signed by an authorized officer in the name and on behalf of the Owner Participant dated the Refunding Date, certifying that (i) the representations and warranties of the Owner Participant contained herein are correct as though made on and as of the Refunding Date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties are correct on and as of such earlier date), (ii) there are no Owner Participant's Liens affecting the Indenture Estate or the Trust Estate or any part thereof, (iii) to the actual knowledge of a Responsible Officer of the Owner Participant, no event has occurred and is continuing which constitutes, or with notice or lapse of time or both would constitute, due to any action or omission on the part of the Owner Participant, an Indenture Event of Default and (iv) all of the covenants and agreements of the Owner Participant required to be performed on or as of the Refunding Date have been performed. (t) On the Refunding Date, the statements set forth in this paragraph shall be true and correct and the Indenture Trustee, the Owner Participant, the Pass Through Trustee and the Lessee each shall have received a certificate signed by an authorized officer in the name and on behalf of the Owner Trustee, dated the Refunding Date, certifying that (i) the representations -19- and warranties of the Owner Trustee in its individual capacity and as Owner Trustee contained herein are correct as though made on and as of the Refunding Date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties are correct on and as of such earlier date), (ii) there are no Lessor's Liens affecting the Indenture Estate or the Trust Estate or any part thereof, (iii) to the actual knowledge of a Responsible Officer of the Owner Trustee, no event has occurred and is continuing which constitutes, or with notice or lapse of time or both would constitute, due to any action or omission on the part of the Owner Trustee (in its individual capacity or as Owner Trustee), an Event of Default or Indenture Event of Default and (iv) all of the covenants and agreements of the Owner Trustee required to be performed on or as of the Refunding Date have been performed. (u) On the Refunding Date, the statements set forth in this paragraph shall be true and correct, and the Owner Trustee, the Owner Participant, the Pass Through Trustee and the Lessee each shall have received a certificate signed by an authorized officer of the Indenture Trustee, dated the Refunding Date, certifying that (i) the representations and warranties of the Indenture Trustee in its individual capacity and as Indenture Trustee contained herein are correct as though made on and as of the Refunding Date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties are correct on and as of such earlier date), (ii) there are no Indenture Trustee's Liens affecting the Indenture Estate or any part thereof, (iii) to the actual knowledge of a Responsible Officer of the Indenture Trustee, no event has occurred and is continuing which constitutes, or with notice or lapse of time or both would constitute, due to any action or omission on the part of the Indenture Trustee (in its individual capacity or as Indenture Trustee), an Indenture Event of Default and (iv) all of the covenants and agreements of the Indenture Trustee required to be performed on or as of the Refunding Date have been performed. (v) The Owner Trustee, the Indenture Trustee, the Owner Participant and the Lessee each shall have received a certificate signed by an authorized officer of the Pass Through Trustee, dated the Refunding Date, certifying that (i) the representations and warranties of the Pass Through Trustee (in its individual capacity and as Pass Through Trustee) contained herein are correct as though made on and as of the Refunding Date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties are correct on and as of such earlier date) and (ii) all of the covenants and agreements of the Pass Through Trustee required to be performed on or as of the Refunding Date have been performed. -20- (w) The Pass Through Certificates shall have been registered under the Securities Act and no stop order shall have been issued with respect thereto, any applicable federal or state securities laws shall have been complied with, and the Pass Through Agreement shall have been qualified under the Trust Indenture Act. (x) No change shall have occurred in applicable law or regulations thereunder or interpretations thereof by appropriate regulatory authorities which, in the opinion of the Owner Participant or the Pass Through Trustee, would make it a violation of law or regulations for the Lessee, the Indenture Trustee, the Owner Participant, the Pass Through Trustee or the Owner Trustee to execute, deliver and perform the Operative Documents to which any of them is a party. (y) On the Refunding Date, all orders, permits, waivers, exemptions, approvals and authorizations of, filings and registrations with, and notifications to, and all other action to be taken by the FAA, and all other federal and state authorities required for the consummation of the transactions contemplated by this Agreement, if any, shall have been duly obtained or made and shall be in full force and effect. (z) All proceedings taken in connection with the transactions contemplated hereby and the Operative Documents and all documents and papers relating hereto and thereto shall be satisfactory to the Owner Participant, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and their counsel, each of which shall have received copies of such documents and papers as it may request in connection therewith or as a basis for such counsel's closing opinion, all in form and substance satisfactory to each of them. Promptly upon the recording of the documents specified in Sections (a)(ii) through (iv) hereof pursuant to the Act, the Lessee will cause Daugherty, Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma, to deliver to the Owner Participant, the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Underwriters an opinion as to the due registration of the Aircraft, the due recording of such documents, and the lack of filing of any intervening documents (other than the Original Documents) with respect to the Aircraft. Section 4. Extent of Interest of Interim Refinancing Loan ---------------------------------------------- Participant. Delivery of the Interim Refinancing Loan Certificate by the - ------------ Interim Refinancing Loan Participant to the Indenture Trustee for cancellation on the Refunding Date shall be conclusive evidence of receipt by the Interim Refinancing Loan Participant of all amounts then due and payable to the Interim Refinancing Loan Participant under the Operative Documents and Original Documents by any Person a party thereto. Section 5. Intentionally Left Blank. ------------------------- -21- Section 6. Lessee's Representations, Warranties and Indemnities. ----------------------------------------------------- (a) The Lessee covenants, represents and warrants to and with the Owner Participant, the Owner Trustee, in its individual capacity and as Owner Trustee, the Indenture Trustee, in its individual capacity and as Indenture Trustee, and the Pass Through Trustee, that as of the date hereof and as of the Refunding Date: (i) the Lessee is a corporation duly organized and validly existing in good standing under the laws of the State of Delaware, is a Citizen of the United States and a certificated air carrier under Section 401 of the Act and an air carrier of the type referred to in 11 U.S.C. Section 1110, holds an air carrier operating certificate pursuant to Section 604(b) of the Act, has the full power, authority and legal right to own its properties or hold such properties under lease and to enter into and perform its obligations under the Original Documents to which it is a party, this Agreement, the Lease, the Indemnity Agreement, the Pass Through Agreement, the Series Supplements and each other document executed and delivered by the Lessee on or prior to the Refunding Date in connection with the transactions contemplated hereby and thereby collectively, the "Lessee Documents"), in accordance with the respective provisions thereof, and is duly qualified to do business as a foreign corporation in good standing in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure to so qualify would have a material adverse effect on the financial condition of the Lessee and its subsidiaries taken as a whole or on the ability of the Lessee to perform its obligations under the Lessee Documents; (ii) the execution, delivery and performance by the Lessee of the Lessee Documents, in accordance with the respective provisions thereof, have been duly authorized by all necessary corporate action on the part of the Lessee, do not require any stockholder approval, or approval or consent of any trustee or holder of any indebtedness or obligations of the Lessee, and do not and will not contravene any law, judgment, governmental rule, regulation or order currently in effect or in effect at the time of execution and delivery of such document and binding on the Lessee or any of its subsidiaries or the certificate of incorporation or by-laws of the Lessee or any of its subsidiaries or contravene the provisions of, or constitute a default under, or result in the creation of any Lien (other than Permitted Liens) upon the property of the Lessee under, any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or -22- other agreement or instrument to which the Lessee or any of its subsidiaries is a party or by which it or any of its subsidiaries may be bound or affected; (iii) neither the execution and delivery by the Lessee of the Lessee Documents, nor the consummation by the Lessee of any of the transactions contemplated thereby in accordance with the provisions thereof, requires the consent or approval of, the giving of notice to, or, except as described in clause (vi) of this Section 6(a), the registration with, or the taking of any other action in respect of, the United States Department of Transportation, the FAA, the SEC or any other federal, state or foreign governmental authority or agency or the taking of any other action under any applicable law except for those that have been or, on or before the Refunding Date, will have been, duly made, given or accomplished; (iv) this Agreement constitutes and each other Lessee Document, when entered into, will constitute, the legal, valid and binding obligation of the Lessee enforceable in accordance with the terms hereof and thereof; (v) the audited consolidated balance sheet of the Lessee as of June 30, 1995 and the related consolidated statements of income, cash flows and common stockholders' equity for the period then ended (copies of which have been furnished to each party hereto), have been prepared in accordance with generally accepted accounting principles consistently applied, fairly set forth in all material respects the financial position of the Lessee and its consolidated subsidiaries as of such date and the results of operations and cash flows for such period and such financial statements do not contain any material misstatement or material omission which would render such financial statements false or misleading; since June 30, 1995 no event has occurred, except for matters disclosed in the financial statements referred to above or in Lessee's filings with the SEC on forms 10-Q or 8-K on or prior to the date hereof, copies of which have been delivered to the parties to this Agreement, and no other event or condition has occurred which in the reasonable opinion of the Lessee has materially adversely affected or is likely to materially adversely affect the financial condition or results of operations of Lessee or the ability of the Lessee to carry on its business or operations or to perform its obligations under the Lessee Documents in accordance with the provisions thereof; -23- (vi) except for (A) the filing for recording pursuant to the Act of the Lease, the Indenture and the Trust Agreement, (B) the filing of the financing statements referred to in Section 3(b) hereof under the applicable UCC and (C) the taking of possession by the Indenture Trustee of the original counterpart of the Lease, no further action, including any filing or recording of any document, is necessary or advisable in order to establish and perfect the Owner Trustee's title to and interest in the Aircraft as against the Lessee and any third parties, or to establish and perfect the first mortgage Lien on the Aircraft in favor of the Indenture Trustee and the assignment of the Lease and the Lease Supplement to the Indenture Trustee pursuant to the Indenture in any applicable jurisdiction in the United States; (vii) neither the Lessee nor any subsidiary of the Lessee is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended; (viii) the chief executive office (as such term is used in Article 9 of the UCC) of the Lessee is located at Hartsfield Atlanta International Airport, Fulton County, Atlanta, Georgia and the Lessee agrees to give the Owner Trustee and the Indenture Trustee at least 30 days' prior written notice of any relocation of said chief executive office from its present location; (ix) no material default under any lease, which on the date of inception thereof requires payments of aggregate rentals or similar payments over the entire term of such lease in excess of $10,000,000, or under any instrument for borrowed money in an amount of $10,000,000 or more, to which the Lessee is a party or by which it is bound, has occurred and is continuing; (x) the Lessee and its authorized agents have not offered the beneficial interests in the Trust Estate for sale by means of any form of general solicitation or general advertising, and have not offered to sell the beneficial interests in the Trust Estate to any persons other than the Owner Participant and not more than 50 other institutional investors, each of whom was offered a portion of the beneficial interests in the Trust Estate at private sale for investment; and in the case of each offering by the Lessee and its authorized agents, the beneficial interests in the Trust Estate have been offered solely for investment and not for resale or distribution and the offeree has been a person considered to have such knowledge and experience in financial and business matters as to be capable of -24- evaluating the merits and risks of an investment in the beneficial interests in the Trust Estate; the Lessee agrees that it has not and neither it nor any authorized person acting on its behalf will hereafter offer any of the beneficial interests in the Trust Estate for sale to, or solicit any offers to buy any of the beneficial interests in the Trust Estate from, or otherwise approach or negotiate in respect thereof with, any person or persons whomsoever, so as thereby to result in the creation and distribution of the beneficial interests in the Trust Estate being in violation of the provisions of Section 5 of the Securities Act and the rules and regulations promulgated thereunder; (xi) the Aircraft is fully equipped to operate in commercial service, complies with all governmental requirements governing such service, possesses a valid certificate of airworthiness and has been continuously maintained in accordance with the Lessee's FAA-approved maintenance program since the date of delivery to the Seller by the Manufacturer; (xii) there are no legal or governmental actions, suits or proceedings or, to the Lessee's knowledge, investigations pending to which the Lessee is a party or to which it is subject or of which any of its property is the subject other than: (A) as set forth in the financial statements referred to in clause (v) of this Section 6(a), or (B) legal or governmental actions, suits or proceedings which would not, in the Lessee's reasonable opinion, in the aggregate have a material adverse effect on the financial condition of the Lessee or the Lessee's ability to perform its obligations under the Operative Documents to which it is a party; and no such actions, suits or proceedings are known by the Lessee to be threatened or contemplated by government authorities or threatened by others; (xiii) none of the transactions contemplated by this Agreement (including, without limitation, the use of the proceeds from the issuance of the Certificates) will violate or result in a violation of Section 7 of the Exchange Act or any regulations issued pursuant thereto, including, without limitation, Regulations G, T and X of the Board of Governors of the Federal Reserve System, and none of the proceeds from the sale of the Certificates will be used, directly or indirectly, to purchase, or to refinance any borrowing, the proceeds of which were used to purchase any "security" within the meaning of the Exchange Act; -25- (xiv) the Lessee is not, and on the Refunding Date the Lessee shall not be, in default in the performance of any term or condition of the Purchase Agreement or the Purchase Agreement Assignment; (xv) no governmental approval of any kind is required of the Owner Participant, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee for their respective execution of or performance under this Agreement or any agreement contemplated hereby by reason of any fact or circumstance of Lessee, the nature of the Aircraft or the Lessee's proposed operation or use of the Aircraft; (xvi) on the Refunding Date, all sales, use or other transfer taxes due with respect to the sale and leaseback of the Aircraft hereunder and for which the Lessee is responsible pursuant to Section 6(b) hereof have been paid; (xvii) the Lessee has filed or caused to be filed all income tax returns which are required to be filed, and has paid or caused to be paid all taxes shown as due and payable on such returns and all tax assessments received by it to the extent that such taxes have become due and payable, except for taxes: (A) being contested in good faith by appropriate proceedings for which adequate reserves have been recorded in the Lessee's books in accordance with generally accepted accounting principles as reasonably determined by the Lessee and its accountants in good faith; or (B) the nonpayment of which would not have a material adverse effect on the financial condition of the Lessee or its ability to perform its obligations under the Operative Documents to which it is a party; (xviii) the sale of the Aircraft to the Owner rustee was completed and effective on the Delivery Date and is not voidable or void; (xix) assuming the truth of the representations contained in Section 7(e) and Section 7(f) of the Original Participation Agreement, the Lessee has not engaged in any transaction in connection with which the Lessee could be subjected to either a material civil penalty assessed pursuant to Section 502(i) of ERISA, or a material tax imposed by Section 4975 of the Code; no material liability under Title IV of ERISA has been or is reasonably expected by the Lessee to be incurred with respect to any Plan; there has been no event or condition which presents a material risk of termination of any currently maintained Plan (other than a multiemployer plan, within the meaning of Section 3(37) of ERISA) by the Pension Benefit Guaranty Corporation; -26- no accumulated funding deficiency (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, exists with respect to any Plan which could reasonably result in any liability to the Lessee or any affiliate; no material amount of "withdrawal liability" as that term is used in Section 4201 of ERISA, has been or is reasonably expected to be incurred by the Lessee or any affiliate nor has the Lessee or any affiliate been notified by any multiemployer plan (within the meaning of Section 3(37) of ERISA) that such multiemployer plan is in reorganization or insolvency under and within the meaning of Section 4241 or 4245 of ERISA or that such multiemployer plan intends to terminate or has been terminated under Section 4041A of ERISA. Neither the Lessee nor any affiliate (i) is in the process of terminating any Plan and (ii) has incurred or reasonably expects to incur, any material liability under Title IV of ERISA with respect to any termination of any employee benefit plan (within the meaning of Section 3(3) of ERISA and including multiemployer plans within the meaning of Section 3(37) of ERISA) which the Lessee was in process of terminating on July 1, 1987 and in connection with which the final distribution of assets occurred or will occur after July 1, 1987. For purposes of this clause the term "affiliate" shall mean any entity required to be aggregated with the Lessee under Sections 414(b), (c), (m) or (o) of the Code or under Section 4001 of ERISA; (xx) assuming the truth of the representations and warranties contained in Sections 7(e) and 7(f) of the Original Participation Agreement and compliance with Section 10.06 of the Indenture and Section 6.06 of the Pass Through Agreement, the execution and delivery of this Agreement and the other Operative Documents and the consummation and performance of the transactions described herein and therein will not involve any transaction which is subject to the prohibitions of Section 406 of ERISA or in connection with which a tax could be imposed pursuant to Section 4975 of the Code; (xxi) there are no broker's or underwriter's fees payable in connection with the transactions contemplated in the Operative Documents other than those of Babcock & Brown Financial Corporation referred to in Section 14 (for which the Lessee is responsible) and those payable under the Underwriting Agreement to the Underwriters; (xxii) the representations and warranties of the Lessee set forth in Section 6 of the Original Participation Agreement were correct on and as of the Delivery Date (except to the extent that such -27- representations expressly relate solely to a specified earlier date, in which case such representations and warranties were correct on and as of such earlier date); (xxiii) there has not occurred any event which constitutes a Default or an Event of Default under the Lease which is presently continuing and there has not occurred any event which constitutes or would with the passage of time or the giving of notice, or both, constitute an Event of Loss; (xxiv) the Lessee will perform all of its obligations under the Pass Through Agreement; (xxv) there are no actions or proceedings or, to Lessee's knowledge, threatened governmental actions, before any court or other governmental authority and there has not been issued, or to Lessee's knowledge, proposed to be issued, any order, judgment or decree by any court or other governmental authority, to set aside, restrain, enjoin or prevent the consummation of any of the transactions contemplated herein; and (xxvi) the representations and warranties of the Lessee set forth in the Underwriting Agreement are true and correct. (b) Taxes. ----- Subject to the exclusions set forth below, all payments of Rent will be free and clear from the withholding of any Tax imposed by the United States, any state or local government or taxing authority in the United States, any foreign or international taxing authority or the taxing authority of any United States possession or territory, and if any such withholding is required, Lessee shall pay an additional amount of Rent such that the net amount of Rent actually received by an Indemnitee will be equal to the amount of Rent that would have been due absent such withholding. The Lessee agrees to pay, and to indemnify and hold each Indemnitee (which term, for the purposes of this Section 6, shall mean the Owner Participant, the Interim Refinancing Loan Participant (but excluding any assignee or transferee of, or the holder of any participation granted by, the Interim Refinancing Loan Participant), the Owner Trustee, in its individual capacity and as Owner Trustee, the Indenture Trustee, in its individual capacity and as Indenture Trustee (and, in the case of each of the foregoing, as to any such corporation, any officer, director or Affiliate thereof), the Indenture Estate and the Trust Estate and, in each case, their respective directors, officers, agents, successors and assigns) harmless from all license, recording, documentary, registration, and other similar fees and all taxes (including, without limitation, income, gross receipts, sales, rental, use, value added, property (tangible and intangible), ad valorem, excise and stamp taxes), levies, imposts, -28- duties, charges, assessments or withholdings of any nature whatsoever, together with any penalties, additions to tax, fines or interest thereon or additions thereto imposed by any federal, state or local government or taxing authority in or of the United States (including any possession or territory of the United States), any foreign government or any international authority or any subdivision or taxing authority thereof (collectively, "Taxes", separately "Tax"), against any Indemnitee, the Lessee, the Seller, the Aircraft or any Part, upon or with respect to the Aircraft or any Part or interest therein or upon or with respect to or measured by the purchase, manufacture, sale, import, export, transfer of title, ownership, mortgaging, delivery, transport, lease, sublease, assignment, possession, repossession, use, abandonment, alterations, improvements, modifications, additions, operation, registration, transfer of registration, reregistration, repair, replacement, overhaul, location, control, the imposition of any Lien (other than a Permitted Lien), refinancing or other disposition thereof, or upon or with respect to the rentals, receipts or earnings arising therefrom, or upon or with respect to this Agreement, the Trust Agreement, the Indenture, the Certificates, the Trust Agreement and Trust Indenture Supplement, the Lease, the Lease Supplement, the Series Supplements, the Pass Through Agreement, the Original Loan Certificate, the Pass Through Certificates or any of the Operative Documents or the issuance thereof under the Indenture or the beneficial interests in the Trust Estate or the creation thereof under the Trust Agreement, or any payment made pursuant to any such agreement or instrument or upon or with respect to the property, or the income or other proceeds received with respect to the property, held by the Owner Participant, by the Owner Trustee or by the Indenture Trustee under the Indenture or otherwise with respect to or in connection with the transactions contemplated by the Operative Documents as and when such Taxes shall become due and payable, but excluding Taxes: (i) in the case of any Indemnitee, (A) on, based on, or measured by, the gross or net income or receipts of such Indemnitee, (B) any capital gains taxes, excess profits taxes, minimum taxes from tax preferences, alternative minimum taxes, accumulated earnings taxes, personal holding company taxes, succession taxes and estate taxes imposed upon any Indemnitee by the United States or any state or local taxing authority therein or (C) any value added taxes which are in lieu of income or receipts taxes (by reason of repeal, modification, or failure to increase the rate of such taxes as evidenced by the text of enabling legislation, the legislative history or statements by public officials) (other than (x) in the case of (A) or (B) above, any such Taxes which are in the nature of a sales or use tax, license fee, rental, property tax or ad valorem tax and ---------- (y) in the case of (A) or (B) above any Tax on or measured by any gross or net income or gross or net receipts in any jurisdiction if such Taxes -29- would have been imposed if the presence, location, use or operation of the Aircraft in such jurisdiction were the sole connection between such Indemnitee and such jurisdiction); (ii) in the case of any Indemnitee, on, or with respect to, or measured by the capital or net worth of such Indemnitee or in the nature of a franchise tax on, or a tax for the privilege of doing business by, such Indemnitee (however calculated) imposed by the United States or any state or local taxing authority therein (other than (x) any such Taxes which are in the nature of a sales or use tax, license fee, rental, property or ad -- valorem tax and (y) any such Taxes which are imposed in any jurisdiction if ------- such Taxes would have been imposed if the presence, location, use or operation of the Aircraft in such jurisdiction were the sole connection between such Indemnitee and such jurisdiction); (iii) on, with respect to or measured by any trustee fees received by the Owner Trustee or the Indenture Trustee for services rendered under the Trust Agreement and the Indenture, respectively; (iv) to the extent actually reimbursed on an after-tax basis to such Indemnitee by any person other than any Affiliate of the Indemnitee or, if such Indemnitee is the Indenture Trustee, other than any Holder; (v) imposed on the Owner Trustee in its trust capacity or the Indenture Trustee in its trust capacity to the extent that such Taxes reduce taxes, fees or other charges which otherwise would have been imposed on the Owner Participant, any Holder or any holder of a Pass Through Certificate and which are not Taxes indemnified against under this Section 6(b) or pursuant to the Indemnity Agreement; (vi) which have not been paid but only during the period that such Taxes are being contested as provided in this Section 6(b); (vii) imposed on any Indemnitee to the extent that such Taxes arise out of or are caused by any act or omission of such Indemnitee where such act or omission in breach of express obligations of the Indemnitee under the Operative Documents; (viii) imposed on any Indemnitee to the extent that such Taxes result from the gross negligence or willful misconduct of such Indemnitee (other than gross negligence or willful misconduct imputed by reason of -30- such Indemnitee's participation in the transactions contemplated by the Operative Documents); (ix) imposed on any Indemnitee as a result of (A) a voluntary transfer or other voluntary disposition by the Owner Participant, the Owner Trustee or the Indenture Trustee of any interest in the Aircraft or any part thereof or the Trust Estate or the Indenture Estate (it being understood that a transfer or disposition pursuant to Section 5 (other than a sale at fair market value) or Sections 7, 8, 9, 10 or 15 of the Lease or the last paragraph of this Section 6(b) (other than a sale at fair market value) is not a voluntary transfer or disposition for this purpose), (B) with respect to any taxes imposed on the Owner Participant, a transfer or disposition by the Owner Participant resulting from bankruptcy or other proceedings for the relief of debtors in which the Owner Participant is the debtor, whether voluntary or involuntary, of any interest in the Aircraft or any part thereof, or the Trust Estate, or (C) a transfer by such Indemnitee of all or any part of its interest in a Certificate or a Pass Through Certificate unless, in each case, such transfer or disposition shall occur at any time while an Event of Default shall have occurred and be continuing or shall occur in connection with any substitution, replacement, modification, or pooling of the Aircraft, any Engine or any Part thereof; (x) as to which such Indemnitee is indemnified by the Lessee pursuant to the Indemnity Agreement; (xi) with respect to any period after the xpiration or earlier termination of the Term and the return of the Aircraft or payment in full of Stipulated Loss Value or Termination Value, as the case may be, for the Aircraft and all Rent due and owing with respect to the Aircraft in each case in accordance with the Lease, unless such Taxes relate to events or matters occurring prior to or coincidental with such expiration, termination, return or payment, as the case may be; and (xii) imposed on the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant as the result of any prohibited transaction, within the meaning of Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Certificate or any Pass Through Certificate or any participation interest therein (i) over which purchase or holding the Owner Participant -31- (or any Affiliate thereof, which for purposes of this clause (xii) shall also include any affiliate within the meaning of the first sentence of Part V(c)(3) of Prohibited Transaction Exemption 84-14) has discretion or control, or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or employee benefit plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to appoint or terminate, or to negotiate the terms of the management agreement with, the person or persons having discretion or control over such purchase or holding, provided, however, that such -------- ------- exclusion shall occur only in the event that the Owner Participant or the Affiliate thereof which has the discretion or control described in subclause (i) above or which has the power described in subclause (ii) above, as the case may be, knows or reasonably should have known that such purchase or holding of the Certificates or Pass Through Certificates (or participation interests therein) may constitute a prohibited transaction, within the meaning of Section 4975(c)(1) of the Code. If the Owner Participant reimburses the Owner Trustee or the Indenture Trustee for any Tax for which indemnification would be required hereunder, the Lessee will reimburse the Owner Participant therefor. The Pass Through Trustee shall withhold any Taxes required to be withheld on payments to any holder of a Pass Through Certificate who is not a United States person except to the extent that such holder has furnished evidence satisfactory to the Pass Through Trustee of any exemption from withholding Taxes claimed by such holder. The Indenture Trustee shall withhold any Taxes required to be withheld on payments to any Holder who is not a United States person except to the extent that such Holder has furnished evidence satisfactory to the Indenture Trustee of any exemption from withholding Taxes claimed by such Holder. Notwithstanding the exclusion set forth in subparagraphs (i) through (xii) of this Section 6(b) or any other provision of any of the Operative Documents, the Lessee shall indemnify and hold harmless on a net after-tax basis the Owner Participant and, if applicable, the Owner Trustee for any withholding Taxes imposed with respect to such a holder or Holder, as the case may be, that result from the failure of the Pass Through Trustee or the Indenture Trustee to properly withhold such Taxes or the failure of the relevant holder or Holder, as the case may be, to provide the documentation and other forms necessary to establish an exemption from such Tax. To the extent that the Lessee is not otherwise reimbursed for such amounts, the Lessee shall be entitled to recover any amounts paid pursuant to the preceding sentence from the Pass Through Trustee or the Indenture Trustee, as the case may be, (in its individual capacity; provided, -32- however, that notwithstanding anything herein to the contrary, in no event shall such payment be made out of, or be indemnifiable from, the assets held by the Pass Through Trustee or the Indenture Trustee on behalf of the holders of the Pass Through Certificates or the Holders, as the case may be) (plus interest thereon at the Debt Rate) until such amounts have been recovered in full by the Lessee. In the event the Indenture Trustee or the Pass Through Trustee is required to pay any amount in its individual capacity hereunder, it shall have no recourse to or right of reimbursement from the Indenture Estate, any Pass Through Trust, the Trust Estate, or any portion of either. With respect to any payment or indemnity hereunder, such payment or indemnity shall include an amount payable to the Indemnitee sufficient to hold such Indemnitee harmless on an after-tax basis from all Taxes required to be paid by such Indemnitee with respect to such payment or indemnity under the laws of any federal, state or local government or taxing authority in or of the United States, or under the laws of any taxing authority or governmental subdivision in or of a foreign country; provided that, if any Indemnitee -------- currently realizes and recognizes a permanent tax benefit by reason of such payment or indemnity (whether such tax benefit shall be by means of a foreign tax credit, depreciation or recovery deduction or otherwise) not otherwise taken into account in computing such payment or indemnity, such Indemnitee shall pay to the Lessee (but not before the Lessee shall have made all payments then due to such Indemnitee under the Operative Documents) an amount equal to the sum of such tax benefit plus any permanent tax benefit realized as the result of any payment made pursuant to this proviso, when, as, if and to the extent realized (it being understood that an Indemnitee will not be deemed to realize a permanent tax benefit by reason of any reduction in the amount of, or credit against, Taxes for which the Lessee would have been, absent such reduction or credit, obligated to indemnify such Indemnitee hereunder or under the Indemnity Agreement, as a result of the payment of, or indemnity for, Taxes for which the Lessee has previously paid an indemnity hereunder); provided, however, that such -------- ------- payment by an Indemnitee shall not exceed the lesser of (x) the sum of such tax benefit plus any other permanent tax benefit realized by such Indemnitee as the result of any payment made by such Indemnitee pursuant to this sentence and (y) the amount of all payments pursuant to this Section 6(b) by the Lessee to such Indemnitee (and the excess, if any, of the amount described in clause (x) over the amount described in clause (y) shall be carried forward and applied to reduce pro tanto any subsequent obligations of the Lessee to make payments --------- pursuant to this Section 6(b), it being intended that no Indemnitee should realize a net tax benefit pursuant to this Section 6(b) unless the Lessee shall first have been made whole for any payments by it to such Indemnitee pursuant to this Section 6(b)); provided, further, that if, at the time such payment shall -------- ------- be due to the Lessee an Event of Default or Payment Default shall have occurred and be continuing, such payment shall not be made to the Lessee unless and until all -33- Events of Default or Payment Defaults shall have been cured by the Lessee. Each such 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. Any Taxes that are imposed on any Indemnitee as a result of the loss, disallowance, recapture or reduction of such tax benefit referred to in the next preceding sentence in a taxable year subsequent to the year of allowance and utilization by such Indemnitee (including the expiration of any tax credit carryovers or carrybacks of such Indemnitee that would not otherwise have expired) shall be deemed a Tax indemnified pursuant to the provisions of this Section 6(b). In determining the order in which the Indemnitee utilizes any foreign taxes as a credit against the Indemnitee's United States income taxes, the Indemnitee shall be deemed to utilize (A) first, all foreign taxes other than those described in clause (B) below; provided, however, that such other -------- ------- foreign taxes which are carried back to the taxable year for which a determination is being made shall be deemed utilized after the foreign taxes described in clause (B) below, and (B) then, on a pro rata basis, all foreign taxes in connection with equipment leasing transactions with respect to which and to the extent that the Indemnitee is entitled to obtain indemnification pursuant to an indemnification provision contained in any lease, financing document, participation agreement, or indemnification agreement (including this Agreement) other than any such transaction in which there is an express provision that credits are deemed utilized on a basis more or less favorable than pro rata; provided further, however, that for purposes of the two preceding --- ---- -------- ------- ------- sentences (except to the extent provided in the immediately preceding proviso) a reduction in taxes shall be considered attributable to a foreign tax credit carryover or carryback arising from a recovery by the Indemnitee of foreign tax credits in respect of which the Lessee has previously paid an indemnity hereunder only to the extent that all other carryovers and carrybacks of foreign tax credits of the Indemnitee have been fully used by the Indemnitee. If written claim is made against any Indemnitee for any such Tax referred to in this Section 6(b), the Indemnitee shall promptly notify the Lessee of the Indemnitee's receipt of such claim; provided, however, that the -------- ------- failure of the Indemnitee to so notify the Lessee shall not preclude any indemnity hereunder unless and to the extent that the Lessee's right to effect its contest rights hereunder has been materially impaired by such failure. If requested by the Lessee in writing, such Indemnitee shall in good faith contest the validity, applicability or amount of such Tax provided such Tax is one with respect to which the Lessee has agreed in writing that it would be required to indemnify the Indemnitee under this Section 6 provided that such agreement shall be of no force and effect if the contest is ultimately resolved on an articulated basis which clearly does not constitute a basis for indemnification hereunder. Such Indemnitee shall consult with and keep the Lessee informed as to the progress of any action, suit or proceeding by such Indemnitee contesting -34- the validity, applicability or amount of such Tax and, upon the request of such Indemnitee, the Lessee shall assume responsibility for contesting the validity, applicability or amount of such Tax in the name of the Indemnitee or in the name of the Lessee, if permissible under applicable law; provided that (i) the Lessee -------- shall not be obligated to bring any action, suit or proceeding or to prosecute any such contest, except in its sole discretion; (ii) in the event of any such contest by the Lessee, such Indemnitee shall cooperate with the Lessee by providing to the Lessee all documents (or portions thereof), reports and other information relevant thereto in the Indemnitee's possession (which documents (or portions thereof), reports and other information will be disclosed by the Lessee only for the purposes of such contest), by resisting payment of such Tax if lawful and practicable and, provided that nonpayment of the same would not result in any material danger of sale, forfeiture, loss of use of the Aircraft, the Airframe or any Engine or any risk of criminal liability, by not paying the same except under protest, if protest is necessary and proper; (iii) if the Lessee shall not be qualified to contest such Tax or shall not be requested to do so by such Indemnitee, such Indemnitee shall, upon receipt of indemnity satisfactory to it and upon the written request and at the expense of the Lessee reimbursed to such Indemnitee on reasonable demand and on an after-tax basis (including, without limitation, all reasonable costs, expenses, losses, legal and accountants' fees and disbursements, penalties and interest), in good faith contest in the name of such Indemnitee the validity; applicability or amount of such Tax by, in such Indemnitee's discretion, (A) resisting payment thereof if practicable and consistent with applicable administrative or judicial procedures (B) not paying the same except under protest, if protest is necessary and proper, and provided that non-payment of the same would not result in any material danger of sale, forfeiture, or loss of use of the Aircraft, the Airframe or any Engine or any risk of criminal liability or (C) paying the same and using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings. If an Indemnitee contests a Tax by making a payment thereof, then the Lessee shall advance on an interest free basis and shall indemnify on an after-tax basis such Indemnitee against any adverse tax consequences resulting from such advance, an amount equal to the Taxes and any penalties, additions to tax, fines and interest thereon that are paid by such Indemnitee in connection with such contest. Notwithstanding anything contained in this Section 6(b), an Indemnitee will not be required to contest, or to continue to contest, the validity, applicability or amount of any Tax (or portion thereof) (v) in the nature of an income or franchise tax imposed on the Owner Participant or Owner Trustee unless tax counsel selected by the Owner Participant and reasonably acceptable to the Lessee is of the opinion that there is a Reasonable Basis (as defined in the Indemnity Agreement) for pursuit of such contest and the amount at issue exceeds $12,500, (x) if such Indemnitee waives its right to indemnity hereunder with respect to such Tax (or such portion thereof) or (y) if an -35- Event of Default or a Payment Default has occurred and is continuing, unless the Lessee provides such Indemnitee with security in a manner satisfactory to such Indemnitee within such Indemnitee's reasonable discretion. Notwithstanding the foregoing, if the contest also involves other Taxes which are not required to be indemnified by the Lessee pursuant to this Section 6(b) ("Non-Indemnified Items"), then, such Indemnitee shall not discriminate against such Tax in favor of any Non-Indemnified Items and, unless one of the conditions referred to in clause (x) or (y) of the previous sentence exists, shall not settle such Tax, without the consent of the Lessee (except with respect to Non-Indemnified Items), which consent shall not be unreasonably withheld or delayed given all the facts and circumstances. All costs and expenses of any contest by the Lessee and all reasonable costs and expenses of any contest by any Indemnitee shall be borne by the Lessee (except with respect to Non-Indemnified Items), which costs and expenses shall be paid promptly and on an after-tax basis after receipt of notice. If any Indemnitee shall obtain a refund of all or any part of such Tax paid by the lessee or for which the Lessee shall have reimbursed such Indemnitee, such Indemnitee shall pay promptly to the Lessee an amount equal to the sum of (i) the amount of such refund, including interest, if any, reduced by the Taxes imposed on such Indemnitee by reason of the receipt or accrual of such refund and/or interest plus (ii) the amount of Taxes saved by such Indemnitee by reason of the deduction of its payment over to the Lessee of the sum of amounts in clause (i) and this clause (ii); provided, however, in no event shall such -------- ------- amount payable pursuant to this sentence exceed the amount of such Tax payment by the Lessee to such Indemnitee (plus any other payment by the Lessee to such Indemnitee theretofore made pursuant to this Section 6(b) to the extent not previously taken into account under this Section 6(b)) and any excess amount shall be carried forward to reduce pro tanto any future obligations of the --- ----- Lessee to such Indemnitee under this Section 6(b); provided that, if at the time -------- such payment shall be due to the Lessee an Event of Default shall have occurred and be continuing, such payment shall not be made to the Lessee unless and until all Events of Default shall have been cured. Any amount of refund with respect to which such Indemnitee has made a payment to the Lessee as required hereunder that the Indemnitee is required to repay to any taxing authority shall be treated as a Tax for which the Lessee is obligated to indemnify such Indemnitee pursuant to the provisions of this Section 6(b). The Lessee shall not be deemed to be in default under any of the above indemnification provisions so long as it or any Indemnitee shall diligently prosecute such contest in good faith and in accordance with the terms of this Section 6(b). Upon final determination or settlement of a contest, any unpaid Taxes plus other amounts owed hereunder shall be payable by the Lessee no later than 30 days after such final determination or settlement. -36- Each Indemnitee shall promptly forward to the Lessee any written notice, bill, or advice received by it concerning any indemnified Tax. Subject to the provisions of the last sentence of the preceding paragraph, the Lessee shall pay any amount for which it is liable pursuant to this Section 6(b) (without regard to Section 6(b)(vi)), directly to the appropriate taxing authority if legally permissible or, upon demand of an Indemnitee, to such Indemnitee within thirty (30) Business Days of such demand, but in no event more than ten (10) Business Days nor less than five (5) Business Days (provided that if the Lessee has not received demand within a reasonable time prior to such date, the Lessees shall make such payment promptly within a reasonable time after receipt of such demand) prior to the date the Tax to which such amount payable hereunder relates is due. Within thirty (30) days after the date of each payment by the Lessee of any Tax, the Lessee shall furnish to the appropriate Indemnitee the original or a certified copy of a receipt for the Lessee's payment of such Tax or such other evidence of payment of such Tax as is acceptable to such Indemnitee. The Lessee shall also furnish promptly upon request such data as any Indemnitee may reasonably request to enable such Indemnitee to comply with the Indemnitee's filing, audit or litigation requirements in any taxing jurisdiction. If any report, return or statement is required to be filed with respect to any Tax which is subject to indemnification under this Section 6(b) (without regard to Section 6(b)(vi)), the Lessee shall timely file the same (except for any such report, return or statement which the Indemnitee has notified the Lessee that the Indemnitee intends to file or for which the Indemnitee is required by law to file in its own name). The Lessee shall either file such report, return or statement so as to show the ownership of the Aircraft in the Owner Trustee (unless consented to otherwise by Owner Participant) and send a copy of such report, return or statement to the Indemnitee, and the Owner Trustee if the Indemnitee is not the Owner Trustee, or, where the Lessee is not permitted to file such report, return or statement, it shall notify the Indemnitee of such requirement and prepare and deliver such report, return or statement to the Indemnitee in a manner satisfactory to such Indemnitee within a reasonable time prior to the time such report, return or statement is to be filed. If the Lessee is required to indemnify under this Agreement for any value added tax (or would be required to indemnify pursuant to legislation scheduled to go into effect), and if in the reasonable judgment of the Lessee such indemnification might prove to be burdensome to the Lessee, the Lessee shall have the option upon the delivery of thirty (30) days' prior written notice to elect to purchase the Aircraft or the Owner Participant's interest therein at a purchase price, and following procedures substantially identical to those, set forth in Section 16(b)(i) or (ii) hereof unless prior to the completion of such purchase the Owner Participant shall have waived such indemnity by the Lessee and shall have undertaken in a manner reasonably satisfactory to the Lessee to bear such value added -37- tax. If the Owner Participant incurs any value added tax on the Aircraft or the Rent not indemnified under this Section 6(b) (or would incur such tax pursuant to legislation scheduled to go into effect), and if such Tax might in the reasonable judgment of the Owner Participant prove to be burdensome to the Owner Participant, then the Owner Participant may, by delivery of written notice to the Lessee declare an Event of Loss to have occurred as of the date of such notice, and the provisions of Section 10(a)(i) of the Lease shall become applicable unless Lessee shall have assumed liability for such tax hereunder (it being understood that the provisions of Section 10(a)(ii) of the Lease shall not be available with respect to an Event of Loss declared pursuant to this paragraph). (c) General Indemnity. Whether or not any of the transactions ----------------- contemplated hereby shall be consummated, the Lessee hereby agrees to assume, and does hereby assume, liability for, and does hereby indemnify and agree to protect, defend, save and keep harmless each Indemnitee and their respective successors, assigns, directors, officers, agents, representatives and servants, from and against, any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees and expenses and costs and expenses relating to amendments, supplements, adjustments, waivers, consents and refinancings) of any kind and nature whatsoever (other than any Taxes), which may be imposed on, incurred by or asserted against any Indemnitee or its respective successors, assigns, directors, officers, agents, representatives or servants, by any person other than the Lessee (but including the Lessee to the extent that such cost or expense arises from an unsuccessful assertion of a claim by the Lessee), in any way relating to or arising out of this Agreement, the Purchase Agreement, the Purchase Agreement Assignment, the Bills of Sale, the Lease, the Lease Supplement, the Indenture, the Original Loan Certificate, the Interim Refinancing Loan Certificate, the Certificates, the Pass Through Certificates, the Pass Through Agreement, the Series Supplements, the Trust Agreement or any Original Document or any other documents entered into in connection herewith or therewith or any transactions contemplated hereby or thereby or the enforcement of any of the terms of any hereof or thereof, including, without limitation, amounts referred to in clause "first" of Section 5.02, and clauses "first" through "third" of Section 5.03, of the Indenture, or in any way relating to the Aircraft, the Airframe, any Engine or any Part whether or not arising out of the manufacture, design, purchase, acceptance, non-acceptance or rejection, ownership, registration, reregistration, financing, refinancing, delivery, non- delivery, lease, sublease, assignment, possession, use, operation, maintenance, testing, condition, repair, overhaul, storage, airworthiness, replacement, sale (including all costs incurred in making the Aircraft, the Airframe, or the Engines ready for sale after the exercise of remedies under she Lease and/ or the Indenture), return or other disposition of the Aircraft or any part thereof prior to the expiration or earlier termination of -38- the Term and the return of the Aircraft in compliance with the provisions of Section 5 of the Lease (including any claim for patent, trademark or copyright infringement, any claim based on theories of negligence, warranty, absolute liability, latent or other defects, strict liability, statutory liability or tort or injury, death or property damage of passengers, shippers or others, environmental noise or pollution and any Liens other than Liens referred to in clause (a) or (c) of Section 6 of the Lease), or in any way relating to or arising out of the offer, sale, delivery or resale of the Original Loan Certificate, the Interim Refinancing Loan Certificate, the Certificates, the Pass Through Certificates or any refunding or refinancing thereof, or in any way relating to or arising out of the offer or sale of any interest in the Trust Estate or the Trust Agreement or any similar interest or in any way relating to or arising out of the Trust Agreement and the Trust Estate, the Indenture and the Indenture Estate (including, without limitation, any claim arising out of the Securities Act, the Exchange Act, or any other Federal or state statute, law or regulation, or at common law or otherwise relating to securities (collectively "Securities Liabilities")), or the action or inaction of the Owner Trustee or the Indenture Trustee as trustees (including, without limitation, any claim arising out of the Owner Participant's obligation under Section 8.01 of the Trust Agreement); provided, however, that the Lessee shall not be required -------- ------- to indemnify (i) the Indenture Trustee (individually or otherwise), the Original Loan Participant or the Interim Refinancing Loan Participant (including, in each case, the respective successors, assigns, directors, officers, agents and servants of the Indenture Trustee, the Original Loan Participant or the Interim Refinancing Loan Participant, as the case may be) (a) for liability arising from such Indemnitee's own gross negligence or willful misconduct or (b) for the inaccuracy of any representation by it or breach by such Indemnitee of any warranty or covenant set forth in any Operative Document, or (ii) the Owner Trustee (individually or otherwise and including its successors, assigns, directors, officers, agents and servants) (a) for its own willful misconduct or gross negligence, (b) for the inaccuracy of any representation or breach of any warranty or covenant, made or undertaken in its individual capacity, set forth in any Operative Document, (c) for taxes, fees or other charges on, based on, or measured by, any fees, commissions or compensation received by the Owner Trustee in its individual capacity in connection with the transactions contemplated by any Operative Document, (d) for any failure to use ordinary care in receiving or disbursing funds or in connection with its obligation to invest funds pursuant to Section 1 of this Participation Agreement, Section 24 of the Lease, or Section 3.02 of the Trust Agreement, or (e) for any liability on the part of the Owner Trustee arising out of its negligence or willful or negligent misconduct in connection with its obligations under Sections 6.01, 6.06 or 10.02 of the Trust Agreement or Section 3.05(b)(iii) of the Indenture, it being understood that nothing in this clause (ii) shall derogate from Lessee's indemnification of the Indenture Estate and the Trust Estate hereunder; and provided, further, -------- ------- -39- that, except as and to the extent attributable to default by the Lessee in performing or observing its obligations hereunder or under the Lease or breach by the Lessee of any of its representations or warranties herein or therein, the Lessee shall not be required to indemnify any of the following: (i) the Owner Participant against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including legal fees and expenses) of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Owner Participant to the extent that the same are so imposed, incurred or asserted as a result of a default on its part in the observance or performance of the express terms and provisions to be observed and performed by the Owner Participant in the Trust Agreement or this Agreement; (ii) any Indemnitee against any expense to the extent required to be paid by such Indemnitee pursuant to Section 14 hereof, unless such expense is required to be paid by Lessee hereunder; (iii) the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest", within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursement (including legal fees and expenses) of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Owner Participant or any person who is a "disqualified person", within the meaning of Section 4975(e)(2) of the Code, or a "party in interest," within the meaning of Section 3(14) of ERISA, by virtue of such person's relationship to the Owner Participant, as the case may be, resulting from any prohibited transaction, within the meaning of Section 4975(c)(1) of the Code, occurring with respect to the purchase or holding of any Certificate or Pass Through Certificate or any participation interest in either therein (i) over which purchase or holding the Owner Participant (or any Affiliate thereof, which for purposes of this clause (iii) shall also include any affiliate within the meaning of the first sentence Part V(c)(3) of Prohibited Transaction Exemption 84-14) has discretion or control, or (ii) by an employee benefit plan, within the meaning of Section 3(3) of ERISA, or individual retirement account or employee benefit plan subject to Section 4975 of the Code with respect to which the Owner Participant (or any Affiliate thereof) has the power, directly or indirectly, to -40- appoint or terminate or to negotiate the terms of the management agreement with, the person or persons having discretion or control over such purchase or holding, provided, however, that such exclusion shall occur only in the -------- ------- event that the Owner Participant or the Affiliate thereof which has the discretion or control described in subclause (ii) above, as the case may be, knows or reasonably should have known that such purchase or holding of the Certificates or Pass Through Certificates (or participation interest in either therein) may constitute a prohibited transaction, within the meaning of the Section 4975(c) (1) of the Code; or (iv) any Indemnitee against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including legal fees and expenses) of any kind and nature whatsoever which may be imposed on, made by or asserted against such Indemnitee to the extent that the same are so imposed, made or asserted by reason of (A) any voluntary transfer or voluntary disposition by such Indemnitee (it being understood that a transfer or disposition pursuant to Sections 5 (other than a sale at fair market value), 7, 8, 9, 10 or 15 of the Lease is not a voluntary transfer or disposition for this purpose) or (B) a transfer or disposition by such Indemnitee resulting from bankruptcy or other proceedings for the relief of debtors in which such Indemnitee is the debtor, whether voluntary or involuntary, of any interest in the Aircraft or any part thereof, or the Trust Estate, unless, in each case, such transfer or disposition occurs at any time while an Event of Default has occurred and is continuing. Nothing herein shall be deemed to constitute an assumption by the Lessee of the obligations of the Owner Trustee upon, or a guarantee by the Lessee of, the principal of, or interest upon, the Certificates or the Pass Through Certificates or to constitute any guarantee of any residual value of the Aircraft. Nothing herein shall be deemed to constitute an agreement by the Lessee that the Pass Through Certificates represent an interest in, or obligation of, the Lessee. Payments due from the Lessee to each Indemnitee pursuant to this Section 6(c) shall be made directly to such Indemnitee. This Agreement constitutes a separate agreement with respect to each Indemnitee and is enforceable directly by each such Indemnitee. In the event the Lessee is required to make any payment under this Section 6(c), the Lessee shall pay the person indemnified an amount which, after deduction of all taxes required to be paid by said person in respect of the receipt thereof under the laws of the United States or of any State or of any political subdivision thereof or therein or of any foreign country or of any political subdivision thereof or therein (after giving credit for any actual current savings in respect of any such taxes by reason of deductions, credits or allowances in -41- respect of the payment of the expense indemnified against, and of any other such taxes), shall be equal to the amount of such payment. If the Lessee has knowledge of any material claim or liability indemnified against under this Section 6(c), it shall give prompt written notice thereof to all Indemnitees, and if any Indemnitee shall have any such knowledge, it shall give prompt written notice to the Lessee. In case any action, suit or proceeding shall be brought against any Indemnitee under this Section 6(c), such Indemnitee shall notify the Lessee of the commencement thereof, and the Lessee may, at its expense, participate in, and, to the extent that it shall wish (subject to the provisions of the following paragraph), assume the defense thereof, with counsel satisfactory to such Indemnitee. With respect to any amount which the Lessee is requested by an Indemnitee to pay by reason of this Section 6(c), the Indemnitee shall, if requested by the Lessee and prior to any payment, submit such additional information to the Lessee as the Lessee may reasonably request properly to substantiate the requested payment. Notwithstanding the foregoing, the failure of any Indemnitee to notify the Lessee as provided in this Section 6(c) shall not relieve the Lessee from any liability it may have to such party, except to the extent that any such failure results in any material increase in or inability to mitigate the liability of the Lessee hereunder. The Lessee or its insurers shall have the right to investigate or (provided that the Lessee or its insurers shall agree not to dispute liability hereunder or under any insurance policies pursuant to which coverage is sought and provided that the Lessee shall have used good faith efforts to consult with the relevant Indemnitee) defend or compromise any claim for which indemnification is sought pursuant to this Section 6(c), and each Indemnitee shall cooperate with the Lessee or its insurers with respect thereto provided, -------- however, that the Lessee shall not be entitled to control the defense of or - ------- compromise such claim (i) during the continuance of any Event of Default, (ii) if and to the extent that any Indemnitee has certified that, in its reasonable judgment, such claim involves the potential imposition of criminal liability on such Indemnitee or (iii) if such defense or compromise would involve a material risk of the sale, forfeiture or loss of, or the creation of any Lien (other than a Permitted Lien) on, the Aircraft, the Airframe, the Indenture Estate or the Trust Estate, unless the Lessee shall have posted a bond or other security satisfactory to the relevant Indemnitee with respect to such risk. The Lessee will provide the Indemnitee with such information not within the control of such Indemnitee, as is in the Lessee's control or is reasonably available to the Lessee, which such Indemnitee may reasonably request and will otherwise cooperate with such Indemnitee so as to enable such Indemnitee to fulfill its obligations under this paragraph. Where the Lessee or any of its insurers undertakes the defense of an Indemnitee with respect to a claim and so long as, but only so -42- long as, the Lessee is entitled to control such defense, no additional legal fees or expenses of such Indemnitee in connection with the defense of such claim will be indemnified hereunder unless such fees or expenses were incurred at the request of the Lessee or such insurers; provided, however, that if (i) in the -------- ------- reasonable opinion of such Indemnitee, an actual or potential material conflict of interest exists where it is advisable for such Indemnitee to be represented by separate counsel or (ii) such Indemnitee has been indicted or otherwise charged in a criminal complaint and such Indemnitee informs the Lessee that such Indemnitee desires to be represented by separate counsel, the reasonable fees and expenses of such separate counsel will be borne by the Lessee. Nothing in this Section 6(c) shall be deemed to require an Indemnitee to contest any claim or to assume responsibility for or control of any judicial proceeding with respect thereto. (d) Adjustment of Stipulated Loss Value and Termination Value. If --------------------------------------------------------- any amount is paid by the Lessee to the Owner Participant pursuant to the Indemnity Agreement, the percentages for Stipulated Loss Value and Termination Value set forth in Exhibit B to the Lease and Schedule 1 to the Indemnity Agreement shall be recomputed in the manner set forth in Section 3(e) of the Lease. (e) Survival of Indemnities. The representations, warranties, ----------------------- indemnities and agreements of each of the parties provided for in this Agreement, and each party's obligations under any and all thereof, shall survive the payment of the commitments by the Owner Participant, the Original Loan Participant, the Interim Refinancing Loan Participant, and the refinancing of the Interim Refinancing Loan Certificate on the Refunding Date, the return of the Aircraft and the expiration or other termination of this Agreement, the Trust Agreement, the Indenture and the Lease but, as to such indemnities, only with respect to losses, liabilities, obligations, damages, penalties, claims, actions, suits, costs, expenses and disbursements caused by events occurring or existing prior to or incurred in the process of or simultaneous with (i) the return or disposition of the Aircraft under Section 5 or Section 15 of the Lease, or (ii) the termination of the Lease or the Indenture or, if later, the return of the Aircraft. (f) Effect of Other Indemnities. The Lessee's obligations under the ---------------------------- indemnities provided for in this Agreement shall be those of a primary obligor whether or not the person indemnified shall also be indemnified with respect to the same matter under the terms of this Agreement, the Lease, the Indenture, the Trust Agreement, or any other document or instrument, and the person seeking indemnification from the Lessee pursuant to any provision of this Agreement may proceed directly against the Lessee without first seeking to enforce any other right of indemnification. Upon the payment in full by the Lessee of any indemnity provided for under this Agreement, the Lessee -43- shall be, to the extent permitted by law, subrogated to any right of the person indemnified, other than with respect to any of such Indemnitee's insurance policies or in connection with any indemnity claim the person indemnified may have against the Owner Participant or the Lessor, in respect of the matter as to which such indemnity was paid. (g) Interest. The Lessee will pay to each Indemnitee on demand, to --------- the extent permitted by applicable law, interest on any amount of indemnity not paid when due pursuant to this Section 6 until the same shall be paid, at the Past Due Rate. (h) Continuing Obligations. Notwithstanding anything contained ----------------------- herein or in any other Operative Document to the contrary, Lessor and the Owner Participant shall retain any and all of their respective rights, and Lessee shall continue to be fully responsible for all of its obligations, arising out of or otherwise relating to any claims under any of the Original Documents which are based upon any breach by Lessee prior to or on the Refunding Date (whether or not such breach is known as of such Date) of any representation, warranty or covenant of Lessee contained in any of the Original Documents. Section 7. Representations, Warranties and Covenants. (a) The Owner ------------------------------------------ Participant represents and warrants that neither it nor anyone it has authorized to act on its behalf has directly or indirectly offered any Certificate or Certificates or any interest in and to the Indenture Estate or the Trust Estate or any similar securities relating to the Aircraft for sale to, or solicited any offer to acquire any of the same from, anyone. The Owner Participant represents and warrants that its interest in and to the Trust Estate and the Trust Agreement was acquired for its own account and was purchased and is presently held for investment and not with a present view to any resale or distribution thereof. The Owner Participant is not hereby deemed to have made any representation that it will not at any time in the future resell or transfer such interest. (b) The Owner Trustee, in its individual capacity with respect to clauses (i) through (xi) below and not in its individual capacity but solely as Owner Trustee with respect to clause (xii) below, represents and warrants as of the date hereof (except as otherwise provided) and as of the Refunding Date that: (i) neither the Owner Trustee (in its individual capacity and/or as Owner Trustee) nor anyone it has authorized to act on its behalf has directly or indirectly offered any Certificate or Pass Through Certificates or any interest in and to the Indenture Estate or the Trust Estate or any similar securities relating to the Aircraft for sale to, or solicited any offer to acquire any of the same from, anyone; -44- (ii) its chief executive office (as that term is used in Article 9 of the Uniform Commercial Code) is located at 1100 North Market Street, Rodney Square North, Wilmington, Delaware, 19890-0001 and that it will give the parties hereto at least 30 days' prior written notice of any change of the location of such office; (iii) no Lessor's Lien on any part of the Trust Estate or any part of the Indenture Estate exists which was created, granted or assumed by the Owner Trustee in its individual capacity or which resulted from claims against the Owner Trustee in its individual capacity not related to the transactions contemplated by the Operative Documents; (iv) on the Delivery Date the Owner Trustee received whatever title to the Aircraft that was conveyed to it by the Lessee, and to its knowledge, the Owner Trustee has whatever title to the Aircraft that was conveyed to it by the Lessee (it being understood that the Owner Trustee shall not be deemed to have any such knowledge in the absence of actual knowledge by one of its Responsible Officers); (v) it is a banking corporation duly organized and validly existing in good standing under the laws of the State of Delaware and has the corporate power and authority to carry on its present business and operations and to enter into and perform its obligations under this Agreement, the Trust Agreement, the Indenture, the Lease and the Certificates (the "Financing Documents"); (vi) assuming the due authorization, execution and delivery of the Trust Agreement by the Owner Participant, each of the Financing Documents has been duly authorized by all necessary corporate action on its part, and neither the execution and delivery thereof by the Owner Trustee either in its individual capacity or as Owner Trustee nor its performance of any of the terms and provisions thereof will require shareholder approval or the approval or consent of any trustee or holder of any indebtedness or obligation of the Owner Trustee in its individual capacity or violate any Federal or State of Delaware law, rule or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its charter or by-laws or any judgment or order binding on it or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected or contravene any judgment or order applicable or binding on it; -45- (vii) assuming that the Trust Agreement will, on the Refunding Date, constitute the legal, valid and binding obligation of the Owner Participant, the Trust Agreement will, on the Refunding Date, constitute the legal, valid and binding obligation of the Owner Trustee in its individual capacity, enforceable in accordance with its terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws or equitable principles affecting creditors' rights generally from time to time in effect; with respect to each of the other Financing Documents, to the best of its knowledge in reliance upon the advice of its counsel, it has no reason to believe (assuming due authorization, execution and delivery of each of such other Financing Documents by each of the parties thereto other than the Owner Trustee (in its individual capacity and/or as Owner Trustee, as the case may be) and that such other Financing Documents will, on the Refunding Date, constitute the valid and legally binding obligations of each of the parties thereto other than the Owner Trustee) that each such other Financing Document will not, on the Refunding Date, constitute a valid and legally binding obligation of the Owner Trustee (in its individual capacity and/or as Owner Trustee, as the case may be), enforceable against the Owner Trustee (in its individual capacity and/or as Owner Trustee, as the case may be) in accordance with its terms; (viii) there are no pending or, to the knowledge of the Owner Trustee, threatened actions or proceedings against the Owner Trustee (in its individual capacity and/or as Owner Trustee, as the case may be) before any court, administrative agency or tribunal which, if determined adversely to the Owner Trustee (in its individual capacity and/or as Owner Trustee, as the case may be), would materially adversely affect the ability of the Owner Trustee, individually or as Owner Trustee, as the case may be, to perform its obligations under any of the Financing Documents to which it is a party. The Owner Trustee has no actual knowledge of any pending or threatened actions or proceedings before any court, administrative agency or tribunal involving it in its capacity as Owner Trustee; (ix) no consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any governmental authority or agency of the State of Delaware or any Federal governmental authority or agency of the United States of America regulating the banking or trust powers of the Owner Trustee, in its individual capacity is required for the execution and delivery of, or the carrying out by, the Owner Trustee in its -46- individual capacity or as Owner Trustee, as the case may be, of any of the transactions contemplated hereby or by the Trust Agreement or of any of the other Financing Documents, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken and is in full force and effect; (x) there are no Lessor's Liens which constitute a Lien against any or all of the Trust Estate or the Indenture Estate; (xi) its representations and warranties set forth in Section 7 of the Original Participation Agreement were correct on and as of the Delivery Date (except to the extent that such representations expressly relate solely to a specified earlier date, in which case such representations and warranties were correct on and as of such earlier date); and (xii) the Owner Trustee has whatever title to the Aircraft that was conveyed to it by the Lessee. (c) The Owner Participant represents and warrants that as of the Refunding Date: (i) it is a Citizen of the United States; (ii) it is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the requisite power and authority to enter into this Agreement, the Trust Agreement, the Indemnity Agreement and each document ancillary thereto executed by the Owner Participant and delivered on or prior to the Refunding Date (collectively, the "Owner Participant Documents") and to carry out the transactions contemplated hereby and thereby; (iii) it has duly authorized, executed and delivered the Owner Participant Documents and, assuming due execution of such documents by the other parties thereto, each of the Owner Participant Documents constitutes a legal, valid and binding obligation of the Owner Participant, enforceable against the Owner Participant in accordance with its terms except as such enforceability may be limited by general equitable principles and by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally from time to time in effect and assuming with respect to ERISA, the truth of the representations and warranties made by the Lessee in Sections 6(a)(xix) and 6(a)(xx) and by the Original Loan Participant in Section 7(e) of the Original -47- Participation Agreement, and assuming compliance with Section 10.06 of the Indenture and Section 6.06 of the Pass Through Agreement; (iv) the execution, delivery and performance by the Owner Participant of the Owner Participant Documents are not in violation of its incorporation documents or by-laws or any indenture, mortgage, bank credit agreement, note or bond purchase agreement, long-term lease, license or other agreement or instrument to which it is a party or by which it is bound or order or judgment binding upon it or, assuming the truth of the representations and warranties made by the Lessee in Sections 6(a)(xix) and 6(a)(xx) and by the Original Loan Participant and the Interim Refinancing Loan Participant in Section 7(e) of the Original Participation Agreement, and assuming compliance with Section 10.06 of the Indenture and Section 6.06 of the Pass Through Agreement, of any law or governmental rule or regulation applicable to the Owner Participant; (v) neither the execution and delivery by the Owner Participant of any of the Owner Participant Documents nor the consummation by the Owner Participant of any of the transactions contemplated thereby require the Owner Participant to obtain the consent or approval of, give notice to, or register with, or take any other action with respect to, any state or federal agency or authority except such consents as have been obtained; (vi) there are no Owner Participant's Liens with respect to any or all of the Trust Estate or the Indenture Estate; (vii) the performance by the Owner Participant of its obligations under the Owner Participant Documents will not subject the Trust Estate to any Owner Participant's Liens; and (viii) the representations and warranties of the Owner Participant set forth in Section 7 of the Original Participation Agreement were correct on and as of the Delivery Date (except to the extent that such representations expressly relate solely to a specified earlier date, in which case such representations and warranties were correct on and as of such earlier date). Notwithstanding the foregoing, except as to matters concerning its citizenship, the Owner Participant makes no representation or warranty with respect to laws, rules or regulations relating to aviation (including the Act) or the nature or condition of the equipment purchased by the Owner Trustee pursuant to the Original Participation Agreement. -48- (d) Notwithstanding any other provision of this Agreement or any other Operative Document, each of the Owner Trustee in its individual capacity, and the Indenture Trustee in its individual capacity, represents and warrants that for purposes of Section 101(16) of the Act it is a Citizen of the United States without making use of any voting trust or voting powers agreement. (e) The Indenture Trustee, in its individual capacity, epresents and warrants that as of the Refunding Date: (i) no Indenture Trustee's Lien on any part of the Indenture Estate exists; (ii) it is a validly existing banking corporation duly organized under the laws of the State of New York and has the corporate power and authority to enter into and perform its obligations under the Indenture and this Agreement and to authenticate and deliver the Certificates to be delivered on the Refunding Date; (iii) this Agreement, the Indenture, and the authentication of the Certificates to be delivered on the Refunding Date have been duly authorized by all necessary corporate action on its part, and neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will violate any Federal or state law or regulation relating to its banking or trust powers or contravene or result in any breach of, or constitute any default under its certificate of incorporation, or by-laws or the provisions of any indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected or any judgment or order binding upon it; (iv) each of this Agreement and the Indenture has been duly executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is the legal, valid and binding obligation of the Indenture Trustee enforceable against the Indenture Trustee in accordance with its terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws or equitable principles affecting creditors' rights generally from time to time in effect; (v) neither the execution and delivery of this Agreement and the Indenture, nor the authentication of the Certificates to be delivered on the Refunding Date, nor the consummation by the Indenture Trustee of any of the transactions contemplated hereby or thereby require the Indenture Trustee to obtain the consent or approval of, give notice to, or register with, or take any other action with respect to, any state or Federal agency or authority governing the banking and trust powers of the Indenture -49- Trustee, in its individual capacity or as Indenture Trustee except such consents as have been obtained; and (vi) the representations and warranties of the Original Indenture Trustee set forth in Section 7 of the Original Participation Agreement were correct on and as of the Delivery Date (except to the extent that such representations expressly relate solely to a specified earlier date, in which case such representations and warranties were correct on and as of such earlier date). (f) The Interim Refinancing Loan Participant represents and warrants as of the date hereof (except as otherwise provided) and as of the Refunding Date that the representations and warranties of the Interim Refinancing Loan Participant set forth in Section 7 of the Original Participation Agreement were correct on and as of the "Interim Refunding Date" (as defined in the First Amendment to Participation Agreement) (except to the extent such representations expressly relate solely to a specified earlier date, in which case such representations and warranties were correct on and as of such earlier date). (g) The Pass Through Trustee, in its individual capacity (except for clause (iii) hereof) represents and warrants as of the date hereof (except as otherwise provided), as of the Pass Through Closing Date and as of the Refunding Date that: (i) it is a validly existing banking corporation duly organized under the laws of the State of New York and has the corporate power and authority to enter into and perform its obligations under the Pass Through Agreement, each Series Supplement and this Agreement and to execute and authenticate the Pass Through Certificates to be delivered on the Pass Through Closing Date; (ii) the execution, delivery and performance of this Agreement, the Pass Through Agreement and each Series Supplement and the performance of its obligations thereunder (including the execution and authentication of the Pass Through Certificates to be delivered on the Pass Through Closing Date) have been duly authorized by all necessary corporate action on its part, and, subject to (A) the registration of the issuance and sale of the Pass Through Certificates under the Securities Act, (B) compliance with any applicable state securities laws and (C) the qualification of the Pass Through Agreement under the Trust Indenture Act, neither the execution and delivery thereof nor its performance of any of the terms and provisions thereof will (x) violate any Federal or state law or regulation relating to its banking or trust powers or contravene or result in any breach of, (y) constitute any default under its certificate of incorporation, or by-laws or the provisions of any -50- indenture, mortgage, contract or other agreement to which it is a party or by which it or its properties may be bound or affected, or (z) require the Pass Through Trustee to obtain the consent or approval of, give notice to, or register with, or take any other action with respect to, any state or federal agency or authority; (iii) each of this Agreement and the Pass Through Agreement has been, and as of the Pass Through Closing Date each of the Series Supplements will be, duly executed and delivered by it and, assuming that each such agreement is the legal, valid and binding obligation of each other party thereto, is or will be, as the case may be, the legal, valid and binding obligation of the Pass Through Trustee, enforceable in accordance with its terms except as limited by bankruptcy, insolvency, moratorium, reorganization, receivership, fraudulent conveyance or other similar laws or equitable principles of general application to or affecting the enforcement of creditors' rights and remedies generally from time to time in effect, regardless- of whether such enforceability is considered in a proceeding at equity or at law; (iv) the performance by the Pass Through Trustee of its obligations under this agreement and the Pass Through Agreement will not subject any part of the Trust Estate or the Indenture Estate to any Lien (other than the Liens created by the Lease and the Indenture) under any indenture, mortgage, contract or other instrument to which it is a party or by which it is bound; and (v) there are no pending or, to the knowledge of the Pass Through Trustee, threatened actions or proceedings against the Pass Through Trustee before any court, administrative agency or tribunal which, if determined adversely to the Pass Through Trustee, would materially adversely affect the ability of the Pass Through Trustee to perform its obligations under any of the Operative Documents to which it is or will be party, and the Pass Through Trustee has no actual knowledge of any pending or threatened actions or proceedings before any court, administrative agency or tribunal involving it in its capacity as Pass Through Trustee. (h) The Owner Trustee, in its individual capacity, at its own cost and expense (and at no after-tax cost to the Indenture Trustee, the Pass Through Trustee, the Owner Trustee, the Owner Participant, any Holder, any Pass Through Trust, the Trust Estate, the Indenture Estate and the Lessee), covenants that it will in its individual capacity promptly take such action as may be necessary to discharge duly any Lessor's Liens attributable -51- to it in its individual capacity and will personally hold harmless and indemnify each Holder, the Pass Through Trustee, the Lessee, the Owner Participant, the Indenture Trustee, the Trust Estate, the Indenture Estate, the Pass Through Trusts and their respective successors, assigns, servants, representatives and agents against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements, including fees and expenses, of whatsoever kind and nature and against any reduction in the amount payable out of the Trust Estate, the Indenture Estate, or the Pass Through Trusts and against any interference with the possession, operation, or other use of the Aircraft, Airframe, any Engine or any Part, imposed on, incurred by or asserted against any of the foregoing as a consequence of any such Lessor's Lien. The Owner Trustee, in its trust capacity, and at the cost and expense of the Lessee, covenants that it will, in its trust capacity, promptly take such action as may be necessary to discharge duly any Lessor's Liens attributable to it in its trust capacity. The Indenture Trustee, in its individual capacity, at its own cost and expense (and at no after-tax cost to the Indenture Trustee, the Pass Through Trustee, Owner Trustee, Owner Participant, any Holder, the Trust Estate, the Indenture Estate, any Pass Through Trust or the Lessee), covenants that it will in its individual capacity promptly take such action as may be necessary to discharge duly any Indenture Trustee's Liens and will personally hold harmless and indemnify each Holder, the Pass Through Trustee, the Lessee, the Owner Participant, the Owner Trustee, the Trust Estate, the Indenture Estate, the Pass Through Trusts and their respective successors, assigns, servants, representatives and agents against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements, including fees and expenses, of whatsoever kind and nature and against any reduction in the amount payable out of the Trust Estate, the Indenture Estate, the Pass Through Trusts and against any interference with the possession, operation, or other use of the Aircraft, Airframe, any Engine or any Part, imposed on, incurred by or asserted against any of the foregoing as a consequence of any such Indenture Trustee's Lien. (i) The Owner Trustee covenants that it will neither incur any indebtedness for money borrowed nor enter into any business or other activity except as contemplated by the Operative Documents. (j) If (i) all or any part of the Trust Estate becomes the property of a debtor subject to the reorganization provisions of the Bankruptcy Code, (ii) pursuant to such reorganization provisions, including Section 1111(b) of the Bankruptcy Code, the Owner Participant is required, by reason of the Owner Trustee in its individual capacity or the Owner Participant being held to have recourse liability to the Indenture Trustee or any Holder (other than as contemplated by the Operative Documents), directly or indirectly, to make payment on account of any amount payable as principal, premium, interest or other amounts on the Certificates, -52- and (iii) the Indenture Trustee actually receives any Excess Amount, as defined below, which reflects any payment by the Owner Participant on account of clause (ii) above, then the Indenture Trustee, to the extent permitted by applicable law, shall promptly refund to the Owner Participant such Excess Amount. The Indenture Trustee hereby waives to the fullest extent permitted by law the benefit of the provisions of Section 1111(b) of the Bankruptcy Code with respect to recourse against the Owner Trustee in its individual capacity and the Owner Participant on account of any amounts payable as principal premium, interest or other amounts pursuant to the Certificates. For purposes of this Section 7(j), "Excess Amount" means the amount by which such payment exceeds the amount which would have been received by the Indenture Trustee if the Owner Trustee, in its individual capacity, or the Owner Participant had not become subject to the recourse liability referred to in clause (ii) above. Nothing contained in this Section 7(j) shall prevent the Indenture Trustee from enforcing any personal recourse obligation (and retaining the proceeds thereof) of the Owner Participant under this Participation Agreement or the Indenture or the Trust Agreement (and any exhibits or annexes thereto) or from retaining any amount paid by the Owner Participant under Sections 5.01, 8.02 and 8.03 of the Indenture. Nothing contained herein shall be construed as requiring any Holder or holder of a Pass Through Certificate to refund any amount distributed to it pursuant to the Indenture or the Pass Through Agreement, respectively. (k) The representations and warranties set forth in this Section 7 shall survive the Closings hereunder. Section 8. Other Documents. (a) The Lessee hereby consents in all ---------------- respects to the execution and delivery of the Trust Agreement and the Indenture and to all of the terms thereof, and the Lessee acknowledges receipt of an executed counterpart of the Trust Agreement and the Indenture; it being agreed that such consent shall not be construed to require the Lessee's consent to any future supplement to, or amendment, waiver or modification of the terms of, the Trust Agreement, the Indenture, the Pass Through Certificates or the Certificates, except that none of the provisions of Articles I and VII, Sections 2.04, 3.03, 3.05, 3.07, 3.09, 5.08, 5.09, 9.08, 9.09, 9.10, 10.06, 13.01, 13.06, and 15.05 and Exhibit B of the Indenture shall be amended or modified without the consent of the Lessee and except, in the case of the Trust Agreement, in accordance with Section 11.01 of the Trust Agreement. (b) The Owner Participant hereby consents in all respects to all the terms of the Lease as entered into on the Refunding Date by the Owner Trustee pursuant to Section 2.01 of the Trust Agreement. The Lessee hereby confirms to the Owner Participant as of the Refunding Date its covenants set forth in and obligations under the Lease. The Lessee agrees, for the benefit of the parties hereto, to perform its obligations under the Pass Through Agreement. -53- (c) Each of the Owner Participant and the Owner Trustee hereby agrees with the Lessee and, so long as the Lien of the Indenture shall be in effect, agrees with the Indenture Trustee and the Pass Through Trustee (i) not to terminate or revoke the trust created by the Trust Agreement (the "Trust") or to terminate any other Operative Document in violation of the terms thereof and (ii) not to amend, supplement or otherwise modify any provision of (A) Article IX or X of the Trust Agreement or (B) any other provision of the Trust Agreement in such a manner as to adversely affect the rights of such party, without the prior written consent of such party. Nothing in the next preceding sentence shall impair any right under the Trust Agreement of the Owner Trustee in its individual capacity to resign as Owner Trustee or the Owner Participant's rights arising from Article VII of the Indenture. The provisions of Sections 5.01, 11.01, 12.01, 12.03 and 12.04 of the Trust Agreement are incorporated herein, as if fully set forth herein. (d) The Owner Trustee or any successor may resign or be removed by the Owner Participant, a successor Owner Trustee may be appointed, and a corporation may become the Owner Trustee under the Trust Agreement, only in accordance with the provisions of Article X of the Trust Agreement. So long as no Event of Default shall be continuing, no successor Owner Trustee shall be appointed unless the Owner Participant shall in good faith have consulted with the Lessee as to such appointment. The Owner Participant agrees to appoint as promptly as Practicable a successor Owner Trustee if the Owner Participant shall have knowledge that the Owner Trustee is not in compliance with its covenants herein. (e) Notwithstanding the fact that this Agreement, the Lease, the Indenture, the Indemnity Agreement and the Trust Agreement are dated as of March 1, 1996, such documents are effective on the Refunding Date and each amend and restate the respective original agreements with no intention of retroactive application. Such original agreements have been restated for the convenience of the parties and such amendments and restatements are not intended to waive or modify the obligations or liabilities of any party which accrued or were to have been performed on or prior to the Refunding Date under such unamended agreements or to deprive any party of its rights and remedies in respect thereof. (f) The Lessee and the Pass Through Trustee hereby agree that Section 11.08 of the Pass Through Agreement (to the extent relating to the Certificates) shall not be amended without the prior written consent of the Owner Participant, which consent shall not be unreasonably withheld. (g) The Pass Through Trustee hereby agrees that, except as otherwise required by applicable law (including, without limitation, any law which requires the Pass Through Trustee to act within its own discretion), if requested to do so by the Owner Trustee or the Owner Participant, the Pass Through Trustee shall, at the expense of the Owner Participant, request a direction, -54- consent or waiver from the relevant Certificateholders (as defined in the Pass Through Agreement) to determine whether action already taken by the Pass Through Trustee should be rescinded, or action not yet taken by the Pass Through Trustee should be taken, pursuant to the Operative Documents. The Pass Through Trustee shall be under no obligation to request such direction, consent or waiver pursuant to this paragraph (g) at the request of the Owner Trustee or Owner Participant unless the Owner Trustee or the Owner Participant, as the case may be, shall have offered to the Pass Through Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by the Pass Through Trustee in connection with the Pass Through Trustee making such request pursuant to this paragraph (g); provided however, that such requests of the Owner Participant shall be at no cost to the Owner Participant if such direction, consent or waiver is otherwise required by the Operative Documents. Section 9. Benefits of Certain Obligations. Sections 3(d) and 23 and -------------------------------- the final paragraph of Section 3(a) of the Lease (as the same may be amended from time to time in accordance with the applicable provisions of the Lease and the Indenture) are hereby incorporated herein by reference for the express benefit of the Indenture Trustee, the Holders and the Pass Through Trustee. Section 15.05 of the Indenture (as the same may be amended from time to time in accordance with the applicable provisions of the Indenture and this Agreement) is hereby incorporated herein by reference for the express benefit of the Lessee. Section 10. Intentionally Left Blank. ------------------------- Section 11. Liabilities of the Owner Participant and the Indenture ------------------------------------------------------ Trustee. The Owner Participant shall have no obligation or duty to the Lessee, - ------- to the Original Loan Participant, to the Interim Refinancing Loan Participant, to the Owner Trustee, to the Pass Through Trustee, to the Indenture Trustee or to others with respect to the transactions contemplated hereby, except those obligations or duties of the Owner Participant expressly set forth in this Agreement and the Trust Agreement and the Owner Participant shall not be liable for performance by any other party hereto of such other party's obligations or duties hereunder. Without limiting the generality of the foregoing, under no circumstances whatsoever shall the Owner Participant, as such, be liable to the Lessee nor shall the Owner Participant be liable to any Holder, to the Original Loan Participant, to the Interim Refinancing Loan Participant or to the Pass Through Trustee for any action or inaction on the part of the Owner Trustee or the Indenture Trustee in connection with the Indenture, the Trust Agreement, the Lease, the Aircraft, the administration of the Indenture Estate or the Trust Estate or otherwise, whether or not such action or inaction is caused by the negligence or willful misconduct of the Owner Trustee or the Indenture Trustee, unless, in the case of willful misconduct by the Owner Trustee, if such action or inaction is in accordance -55- with the express direction of the Owner Participant. The Indenture Trustee agrees that (i) obligations of the Owner Trustee under the Indenture or any other Operative Document and with respect to the Certificates shall be non- recourse to the Owner Participant and to the Owner Trustee in its individual capacity and (ii) it will look solely to the income and proceeds from the Trust Estate (which does not include Excepted Payments (as defined in the Indenture)) to the extent available for distribution to the Indenture Trustee or the relevant Holder as provided in the Indenture and that neither the Owner Participant nor the Owner Trustee in its individual capacity shall be personally liable to such Holder for any amounts payable by the Owner Trustee under the Indenture or any other Operative Document. The foregoing is not intended to limit any liability of the Owner Participant or the Owner Trustee in its individual capacity to the extent that such liability is expressly set forth in any of the Operative Documents. The Indenture Trustee is not personally liable to the Owner Participant or any Holder for any amounts payable under the Indenture or for any liability under the Indenture, except as provided therein. Section 12. Covenants of the Lessee. The Lessee covenants and agrees ------------------------ with the Owner Participant, the Indenture Trustee, the Pass Through Trustee and the Owner Trustee as follows (which agreements shall be performed at Lessee's cost and expense): (a) The Lessee will cause to be done, executed, acknowledged and delivered each and every further act, conveyance and assurance as the Owner Trustee, the Indenture Trustee, the Pass Through Trustee or the Owner Participant shall reasonably require for accomplishing the purposes of this Agreement, the Trust Agreement, the Indenture and the Lease. Lessee, except as otherwise provided in Section 19 hereof and Section 7 of the Lease, at all times will cause the Aircraft to remain duly registered under the Act in the name of the Owner Trustee, shall promptly take such action with respect to the recording, filing, rerecording and refiling of the Lease, the Trust Agreement and the Indenture and the supplements thereto as is necessary to maintain the interests and rights of the Owner Trustee in and to the Aircraft and under the Lease and the perfection of the security interests created by the Indenture and shall furnish to the Owner Participant or the Owner Trustee such information (other than with respect to the citizenship of the Owner Participant and the Owner Trustee) as may be required to enable the Owner Participant or the Owner Trustee to make application for such registration under the Act, and shall promptly furnish to the Owner Participant or the Owner Trustee such information (other than with respect to the citizenship of Owner Participant and the Owner Trustee) as may be required to enable the Owner Participant or the Owner Trustee timely to file any reports required to be filed by it as the Lessor under the Lease (or, in the case of the Owner Participant, -56- as the beneficiary of the Trust Estate) with any governmental authority because of the Owner Trustee's ownership of the Aircraft or the Owner Participant's interest in the Trust Estate. (b) The Lessee will cause the Lease, the Trust Agreement, the Indenture and the Trust Indenture and Trust Agreement Supplement to be promptly filed and recorded or filed for recording, to the extent permitted under the Act, or required under any other applicable law. The Lessee shall provide photocopies of file stamped copies of documents filed and recorded with the FAA upon request of any party hereto. (c) The Lessee shall at all times maintain its corporate existence except as permitted by Section 12(d) hereof. The Lessee will do or cause to be done all things necessary to preserve and keep in full force and effect its rights (charter and statutory) and franchises; provided, however, that the -------- ------- Lessee shall not be required to preserve any right or franchise if the Lessee shall reasonably determine that the loss thereof will not adversely affect the rights of the Owner Participant or the Holders, or the Lessee's ability to perform its obligations under the Operative Documents. The Lessee shall at all times remain an "air carrier" within the meaning of the Act operating under a certificate of public convenience and necessity issued pursuant to Section 401 thereof and shall at all times be otherwise certified and registered to the extent necessary to fall within the purview of and to provide to Lessor (and to the Indenture Trustee as assignee of Lessor's rights under the Lease) the benefits contemplated by Section 1110 of the Bankruptcy Code or any successor provisions thereto. (d) The Lessee shall not (i) consolidate with or merge into any other corporation under circumstances in which the Lessee is not the surviving corporation or (ii) convey, transfer or lease substantially all of its assets as an entirety to any Person (which term, for the purposes of this Section 12(d), means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof), unless: (i) the corporation formed by such consolidation or into which the Lessee is merged or the Person which acquired by conveyance, transfer or lease substantially all of the assets of the Lessee as an entirety shall be a Citizen of the United States, an "air carrier" within the meaning of the Act operating under a certificate issued under Section 401 of the Act and a corporation organized and existing under the laws of the United States of America or any State or the District of Columbia, and shall execute and deliver to the Owner Trustee, the Pass Through Trustee and the Indenture Trustee an agreement reasonably satisfactory in form and substance to the Owner Trustee, the -57- Indenture Trustee, the Pass Through Trustee and the Owner Participant containing an effective assumption by such successor corporation of the due and punctual performance and observance of each covenant and condition of this Agreement, the Lease, the Purchase Agreement, the Purchase Agreement Assignment, the Indemnity Agreement and each other Operative Document to which the Lessee is a party to be performed or observed by the Lessee (which agreement shall include an undertaking to cure as promptly as practicable any Event of Default or Default on the date of such merger, consolidation, conveyance, transfer or lease, as the case may be); (ii) immediately after giving effect to such transaction, no Event of Default shall have occurred and be continuing; (iii) the Lessee shall have delivered to the Owner Trustee, the Indenture Trustee, the Pass Through Trustee and the Owner Participant an opinion of Lessee's general counsel or other counsel satisfactory to the Owner Trustee, the Pass Through Trustee, the Owner Participant and the Indenture Trustee, and an officer's certificate, each stating that such consolidation, merger, conveyance, transfer or lease and the assumption agreement mentioned in clause (i) above comply with this Section 12(d) and that all conditions precedent relating to such transaction have been complied with and that such assumption agreement has been duly authorized, executed and delivered by, and constitutes a legal, valid and binding agreement of, such person enforceable against such person in accordance with its terms and that the succeeding entity is a Citizen of the United States and an "air carrier" within the meaning of the Act operating under a certificate issued under Section 401 of the Act; and (iv) the corporation formed by such consolidation or into which the Lessee is merged or the Person which acquired by conveyance, transfer or lease substantially all of the assets of the Lessee as an entirety, shall make such filings and recordings with the FAA pursuant to the Act or under the laws of any other jurisdiction in which the Aircraft may then be registered, as shall be necessary or reasonably desirable to evidence such consolidation, merger, conveyance, transfer or lease with or to such entity in order to protect the interests of the Owner Participant, the Holders, the Owner Trustee and the Indenture Trustee in the Aircraft, the Trust Estate and the Indenture Estate. -58- Upon any consolidation or merger, or any conveyance, transfer or lease of all or substantially all the assets of the Lessee as an entirety in accordance with this Section 12(d), the successor corporation formed by such consolidation or the person into which the Lessee is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Lessee under this Agreement with the same effect as if such successor corporation or such person, as the case may be, had been named as the Lessee herein. No such conveyance, transfer or lease of all or substantially all of the assets of the Lessee as an entirety shall have the effect of releasing the Lessee or any successor corporation which shall theretofore have become such in the manner prescribed in this Section 12(d) from its liability hereunder or under the Operative Documents. Nothing contained herein shall permit any lease, sublease or other arrangement for the use, operation or possession of the Aircraft except in compliance with the applicable provisions of the Lease. (e) The Lessee also agrees to furnish following the date of this Agreement to the Owner Trustee, the Owner Participant, the Pass Through Trustee and the Indenture Trustee (i) within two months after the end of the first, second and third quarterly accounting periods in each fiscal year of the Lessee, a consolidated balance sheet of the Lessee and its consolidated subsidiaries prepared by it as of the close of the accounting period then ended, together with the related consolidated statements of income, common stockholders' equity and cash flows for the quarter then ended and reinvested earnings for such accounting period certified by the chief accounting officer or a financial vice president of the Lessee, (ii) within three months after the close of each fiscal year of the Lessee, a consolidated balance sheet of the Lessee as of the close of such fiscal year and the related consolidated statements of income, common stockholders' equity and cash flows and reinvested earnings for the fiscal year then ended as prepared and certified by independent certified public accountants, including their opinion, (iii) promptly upon transmission thereof, copies of all regular and periodic reports furnished by the Lessee to its stockholders, (iv) promptly after filing with the SEC, copies of the Lessee's annual reports on Form 10-K (including all corresponding annual reports to shareholders), quarterly reports on Form 10-Q and current reports on Form 8-K, including any amendments of such reports, (v) immediate telephonic advice after the Lessee obtains knowledge that there exists an Event of Default, confirmed promptly by an officer's certificate describing such default in reasonable detail, with a statement of the Lessee's action with respect thereto taken or proposed to be taken and (vi) from time to time such other information as the Owner Trustee, the Pass Through Trustee, the Indenture Trustee or the Owner Participant may reasonably request. The Lessee's obligations pursuant to clauses (i) and (ii) of the foregoing sentence any may be satisfied by furnishing to the Owner Trustee, the Owner Participant, the Pass Through Trustee and the Indenture Trustee -59- the reports on Forms 10-K and 10-Q in accordance with clause (iv) of the foregoing sentence. On or before March 31 of each calendar year commencing in 1997, the Lessee shall deliver to the Owner Trustee and the Indenture Trustee a certificate of the Lessee, signed by a Responsible Officer of the Lessee (and the Lessee shall at the time furnish a copy thereof to the Owner Participant and the Pass Through Trustee), to the effect that the signer is familiar with or has reviewed the relevant terms of this Agreement and the Lease and has made, or caused to be made under his supervision, a review of the transactions and condition of the Lessee during the preceding calendar year, and that such review has not disclosed the existence during such calendar year, nor does the signer have knowledge of the existence as at the date of such certificate, of any condition or event which constitutes an Event of Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action the Lessee has taken or is taking or proposes to take with respect thereto. Section 13. Owner for All Purposes. It is hereby acknowledged by the ----------------------- Lessee that the Owner Trustee is the owner of the Aircraft and the Lessee will be the lessee thereof for all purposes; provided, however, that all parties -------- ------- acknowledge (but do not represent) that the Owner Participant is the owner of the Aircraft for income tax purposes. Section 14. Expenses. (a) If the refunding contemplated to occur --------- on the Refunding Date shall be consummated, the Owner Participant shall pay promptly all fees and expenses of the following persons relating to the public offering of the Pass Through Certificates contemplated by the Underwriting Agreement and related to the transactions contemplated hereby: (i) the fees and expenses of counsel for the Owner Participant; (ii) the fees and expenses of counsel for the Owner Trustee, the Indenture Trustee, the Pass Through Trustee, the Interim Refinancing Loan Participant and the Underwriters (other than those fees, expenses and disbursements payable by the Underwriters pursuant to the Underwriting Agreement); (iii) the fees and expenses of Daugherty, Fowler & Peregrin; (iv) any initial fees of the Owner Trustee, the Pass Through Trustee and the Indenture Trustee; (v) any compensation, commissions and discounts payable to the Underwriters pursuant to the Underwriting Agreement; (vi) the fees of American Bank Note Company, if any; (vii) the fees and expenses incurred in connection with printing any amendment to the Registration Statement on Form S-3 bearing Registration No. 33-50175 and printing any Preliminary Prospectus or Prospectus (as such terms are defined in the Underwriting Agreement) for the offering of the Pass Through Certificates; (viii) the fees and expenses of Arthur Andersen & Co.; and (ix) the fees and expenses of Moody's Investors Service, Inc. and Standard & Poor's Corporation. -60- The Owner Participant, the Owner Trustee and the Lessee acknowledge that the percentages for Basic Rent, Stipulated Loss Value, Termination Value and the calculation of the EBO Percentage, set forth in the Lease, have been prepared assuming the aggregate amount payable by the Owner Participant pursuant to the preceding paragraph, Section 14 of the Original Participation Agreement and Section 10 of the First Amendment to Participation Agreement is $___________ (the "Estimated Expense Amount"). If the amount of the expenses paid by the Owner Participant is less than the Estimated Expense Amount, the Owner Participant shall pay all costs, fees and expenses of the Owner Trustee in connection with the administration of the Trust Estate until such time as the amount paid by the Owner Participant pursuant to the preceding paragraph and the costs, fees and expenses of the Owner Trustee paid by the Owner Participant equals the Estimated Expense Amount. If the amount of the expenses is greater than the Estimated Expense Amount, the excess shall be paid by the Lessee on behalf of the Owner Participant as Supplemental Rent on an after-tax basis. Notwithstanding the provisions of the first paragraph of this Section 14(a), the Lessee agrees to pay as Supplemental Rent all reasonable costs, fees and expenses of the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee, including, without limitation, the item enumerated in the first paragraph of this Section 14(a), if the transactions contemplated hereby fail to close for any reason; provided, however, that if such failure to close is solely caused by the wrongful failure of the Owner Participant to close, after satisfaction of the conditions precedent set forth herein to participation in the transactions contemplated hereby, the Lessee shall have no obligation to the Owner Participant to cover the expenses incurred by the Owner Participant (including the fees of Dewey Ballantine, special counsel to the Owner Participant), it being understood that nothing hereunder shall affect the Lessee's right to initiate an action at law to recover damages from the Owner Participant with respect to all amounts paid by the Lessee pursuant to the first paragraph of this Section 14(a). The Owner Participant shall pay, to the extent it has not already done so, all amounts payable by it pursuant to Section 14(a) of the Original Participation Agreement and Section 10 of the First Amendment to Participation Agreement. (b) The Lessee shall pay: (i) subject to Section 14(a) hereof, all its own costs, fees and expenses in connection with the transactions contemplated hereby and by the Original Participation Agreement and the First Amendment to Participation Agreement, including, but not limited to, the fees, expenses and disbursements of King & Spalding, special counsel for the Lessee; -61- (ii) subject to the second sentence of the second paragraph of Section 14(a), as Supplemental Rent all reasonable out-of-pocket costs, fees and expenses of the Owner Trustee, the Pass Through Trustee, FSC and of the Indenture Trustee (other than the initial fees, expenses and disbursements referred to in the first paragraph of Section 14(a) hereof and Section 14(a) (iii) of the Original Participation Agreement) in connection with the administration of the Indenture Estate, the Trust Estate, the Pass Through Trusts or the activities of FSC; (iii) to the extent not already paid, as Supplemental Rent, all reasonable out-of-pocket costs, fees and expenses of the parties hereto (or their predecessors in interest) incurred in connection with the attempt in September/October 1994 to refund amounts payable by the Owner Trustee to the Original Loan Participant; and (iv) as Supplemental Rent, on an after-tax basis (except that the Owner Participant shall not be entitled, pursuant to this Agreement, to be reimbursed for the tax cost of any such payment of Supplemental Rent to the extent provision for such reimbursement is made in the Indemnity Agreement), all reasonable costs, fees and expenses of the Owner Participant, the Owner Trustee, the Pass Through Trustee and the Indenture Trustee in connection with any supplements, amendments, modifications or consents to, or waivers of, any of the Operative Documents entered into after the Refunding Date, unless such supplements, amendments, modifications, consents or waivers are initiated by a party other than the Lessee and are not required or necessary to effectuate the intent of any provisions of the Operative Documents. Section 15. Miscellaneous. (a) This Agreement may be executed in any -------------- number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement may be terminated, amended, supplemented, waived or modified only by an instrument in writing signed by all of the parties hereto. The terms of this Agreement shall be binding upon, and inure to the benefit of: (i) the Lessee and its successors and permitted assigns, except Lessee shall not assign its rights hereunder except to the extent permitted by Section 12(d); (ii) the Owner Trustee and its successors under the Trust Agreement; (iii) the Indenture Trustee and its successors under the Indenture; (iv) the Pass Through Trustee and any other Holders (to the extent provided herein); and (v) the Owner Participant and its successors and, subject to the provisions of Section 16 of this Agreement and Article IX of the Trust Agreement, assigns. -62- (b) Unless otherwise specifically provided herein, all notices required or permitted by the terms hereof or the other Operative Documents shall be in writing and shall be delivered personally, sent by overnight express, or mailed by first-class registered or certified mail, postage prepaid, or, if promptly confirmed by mail as provided above, dispatched by facsimile, (i) if to the Lessee, the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, to the respective addresses set forth opposite the names of such parties on Annex II to this Agreement, (ii) if to the Owner Participant, to the address set forth for such purpose in Annex II hereto, or (iii) if to any Holder, at its address set forth in the Register (as defined in the Indenture), or to such other address as any such party hereto or any such holder may designate by notice given to the parties hereto. The Indenture Trustee agrees that all payments to be made by it to the Owner Participant will be made in the manner specified by the Owner Participant as set forth in Schedule B to this Agreement or as otherwise directed in written notice from the Owner Participant. All notices delivered, mailed or dispatched pursuant to this Section 15(b) shall become effective when received. (c) THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS THEREOF. (d) Each of the Owner Trustee, the Indenture Trustee and the Pass Through Trustee is entering into this Agreement solely as trustee as provided in the Trust Agreement, the Indenture, the Pass Through Agreement and each Series Supplement and not in its individual capacity (except as otherwise expressly provided herein or therein) and in no case whatsoever shall any of them be liable in its individual capacity for any of the statements, representations, warranties, agreements or obligations of the Owner Trustee, the Pass Through Trustee or the Indenture Trustee, as the case may be, in its trust capacity hereunder, or for any loss in respect thereof, as to all of which the parties agree to look solely to the Trust Estate and the Indenture Estate; provided, -------- however, that (i) the Indenture Trustee in its individual capacity shall be - ------- liable hereunder for its own gross negligence or willful misconduct or for the inaccuracy or breach of its representations and warranties and agreements made in its individual capacity in Sections 7(d), 7(e) and 7(h) hereof, and (ii) the Owner Trustee in its individual capacity shall be liable hereunder (a) for its own willful misconduct or gross negligence, (b) for the inaccuracy of any representation or breach of any warranty or covenant, made in its individual capacity, set forth in any Operative Document, (c) for taxes, fees or other charges on, based on, or measured by, any fees, commissions or compensation received by the Owner Trustee in its individual capacity in connection with the transactions contemplated by any Operative Document, (d) for any failure to use ordinary care in receiving or disbursing funds or in connection with its obligation -63- to invest funds pursuant to Section 22 of this Agreement, Section 24 of the Lease, or Section 3.02 of the Trust Agreement, or (e) for any liability on the part of the Owner Trustee arising out of its negligence or willful or negligent misconduct in connection with its obligations under Sections 6.01, 6.06 or 10.02 of the Trust Agreement or Section 3.05(b)(iii) of the Indenture. The Indenture Trustee and the Owner Trustee, in their individual capacities, each accepts the benefits of the indemnification granted, and the representations and warranties made, to each of them hereunder. (e) This Agreement, all other Operative Documents and all documents relating hereto, including, without limitation, (1) consents, waivers and modifications which may hereafter be executed and (2) financial statements, certificates and other information previously or hereafter furnished to any party hereto, may be reproduced by such party by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process, and such party may destroy any original documents so reproduced. Any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by such party in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. (f) The captions in this Agreement are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. (g) (A) Each of the Lessee, the Owner Trustee in its individual capacity and the Indenture Trustee in its individual capacity agrees that it will, for purposes of Section 101(16) of the Act, immediately upon obtaining actual knowledge of any facts which would cast doubt upon its continuing status as a Citizen of the United States and promptly upon public disclosure of negotiations in respect of any transaction which would or might adversely affect such status, notify in writing all parties hereto of all relevant matters in connection therewith. (B) The Owner Participant agrees that, for purposes of Section 101(16) of the Act, in the event its status is to change as a Citizen of the United States, or it makes public disclosure of circumstances as a result of which it believes that such status is likely to change, it will notify in writing all parties hereto of (i) such change in status promptly after obtaining knowledge thereof or (ii) such belief as soon as practicable after such public disclosure but in any event within ten Business Days after such public disclosure. -64- (C) If the Owner Trustee shall at any time obtain knowledge of any facts which would cast reasonable doubt upon the continuing status of the Owner Trustee in its individual capacity as a Citizen of the United States, it shall immediately resign as Owner Trustee, and the Owner Participant shall as promptly as practicable, and after consulting with the Lessee, appoint a Citizen of the United States as successor Owner Trustee pursuant to Section 10.01 of the Trust Agreement. (D) If the Owner Participant shall, at any time while the Aircraft is registered in the United States, cease to be a Citizen of the United States (if and so long as such citizenship is necessary under the Act to permit the U.S. registration of the Aircraft (it being understood that the evidence of any such requirement shall he determined without giving consideration to any provision of the Act (or any superseding statute) which permits United States registration of an Aircraft based on conditions which impose restrictions on the location and use of the Aircraft or otherwise restrict the ability of an air carrier to operate the Aircraft in the ordinary course of its business)), the Owner Participant shall immediately at its own expense either (X) take such action as may be required to maintain the U.S. registration of or, in the case of reregistration, to reregister the Aircraft and (to the extent such recordation is dependent on the U.S. registration of the Aircraft) the recordation with the FAA of the Indenture, Lease and any Lease Supplement (which may, if the U.S. registration of the Aircraft is thereby maintained or reregistration is thereby permitted, include the use of a voting trust or other similar arrangements in which event the provisions contained herein restricting the Owner Participant's or the Owner Trustee's ability to amend the Trust Agreement shall not apply to the extent necessary to permit the use of such a voting trust or other similar arrangement), or (Y) transfer, in accordance with Section 16 hereof and Article IX of the Trust Agreement, its right, title and interest in and to the Trust Agreement, the Trust Estate and this Agreement or (Z) take such other action as may be necessary to prevent the Lessee or the Indenture Trustee from being adversely affected (in the context of the transactions contemplated hereby) as a result of such cessation of citizenship. If the Owner Participant shall fail to comply with any of clauses (X), (Y) or (Z), then so long as such failure shall thereafter continue the Owner Participant shall be obligated to reimburse the Lessee for any additional costs and expenses or loss of income which the Lessee shall thereafter actually incur with respect to the Aircraft due to such change in citizenship of the Owner Participant (but the Lessee shall not be entitled to receive such reimbursement so long as an Event of Default or a Payment Default shall have occurred and be continuing or if the Owner Participant shall have complied with any of clauses (X), (Y) or (Z) within 10 days after a Responsible Officer of the Owner Participant has actual knowledge of the facts requiring such actions). If the Lessee has reregistered the Aircraft outside the United States and decides thereafter to reregister the Aircraft under the Act, the Lessee shall notify the Owner Participant, the Owner Trustee, and -65- the Indenture Trustee of its decision and the date as of which the reregistration is proposed to be effective. If the Owner Participant shall, at the time when the Aircraft is proposed to be reregistered under the Act, not be a Citizen of the United States and such citizenship is necessary under the Act to permit the registration or reregistration of the Aircraft under the Act; without giving consideration to any provision of the Act which permits United States registration of an aircraft based on conditions which impose restrictions on the location and use of the Aircraft or otherwise restrict the ability of an air carrier to operate the Aircraft in the ordinary course of its business, the Owner Participant shall promptly, at its own expense, comply with any of clauses (X), (Y) or (Z) of this paragraph (D) and, if it shall fail to do so, reimburse the Lessee for any additional costs and expenses or loss of income which the Lessee shall thereafter actually incur with respect to the Aircraft due to the Owner Participant not being a Citizen of the United States; provided, however, that (x) the Lessee shall not be entitled to receive such reimbursement so long as an Event of Default or a Payment Default shall have occurred and be continuing and (y) the Owner Participant shall not be obligated to reimburse the Lessee pursuant to this sentence if the Owner Participant has complied with any of clauses (X), (Y) or (Z) of this paragraph (D) within the later of (1) the date as of which reregistration of the Aircraft is to be effective and (2) sixty (60) days following the receipt by the Owner Participant of the Lessee's notice of its intention to reregister the Aircraft under the Act. In each such case described in this paragraph (D), the Lessee shall use reasonable efforts to minimize its loss of income or damages but shall be under no obligation to sublease the Aircraft or reregister the Aircraft in another jurisdiction. (E) The Owner Participant, the Owner Trustee and the Indenture Trustee shall be required to give the notice and take the action specified in paragraphs (A), (B), (C) and (D) of this Section 15(g) only if a Responsible Officer of such Owner Participant, the Owner Trustee or the Indenture Trustee, as the case may be, shall have actual knowledge of the facts requiring the giving of such notice or the taking of such action. (h) Anything contained in this Agreement, the Indenture, the Trust Agreement or the Lease to the contrary notwithstanding, the Owner Participant hereby agrees to assume liability for, and does hereby indemnify and agree to protect, defend, save and keep harmless each Holder and its respective successors, assigns, agents and servants, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees and expenses but excluding internal costs and expenses, including, without limitation, overhead and salaries) to the extent caused by any impairment or claimed impairment of the perfection or rank of the Lien of the Indenture on the Indenture Estate or any portion thereof (except when such impairment arises from Lessor's Liens, Indenture Trustee's Liens -66- or Liens which the Lessee is required to remove under the terms of the Lease), resulting directly and solely from the failure of the Lessee to maintain the registration of the Aircraft under the Act when (i) the lapse of such registration or (ii) the inability to reregister under the Act when Lessee is requesting such registration or an Event of Default has occurred and is continuing is solely because the Owner Participant has ceased to be a Citizen of the United States. (i) Subject to the requirements and conditions precedent of the Operative Documents and applicable law, the parties hereto and each of the them agree, from time to time, to execute, acknowledge and deliver such other documents or instruments, and to do or cause to be done such other acts or things as any other party hereto may reasonably request, that may be necessary or desirable to effect the transactions contemplated herein (including without limitation in connection with any refunding pursuant to Section 20 hereof, the execution, delivery and/or provision of any appropriate additional or modified amendment, representation, warranty, certificate, opinion or other document that may reasonably be requested by the Lessee or any other person). The Lessee hereby agrees to pay on an after-tax basis all reasonable fees and out-of-pocket expenses incurred by the Owner Participant, the Owner Trustee and the Indenture Trustee in accordance with this Section 15(i). Section 16. Assignment By the Owner Participant. (a) Prior to the ------------------------------------ termination or expiration of the Lease (or, if later, until the Lien of the Indenture is discharged), the Owner Participant will not sell, assign, transfer or otherwise dispose of its rights (whether separately or in connection with any transaction contemplated by the immediately following paragraph) as the Owner Participant except in compliance with Sections 9.01 and 9.02 of the Trust Agreement, the terms and provisions of which are incorporated herein by reference. (b) If there is a merger or consolidation of the Owner Participant and the resulting corporation (the "New Corporation") is an airline operating regularly scheduled commercial jet passenger or cargo transport service on domestic United States routes or an Affiliate of such an airline and the Lessee does not approve of the New Corporation as the Transferee of the Owner Participant, the Lessee shall have the right (provided that it shall have given the Owner Participant notice of its disapproval within 60 days of receiving notice of such merger or consolidation) to require that the Owner Participant or the New Corporation, as the case may be, transfer to Lessee as hereinafter provided, in accordance with Article IX of the Trust Agreement all of its right, title and interest in and to the Trust Agreement, the Trust Estate and this Agreement. If the Owner Participant or the New Corporation does not comply with the preceding sentence on or prior to the 180th day following the giving of notice of the Lessee to the Owner Participant or the New Corporation of the Lessee's disapproval of the New Corporation as the Transferee of -67- the Owner Participant, the Lessee may make one of the following elections: (i) The Lessee may purchase the Aircraft, and direct the Owner Trustee to give notice of prepayment of the Certificates pursuant to Section 6.02(E) of the Indenture, for an amount equal to (a) whichever shall be the greatest of (x) Stipulated Loss Value for the Aircraft, (y) Fair Market Value of the Aircraft unencumbered by the Lease and (z) Fair Market Value of the Aircraft subject to the Lease, in any such case computed as of the date of purchase in accordance with the Lease, plus (b) the installment of Basic Rent, if any, due on such date, if such installment is designated on Exhibit D to the Lease as payable in arrears, plus (c) any other amounts of Basic Rent for the Aircraft which shall be due and unpaid, plus (d) any premium payable with respect to the Certificates pursuant to the Indenture, and (e) all other amounts, whether Supplemental Rent or otherwise, owing by the Lessee to the Owner Trustee, the Owner Participant, the Indenture Trustee and the Holders under any of the Operative Documents and provided that such purchase shall be effected by the -------- Lessee's payment to the Indenture Trustee of such amounts, and such monies shall be applied by the Indenture Trustee as provided in Section 5.02 of the Indenture; or (ii) the Lessee shall have the right to purchase all of the Owner Participant's right, title and interest in and to the Trust Agreement, the Trust Estate and this Agreement. The purchase price for the Owner Participant's right, title and interest in and to the Trust Agreement, the Trust Estate and this Agreement shall be (a) whichever shall be the greatest of (x) Stipulated Loss Value for the Aircraft, (y) Fair Market Value of the Aircraft unencumbered by the Lease and (z) Fair Market Value of the Aircraft subject to the Lease, in any such case computed as of the date of purchase (the "Purchase Date") in accordance with the Lease plus (b) the installment of Basic Rent, if any, due on such date if such installment is designated on Exhibit D of the Lease as payable in arrears, plus (c) any other amounts of Basic Rent for the Aircraft which shall be due and unpaid plus (d) all other amounts, whether Supplemental Rent, or otherwise, owing by the Lessee to the Owner Participant or the Owner Trustee under any of the Operative Documents less (e) the principal amount of the Certificates outstanding on the Purchase Date (the "Purchase Price"). As a condition to such purchase, the Lessee shall, on the Purchase Date, deliver to the Indenture Trustee an opinion of counsel reasonably satisfactory to the Indenture Trustee stating that, notwithstanding such purchase, this Agreement, the Trust -68- Agreement and the Lease remain valid and binding obligations of the Lessee enforceable against the Lessee, as Lessee or as successor in interest to the Owner Participant, as the case may be, in accordance with their terms and that the Indenture and the Certificates remain valid and binding obligations of the parties thereto, enforceable in accordance with their terms and the Indenture creates a valid first priority Lien on the Aircraft, (or if unable to deliver such opinion, the Lessee shall effect amendments to the Operative Documents and the execution of such new agreements as shall be reasonably satisfactory to the Indenture Trustee to cause the indebtedness represented by the Certificates to be a direct and full recourse obligation of the Lessee secured by a first priority security interest in the Indenture Estate (as modified by such agreements and amendments) and the Lessee shall deliver, or shall cause to be delivered, such certificates, legal opinions and other documentary evidence as shall be reasonably requested by the Indenture Trustee as necessary or advisable to effect such agreements and amendments), and shall pay the Purchase Price to the Owner Participant in immediately available funds and shall execute and deliver appropriate documentation, satisfactory to the Owner Participant, releasing the Owner Participant from all future obligations and liabilities in respect of the Certificates, the Indenture and all other Operative Documents, to the extent that such obligations and liabilities arise after such transfer and do not in any way relate to events or circumstances occurring during the time that the Owner Participant held its right, title and interest in and to the Trust Agreement, the properties of the Owner Trustee pledged or mortgaged as part of the Indenture Estate; the Participation Agreement, as amended, or the Indemnity Agreement, as amended, for which the Owner Participant would be responsible and would not otherwise be indemnified by the Lessee, and the Owner Participant shall, by written instrument satisfactory to the Lessee and the Indenture Trustee, convey all of its right, title and interest to the Trust Agreement, the Trust Estate and this Agreement without representation or warranty, except as to the absence of Owner Participant's Liens. It is understood and agreed among the parties hereto that the transaction contemplated by this paragraph shall not effect a merger of the Lessee's interest, as lessee, in the Lease and the beneficial interest in the Trust Estate to be acquired by the Lessee. (c) If the Lessee elects to purchase the Aircraft under Section 5(b) of the Lease on the EBO Date, it shall elect, in its sole discretion, (A) to direct the Owner Trustee to give notice of prepayment of the Certificates pursuant to Section 6.02(E) of the -69- Indenture or (B)(1) to effect amendments to the Operative Documents and the execution of such new agreements as shall be reasonably satisfactory to (x) the Indenture Trustee to cause the indebtedness represented by the Certificates to be a direct and full recourse obligation of the Lessee secured by a first priority security interest in the Indenture Estate (as modified by such agreements and amendments) and (y) the Owner Participant releasing the Owner Trustee and the Owner Participant from any and all further liability under or in respect of the Certificates, the Indenture, the Operative Documents and any such new agreements and (2) to deliver, or cause to be delivered, such agreements, certificates, legal opinions and other documentary evidence as shall be reasonably requested by the Indenture Trustee and the Owner Participant as necessary or advisable to effect such release, agreements and amendments. (d) The Lessee will pay all reasonable costs and expenses (including reasonable attorneys' fees and disbursements) of the Indenture Trustee, the Owner Participant, the Owner Trustee and the Pass Through Trustee in connection with any purchase pursuant to this Section 16. Section 17. Confidentiality. No party hereto will itself ---------------- intentionally disclose, directly or indirectly, any information (i) obtained from the Lessee hereunder or in connection herewith or any portion of any Operative Document except information filed with the FAA or SEC and available for public inspection or (ii) obtained in connection with a proposed transfer of the Owner Participant's interests as provided in Section 16, and will use all reasonable efforts to have all such information kept confidential and not used in any way known to such party to be detrimental to the Lessee, with regard to information referred to in clause (i) above, or to the Owner Participant with regard to information referred to in clause (ii) above; provided, that (a) each -------- party may use, retain and disclose any such information to its financial advisors, insurance brokers, special counsel and public accountants, any potential transferees and any governmental agency or instrumentality or other supervisory body requesting such disclosure, provided that such party informs -------- such financial advisors, insurance brokers, special counsel, public accountants or potential transferees that access to such information constitutes agreement by such person to keep such information confidential, (b) each party may use, retain and disclose any such information which has been publicly disclosed (other than by such party or any Affiliate thereof in breach of this Section 17) or has rightfully come into the possession of such party or any Affiliate thereof (other than from the Lessee, with regard to information referred to in clause (i) above or from the Owner Participant with regard to information referred to in clause (ii) above) and (c) to the extent that such party or any Affiliate thereof may have received a subpoena or other written demand under color of legal right for such information, such party or Affiliate may disclose such information, but such party shall first, as soon as practicable -70- upon receipt of such demand, furnish a copy of such demand to the Lessee, or the Owner Participant, as the case may be, and afford the Lessee, or the Owner Participant, as the case may be, reasonable opportunity, at the cost and expense of the Lessee, or the Owner Participant, as the case may be, to obtain a protective order or other reasonably satisfactory assurance of confidential treatment for the information required to be disclosed. Nothing in this Section 17 shall prevent the Indenture Trustee from disclosing information to the Holders in accordance with the requirements of the Indenture or prevent the Pass Through Trustee from disclosing information to the holders of the Pass Through Certificates in accordance with the requirements of the Pass Through Agreement or any Series Supplement. Section 18. Certain Obligations of the Owner Participant. The Owner --------------------------------------------- Participant covenants that it will, at its own cost and expense, promptly take such action as may be necessary to duly discharge any Owner Participant's Lien on any part of the Trust Estate or the Indenture Estate; provided, however, that -------- ------- the Owner Participant may in good faith by appropriate proceedings contest claims or charges resulting in any such Lien as long as such contest does not involve any material danger of the sale, forfeiture or loss (or loss of use of any part of the Trust Estate or the Indenture Estate, or any interest therein and does not involve any material danger of an interruption of the payments of Rent assigned to the Indenture Trustee; and the Owner Participant hereby agrees to indemnify and hold harmless the Lessee and the Holders from and against any loss, cost, expense or damages (excluding incidental and consequential damages) to the extent that the same may be suffered by the Lessee or any Holder as the result of the failure of the Owner Participant to discharge and satisfy any such Owner Participant's Lien. Section 19. Change of Registration of the Aircraft. The Owner --------------------------------------- Participant and the Indenture Trustee agree that if, at any time after the end of the Recapture Period as long as no Event of Default has occurred and is continuing, (i) the Lessee by at least 45 days prior written notice has requested their consent to the registration of the Aircraft, at the Lessee's expense, in the name of the Owner Trustee, in a country other than the United States with which the United States at the time of such registration maintains "normal" diplomatic relations and (ii) the Owner Participant or the Indenture Trustee has not determined, acting reasonably, that such other country would not provide substantially equivalent protection for the exercise of rights and remedies of owner participants, lessors or lenders in similar transactions as provided under United States law (except that, in the absence of restrictions under the laws of such country on rights and remedies of lessors and secured parties similar to those imposed by Sections 362 and 363 of the Bankruptcy Code, rights and remedies similar to those available under Section 1110 of the Bankruptcy Code shall not be required), then the Owner Participant and the Indenture Trustee will not unreasonably -71- withhold their consent to such change of registration (it being agreed that the Lessee's inability to deliver an opinion (reasonably satisfactory in form and substance to the Owner Participant and the Indenture Trustee) of counsel acceptable to the Owner Participant and the Indenture Trustee in such proposed country of registry as to the matters referred to in clause (ii) above and to the effect that the courts of such country would give effect to the title, registry and priority of the Lien under the Indenture substantially to the same extent as provided under United States law shall constitute reasonable grounds for a determination that such country would not provide such protection). If said consent is given, the Owner Participant and the Indenture Trustee will instruct the Owner Trustee to take whatever reasonable action is necessary or appropriate, at the Lessee's cost and expense, to effectuate such change of registration provided, however, that prior to any such change in the country of -------- ------- registry of the Aircraft, the Owner Participant and the Indenture Trustee shall have received: (i) assurances reasonably satisfactory to them (A) to the effect that the insurance provisions of the Lease would be complied with after giving effect to such change of registry, (B) of the payment by the Lessee on an after-tax basis of any expenses in connection with such change of registry including, without limitation, (i) the reasonable fees and disbursements of counsel, (ii) any filing or recordation fees, taxes or similar payments incurred in connection with the registration and deregistration of the Aircraft and the creation and perfection of the security interest therein in favor of the Indenture Trustee for the benefit of the Holders, (iii) all costs and expenses incurred in connection with any filings necessary to continue in the United States of America the perfection of the security interest in the Aircraft and the Indenture Estate in favor of the Indenture Trustee, and (iv) any and all other costs, expenses and taxes, on an after-tax basis, whether initial or continuing, incurred by the Owner Trustee, the Indenture Trustee as a result of the registration of the Aircraft, or the creation of the security interest therein, under the laws of the country of registry, (C) to the effect that the original general and tax indemnities in favor of the Owner Participant, the Owner Trustee, the Trust Estate, the Pass Through Trusts, the Pass Through Trustee, the Indenture Estate, and the Indenture Trustee under this Agreement, the Indenture and the Indemnity Agreement afford each such party substantially the same protection as provided prior to such change of registry, (D) as to the continued status of the Indenture as a first priority Lien on the Indenture Estate, (E) that such change will not result in the imposition of, or increase in the amount of, any tax for which the Lessee is not required to indemnify the Owner Participant, the Owner -72- Trustee (or any successor, assign or affiliate thereof) or the Trust Estate pursuant to Section 6(b) hereof, (F) that the Owner Trustee's title to the Aircraft will be recognized, (G) that any import or export permits necessary to take the Aircraft into or out of such jurisdiction and any exchange permits necessary to allow all Rent and other payments provided for under the Lease shall be in full force and effect, (H) that any value added tax, customs duty, tariff or similar governmental charge relating to the change in jurisdiction of registration of the Aircraft shall have been paid in full or adequately provided for by the Lessee to the satisfaction of the Owner Trustee, the Indenture Trustee and the Owner Participant, (I) that such new country of registry imposes aircraft maintenance standards not materially less stringent than those of the FAA, (J) that no Event of Default, Payment Default or Bankruptcy Default exists and that no Event of Default will occur or exist upon or resulting from such reregistration and (K) with respect to such other matters as the Owner Participant, the Owner Trustee or the Indenture Trustee may reasonably request; and (ii) a favorable opinion of counsel reasonably satisfactory to the Owner Participant, the Owner Trustee and the Indenture Trustee in the new jurisdiction of registry (A) that the terms (including, without limitation, the governing-law, service-of-process and jurisdictional- submission provisions thereof) of the Lease and the Indenture are legal, valid, binding and enforceable in such jurisdiction, (B) that it is not necessary for the Owner Participant, the Owner Trustee, or the Indenture Trustee to register or qualify to do business in such jurisdiction, (C) that there is no tort liability of the owner of an aircraft not in possession thereof or of persons lending money to such an owner for the purchase of an aircraft, under the laws of such jurisdiction (it being understood that, in the event such latter opinion cannot be given in a form satisfactory to the Owner Participant, the Owner Trustee and the Indenture Trustee, such opinion shall be waived if insurance reasonably satisfactory to the Owner Participant, the Owner Trustee and the Indenture Trustee is available to cover such risk and is provided at or before the time of such change of registry, at the Lessee's cost and expense), (D) (unless the Lessee shall have agreed to provide insurance reasonably satisfactory to the Owner Participant and the Indenture Trustee covering the risk of requisition of use of or title to the Aircraft by the government of such jurisdiction so long as the Aircraft is registered under the laws of such jurisdiction) that the laws of such jurisdiction require fair compensation by the government of such jurisdiction payable in currency freely convertible into -73- United States Dollars for the loss of use of or title to the Aircraft in the event of the requisition by such government of such use or title, and (E) to such further effect with respect to such other matters as the Owner Participant or the Indenture Trustee may reasonably request. Section 20. Refunding. (a) So long as no Event of Default has ---------- occurred and is continuing, the Owner Participant and the Owner Trustee each agree that (i) prepayment of the Certificates as contemplated by Section 6.02(B) of the Indenture shall be made only with the consent of the Lessee, and (ii) to the extent that an optional prepayment of the Certificates is permitted by the Indenture, they will each cooperate with the Lessee to implement, in addition to other prepayments permitted or required by this Agreement or the Lease, not more than one refunding of the Certificates (including, without limitation, the execution, delivery and/or provision of any appropriate additional or modified amendment, representation, warranty, certificate, opinion or other document that may reasonably be requested by the Lessee or any other person in connection with such refunding and are reasonably satisfactory to, and in their judgment not adverse to the interests of, the Owner Participant and the Owner Trustee) at such interest rates and on such other terms as may be satisfactory to the Lessee and at the expense of the Lessee, provided that (x) such refunding shall satisfy -------- the requirements set forth in Section 3(e) of the Lease, (y) the outstanding principal amount of the Certificates shall not be changed in any such refunding transaction and (z) all payments of Basic Rent and all payments relating to the Certificates shall always be U.S. dollar denominated. Notwithstanding anything herein to the contrary, no refunding will be permitted unless the Owner Participant shall have received at least 3 Business Days prior written notice of the closing date of such refunding, the Owner Participant shall have been provided such longer period required for a reasonable opportunity to review the relevant documentation and the Owner Participant shall have determined in good faith that neither it nor the Owner Trustee shall suffer any loss or expense or bear any increased risk as a result of such refunding (including, without limitation, any risk with respect to taxes or other adverse consequences to the Owner Participant including the application of Revenue Procedures 75-21 and 75- 28 and Section 467 of the Code (to the extent the original rent structure under the Lease complied with Revenue Procedures 75-21 and 75-28 and Section 467 of the Code on the Closing Date, it being understood that, to the extent that the original rent structure complied on the Closing Date with any grandfather or similar provisions in any regulations under Section 467 or other administrative pronouncement interpreting Section 467, such structure shall be deemed to have been in compliance with Section 467 on the Closing Date)) for which it has not been or will not have been indemnified by the Lessee in a manner satisfactory in all respects to the Owner Participant. -74- (b) The Lessee hereby agrees to pay on an after-tax basis all reasonable fees and out-of-pocket expenses (including without limitation, reasonable fees and expenses of counsel) incurred by the Owner Participant, the Owner Trustee, and the Indenture Trustee in connection with any refunding or amendment pursuant to this Section 20. (c) The Lessee agrees that neither it nor any of its Affiliates shall at any time purchase or hold certificates issued pursuant to Section 20(a) hereof ("Refunding Certificates") other than Refunding Certificates scheduled to mature within the twelve month period beginning on the date of such purchase but in no event shall the Lessee and its Affiliates hold at any one time Refunding Certificates representing more than 5% of the Refunding Certificates then outstanding (including such Refunding Certificates held by the Lessee and its Affiliates). To the extent any installment of Basic Rent due is to be applied in redemption of outstanding Refunding Certificates, maturing on a Basic Rent payment date, the Lessee shall have the right but not the obligation to either (i) deliver to the Indenture Trustee for cancellation, in payment of a like amount of Basic Rent, a principal amount of Refunding Certificates not exceeding the principal amount of Refunding Certificates maturing on such date or (ii) if such an optional redemption is permitted under the terms of any Refunding Certificate, have Refunding Certificates held by it in a principal amount not exceeding the principal amount of Refunding Certificate to be redeemed on such date redeemed in priority to all other Refunding Certificates. (d) [Intentionally Omitted] (e) In the case of a refunding involving a public offering of debt securities, (1) the offering materials (including any registration statement) for the refunding transaction shall describe the Owner Participant and the Owner Trustee, and the terms of the transaction among the Owner Participant, the Owner Trustee and the Lessee, only to the extent required by applicable United States federal and state securities laws, and such offering materials shall be otherwise reasonably acceptable to the Owner Participant and the Owner Trustee to the extent such materials describe the Owner Participant or the Owner Trustee or the terms of the transaction among the Owner Participant, the Owner Trustee and the Lessee, but such offering materials shall not include any financial information about the Owner Participant and (2) the structure of the offering shall be reasonably satisfactory to the Owner Participant from a tax point of view. (f) No refunding pursuant to this Section 20 shall permit any floating rate debt to be outstanding at any time after September 30, 1999. (g) The Lessee, the Indenture Trustee, the Owner Trustee and the Owner Participant each agree to execute any document necessary or advisable to implement Section 20 of this -75- Agreement (including, without limitation, the execution, delivery and/or provision of any appropriate additional or modified amendment, representation, warranty, certificate, opinion or other document that may reasonably be requested by the Lessee or any other person). Section 21. Compliance. Notwithstanding any provision herein or ----------- elsewhere contained to the contrary, it is understood and agreed among the parties hereto that the transactions contemplated by this Participation Agreement, the Lease, the Indenture and the other Operative Documents are expressly intended to be, shall be and should be construed so as to be, entitled to the full benefits of 11 U.S.C. Section 1110, as amended from time to time, and any successor provision thereto. Section 22. Certain Investments. Notwithstanding any other provision -------------------- of the Operative Documents, to the extent that funds are available for investment pursuant to the Indenture or the Lease on the last Business Day of any year, such funds shall be invested only in Permitted Investments of the types specified in subparagraphs (a) and (b) of Section 24 of the Lease until January 2 of the following year, at which time Section 24 of the Lease will govern the investment of such funds. The Indenture Trustee in its individual capacity, the Owner Trustee in its individual capacity and as Owner Trustee and the Lessee agree to cause compliance with the foregoing instructions. -76- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first written above. DELTA AIR LINES, INC. By______________________________ Title: WILMINGTON TRUST COMPANY, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By______________________________ Title: THE BANK OF NEW YORK, not in its individual capacity, except as otherwise expressly provided herein, but solely as Indenture Trustee By_____________________________ Title: ___________________________ By______________________________ Title: -77- THE MITSUBISHI TRUST AND BANKING CORPORATION, NEW YORK BRANCH By______________________________ Title: THE BANK OF NEW YORK, not in its individual capacity, except as otherwise provided herein, but solely as Pass Through Trustee By:_____________________________ Title: -78- SCHEDULE A to Participation Agreement (Delta 1994-1) PARTICIPANT INFORMATION Item 1. Owner Participant's Commitment: 20% of Lessor's Cost Item 2. Indenture Trustee's Commitment (on behalf of the Holders): 80% of Lessor's Cost Item 3: Bank Account of Owner Trustee: Citibank, N.A. 399 Park Avenue New York, New York Account of Wilmington Trust Company (Account Number 00-16-1728) Item 4: Lessor's Cost is $99,500,000 Item 5: EBO Date is [_____________] Item 6: EBO Percentage is _____% NOTICE AND PAYMENT INSTRUCTIONS RELATING TO OWNER PARTICIPANT ________________________ Mailing Address: ________________________ ________________________ Attention: _____________ With copies to - -------------- Dewey Ballantine 1301 Avenue of the Americas New York, New York 10019 Attention: Ira Palgon Telephone: (212) 259-8000 Telecopy: (212) 259-6333 Addresses and Instructions for Payments and Notices: All payments for the Owner Participant shall be made by wire transfer of immediately available funds to Bank of America (ABA 121000358), 1850 Gateway Blvd., Concord, California 94520, Account No. 04118-02311 in the name of: ________________________ Treasury Account, Attention: Becky Hanpen, with sufficient information to identify the source and application of such funds. SCHEDULE C to Participation Agreement (Delta 1994-1) PASS THROUGH CERTIFICATE INFORMATION 1. Delta Air Lines 1996 Pass Through Certificates, Series A1 Equipment Trust Certificate 1996-A1 Interest Rate: ____________ Maturity: __________________ Principal Amount: $_________ 2. Delta Air Lines 1996 Pass Through Certificates, Series A2 Equipment Trust Certificate 1996-A2 Interest Rate: _____________ Maturity: __________________ Principal Amount: $_________ ANNEX II to Participation Agreement (Delta 1994-1) Notice Addresses: Delta Air Lines, Inc.: Chief Financial Officer Delta Air Lines, Inc. Department 804 Hartsfield Atlanta International Airport Atlanta, Georgia 30320 with a copy to the General Counsel at the same address Telecopier: (404) 715-2233 Wilmington Trust Company, as Owner Trustee: 1100 North Market Street Rodney Square North Wilmington, Delaware 19890-0001 Attention: Corporate Trust Administration Telecopier: (302) 651-8882 The Bank of New York, as Indenture Trustee and as Pass Through Trustee: 101 Barclay Street New York, New York 10286 Attention: Corporate Trust - Corporate Finance Group Telecopier: (212) 815-5915 With a Copy To: BNY Business Center Inc. Corporate Trust 100 Ashford Center North Suite 520 Atlanta, Georgia 30338 Attention: Corporate Trust Lease Administration Telecopier: (770) 698-5195 ________________________ _____________________________ _____________________________ _____________________________ Telecopier: ________________ The Mitsubishi Trust and Banking Corporation, New York Branch: 520 Madison Avenue New York, New York 10022 Telecopier: (212) 755-2349 EX-4.(E) 5 FORMS OF TRUST AGREEMENT King & Spalding Draft: 2/28/96 =============================================================================== TRUST AGREEMENT DELTA 1994-1 dated as of April 1, 1994 Amended and Restated as of March 1, 1996 BETWEEN ____________________________, as Owner Participant AND WILMINGTON TRUST COMPANY, as Owner Trustee ________________ DELTA AIR LINES, INC. ONE McDONNELL DOUGLAS MD-11 AIRCRAFT =============================================================================== INDEX TO TRUST AGREEMENT
PAGE ---- ARTICLE I. DEFINITIONS...................................................1 Section 1.01 Special Definitions ............................1 Section 1.02 Reference to Lease or Participation Agreement ......................3 ARTICLE 2. AUTHORITY; DECLARATION OF TRUST BY OWNER TRUSTEE ................................................4 Section 2.01 Authorization...................................4 Section 2.02 Declaration of Trust............................4 ARTICLE 3. PAYMENTS TO OWNER PARTICIPANT ................................5 Section 3.01 Payments From Trust Estate Only...................................5 Section 3.02 Method of Payment...............................5 ARTICLE 4. EXECUTION OF DOCUMENTS; ISSUANCE OF CERTIFICATES ................................................5 Section 4.01 Authorization...................................5 Section 4.02 Conditions......................................6 ARTICLE 5. RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST ESTATE...............................6 Section 5.01 Cross Reference to Indenture.....................................6 ARTICLE 6. DUTIES OF THE OWNER TRUSTEE...................................7 Section 6.01 Notice of Event of Default or Indenture Event of Default.......................................7 Section 6.02 Action Upon Instructions........................7 Section 6.03 Indemnification.................................8 Section 6.04 No Duties Except as Specified in Trust Agreement or Instructions..................................8 Section 6.05 No Action Except Under Lease, Trust Agreement or Instructions...............................8 Section 6.06 Preparation of Tax Returns......................9 Section 6.07 Satisfaction of Conditions Precedent.....................................9 Section 6.08 Fixed Investment Trust..........................9
-i- ARTICLE 7. THE OWNER TRUSTEE.............................................9 Section 7.01 Acceptance of Trusts and Duties....................................9 Section 7.02 Absence of Duties..............................10 Section 7.03 No Representations or Warranties as to Aircraft or Documents........................11 Section 7.04 No Segregation of Monies; No Interest..................................12 Section 7.05 Reliance; Agent; Advice of Counsel............................12 Section 7.06 Not Acting in Individual Capacity.....................................12 Section 7.07 Compensation...................................13 ARTICLE 8. INDEMNIFICATION OF WTC BY OWNER PARTICIPANT ...............................................13 Section 8.01 Owner Participant to Indemnify WTC................................13 ARTICLE 9. TRANSFER OF OWNER PARTICIPANT'S INTERESTS....................................................14 Section 9.01 Conditions.....................................14 Section 9.02 Notice.........................................17 ARTICLE 10. SUCCESSOR OWNER TRUSTEES; APPOINTMENT OF SEPARATE TRUSTEES............................................18 Section 10.01 Resignation of Owner Trustee; Appointment of Successor................................18 Section 10.02 Appointment of Separate Trustees....................................19 ARTICLE 11. SUPPLEMENTS AND AMENDMENTS TO THIS TRUST AGREEMENT AND OTHER DOCUMENTS..........................21 Section 11.01 Instructions of Owner Participant; Limitations.................................21 Section 11.02 Owner Trustee Protected...................................22 Section 11.03 Request of Substance, Not Form ...................................22 ARTICLE 12. MISCELLANEOUS ...............................................22 Section 12.01 Termination of Trust Agreement...................................22 Section 12.02 No Legal Title to Trust Estate in Owner Participant.................................23 Section 12.03 Sale of Aircraft by Owner Trustee Is Binding..........................23
-ii- Section 12.04 Trust Agreement for Benefit of Owner Trustee, the Indenture Trustee and Owner Participant Only............................24 Section 12.05 Notices.......................................24 Section 12.06 Severability..................................24 Section 12.07 Limitation on Owner Participant's Liability ..................................24 Section 12.08 Separate Counterparts.........................25 Section 12.09 Successors and Assigns........................25 Section 12.10 Headings......................................25 Section 12.11 Governing Law.................................25 Section 12.12 Authorization to Owner Trustee for Indenture.......................25 Section 12.13 Waivers, etc..................................25 Section 12.14 Performance by Owner Participant.................................25
-iii- TRUST AGREEMENT (DELTA 1994-1) This TRUST AGREEMENT (DELTA 1994-1), dated as of April 1, 1994, as amended and restated as of March 1, 1996, between the Owner Participant, as such term is defined in Section 1.01 hereof, and Wilmington Trust Company, a Delaware banking corporation (in its individual capacity, referred to as "WTC", and not in its individual capacity but solely as Owner Trustee hereunder, referred to as the "Owner Trustee"): W I T N E S S E T H : WHEREAS, capitalized terms used but not otherwise defined herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, the Owner Participant and the Owner Trustee have heretofore entered into that certain Trust Agreement (Delta 1994-1) dated as of April 1, 1994 (the "Original Trust Agreement"); WHEREAS, the Original Trust Agreement has been duly filed with the Federal Aviation Administration on April 12, 1994; WHEREAS, the Interim Refinancing Loan Participant participated in the payment of Lessor's Cost by providing an interim loan as evidenced by the Interim Refinancing Loan Certificate issued to it; WHEREAS, pursuant to Section 20 of the Original Participation Agreement, the Lessee, the Owner Participant and the Owner Trustee desire that the Interim Refinancing Loan Certificate be prepaid with the proceeds from the Certificates to be issued pursuant to the Indenture; and WHEREAS, the Lessee, the Owner Participant and the Owner Trustee desire that the Owner Participant and WTC amend and restate the Original Trust Agreement in its entirety as provided herein. ARTICLE 1. DEFINITIONS SECTION 1.01 Special Definitions. For all purposes of this Trust Agreement ------------------- the following terms have the following meanings (such definitions to be equally applicable to both the singular and plural forms of the terms herein defined): "Certificates" has the meaning specified in the Indenture. ------------ "Commitment" has the meaning specified in the Original Participation ---------- Agreement. "Excepted Payments" has the meaning specified in the Indenture. ----------------- "Holder" has the meaning specified in the Indenture. ------ "Indenture" means that certain Trust Indenture and Security Agreement --------- (Delta 1994-1), dated as of April 1, 1994, as amended and restated as of March 1, 1996, between the Owner Trustee (not in its individual capacity except as expressly provided therein but solely as Owner Trustee) and the Indenture Trustee (not in its individual capacity except as expressly provided therein but solely as Indenture Trustee), as supplemented or amended from time to time, as therein provided, including as supplemented by each Trust Agreement and Trust Indenture Supplement. "Indenture Estate" has the meaning specified in the Indenture. ---------------- "Indenture Event of Default" has the meaning specified in the -------------------------- Indenture. "Indenture Trustee" means The Bank of New York, a New York banking ----------------- corporation, not in its individual capacity, except as otherwise provided in the Indenture, but solely in its capacity as indenture trustee under the Indenture, and its successors and assigns as trustee thereunder. "Lease" means that certain Lease Agreement (Delta 1994-1), dated as of ----- April 1, 1994, as amended and restated as of March 1, 1996, between the Owner Trustee (as Owner Trustee hereunder) and the Lessee, as said Lease Agreement may from time to time be supplemented or amended, or the terms thereof waived or modified, to the extent permitted by and in accordance with its terms, the terms of the Indenture, the terms of the Participation Agreement and the terms of this Trust Agreement. The term "Lease" also includes the Lease Supplement (Delta 1994-1) dated the Delivery Date entered into pursuant to the terms of the Original Lease. "Owner Participant" means ____________________________ so long as it ----------------- shall not have assigned all its interest under this Trust Agreement, and each other person which may from time to time become a party to this Trust Agreement as Owner Participant pursuant to the terms of Article 9 hereof and Section 16 of the Participation Agreement. -2- "Trust Agreement" or "this Trust Agreement" means this Trust Agreement --------------- -------------------- (Delta 1994-1) dated as of April 1, 1994, as amended and restated as of March 1, 1996, as supplemented or amended from time to time, as herein provided, including as supplemented by the Trust Agreement Supplement. "Trust Agreement and Trust Indenture Supplement" or "Trust Agreement ------------------------------------------------------------------- Supplement" means the Trust Agreement and Trust Indenture Supplement (Delta ---------- 1994-1) dated April 12, 1994, as such Trust Agreement and Trust Indenture Supplement shall be amended and supplemented from time to time and any other supplement to the Trust Agreement and Indenture, substantially in the form of Exhibit A to the Original Indenture, which should particularly describe any Replacement Airframe or Replacement Engine included in the Trust Estate and the Indenture Estate. "Trust Estate" means all estate, right, title and interest of the ------------ Owner Trustee in and to the Aircraft, the Original Documents, the Lease, any Lease Supplement, the Purchase Agreement, the Participation Agreement, the Purchase Agreement Assignment, the Manufacturer's warranty bills of sale referred to in Section 2 of the Purchase Agreement Assignment, the Seller's bill of sale with respect to the Aircraft, the Consent and Agreement, the Engine Consent and Agreement and the Bills of Sale, including, without limitation, all amounts of Basic Rent and Supplemental Rent, insurance proceeds (other than liability insurance proceeds payable to or for the benefit of WTC, the Owner Participant, the Holders or the Indenture Trustee) and requisition, indemnity or other payments of any kind for or with respect to the Aircraft (except amounts owing to the Owner Participant, to the Indenture Trustee or to WTC pursuant to Section 6(b), 6(c) or 14 of the Participation Agreement). Notwithstanding the foregoing, "Trust Estate" does not include any Excepted Payments. SECTION 1.02 Reference to Lease or Participation Agreement. For all --------------------------------------------- purposes of this Trust Agreement the following terms have the meanings specified in the Lease (or the Participation Agreement with respect to the terms "Bills of Sale", "Closing Date", "Seller" and "Tax"), except that the term "Owner Trustee" is to be substituted for the term "Lessor" in any such definition: -3- "Act" "Interim Refinancing Loan "Affiliate" Participant" "Aircraft" "Lease Supplement" "Airframe" "Lessee" "Basic Rent" "Lessor's Cost" "Basic Term" "Lien" "Bills of Sale" "Manufacturer" "Business Day" "Operative Documents" "Certificates" "Original Documents" "Citizen of the "Original Indenture" United States" "Original Participation Agreement" "Consent and Agreement" "Participation Agreement" "Delivery Date" "Purchase Agreement" "Engine" "Purchase Agreement Assignment" "Engine Consent "Refunding Date" and Agreement" "Renewal Term" "Event of Default" "Responsible Officer" "Event of Loss" "Stipulated Loss Value" "FAA" "Supplemental Rent" "Indemnity Agreement" "Tax" or "Taxes" "Interim Refinancing Loan "Termination Value" Certificate" ARTICLE 2. AUTHORITY; DECLARATION OF TRUST BY OWNER TRUSTEE SECTION 2.01 Authorization. The Owner Participant hereby authorizes and ------------- directs the Owner Trustee, and the Owner Trustee, as Owner Trustee hereunder, hereby agrees, (i) to execute and deliver this Trust Agreement, the Participation Agreement, the Indenture, the Certificates, the Lease, the other Operative Documents to which it is a party and all other documents (including UCC financing statements and amendments) to which the Owner Trustee is a party (in the respective forms in which they are delivered from time to time by the Owner Participant to the Owner Trustee) necessary or desirable in order to consummate the transactions contemplated hereby and thereby, and (ii) subject to the terms of this Trust Agreement, to exercise the rights and perform the duties of the Lessor under the Lease and its duties under the Participation Agreement and the Indenture as set forth therein. SECTION 2.02 Declaration of Trust. WTC hereby declares that it holds and -------------------- will continue to hold the Trust Estate as Owner Trustee upon the trusts hereinafter set forth for the use and benefit of the Owner Participant, subject, however, to the provisions of and the Lien created by the Indenture. -4- ARTICLE 3. PAYMENTS TO OWNER PARTICIPANT SECTION 3.01 Payments From Trust Estate Only. Except as provided in ------------------------------- Section 7.01 hereof, all payments to be made by the Owner Trustee under this Trust Agreement shall be made only from the income and the proceeds from the Trust Estate and only to the extent that the Owner Trustee shall have received sufficient income or proceeds from the Trust Estate to make such payments. The Owner Participant agrees that it will look solely to the income and proceeds from the Trust Estate to the extent available for distribution to the Owner Participant as herein provided and, except as provided in Section 7.01 hereof, that WTC is neither personally liable to the Owner Participant for any amounts payable under this Trust Agreement nor, except as provided in Section 7.01 hereof, subject to any liability under this Trust Agreement. SECTION 3.02 Method of Payment. All amounts payable to the Owner ----------------- Participant pursuant to this Trust Agreement shall be payable at the Corporate Trust Administration office of the Owner Trustee in Wilmington, Delaware, or at the corporate trust office of any successor owner trustee in the United States of America, in immediately available funds. Notwithstanding the foregoing, the Owner Trustee will pay all amounts payable by the Owner Trustee hereunder to the Owner Participant (including all amounts distributed pursuant to Article 5 of this Trust Agreement) on the day received (or on the next succeeding Business Day if the funds to be so distributed shall not have been received by the Owner Trustee prior to 12:00 Noon E.S.T. or E.D.T., as the case may be, and which funds the Owner Trustee shall not have been reasonably able to distribute to the Owner Participant on the day received) as provided in Schedule A to the Participation Agreement or in such other manner as the Owner Participant may, from time to time, direct in writing, provided, however, that, except as -------- ------- otherwise instructed in writing by the Owner Participant, the Owner Trustee shall invest overnight in investments permitted under Section 24 of the Lease all funds received by it at or later than 12:00 Noon E.S.T. or E.D.T., as the case may be, and which funds the Owner Trustee shall not have been reasonably able to distribute to the Owner Participant on the day received. ARTICLE 4. EXECUTION OF DOCUMENTS; ISSUANCE OF CERTIFICATES SECTION 4.01 Authorization. The Owner Participant hereby authorizes and ------------- directs the Owner Trustee to, and the Owner Trustee agrees for the benefit of the Owner Participant that on the Refunding Date it will, as Owner Trustee hereunder, subject to due compliance with the terms of Section 4.02 of this Trust Agreement: -5- (a) execute and deliver the Lease, the Indenture, the Participation Agreement and all other such instruments, documents or certificates and take all such other actions in accordance with the direction of the Owner Participant as the Owner Participant may deem necessary or advisable in connection with the transactions contemplated by the Participation Agreement; and (b) issue and deliver to the Indenture Trustee for authentication and further delivery to each Holder the Certificate or Certificates to be issued to it, in the amounts and otherwise as provided in Sections 2.04, 2.06, 2.07, 2.09 and 2.11 of the Indenture; the taking of any such action by the Owner Trustee in the presence of the Owner Participant or its counsel shall evidence, conclusively, the direction of the Owner Participant. SECTION 4.02 Conditions. The right and obligation of the Owner Trustee to ---------- take the action required by Section 4.01 hereof with respect to the Aircraft and the Certificates shall be subject to the conditions precedent that the terms and conditions of Section 3 of the Participation Agreement shall have been complied with in a manner satisfactory to the Owner Trustee and to the Owner Participant (or waived thereby), and the Owner Participant (acting directly or through special counsel) shall have so notified the Owner Trustee. ARTICLE 5. RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST ESTATE SECTION 5.01 Cross Reference to Indenture. Until the Indenture shall have ---------------------------- been terminated pursuant to Section 14.01 thereof or until the Aircraft shall have been released from the lien created under the Indenture pursuant to the terms thereof (i) any payment distributed to the Owner Trustee pursuant to clause "second" of Section 5.01 of the Indenture shall be paid to the Owner Participant by the Indenture Trustee by wire transfer of such funds to the account of the Owner Participant set forth in Schedule A to the Participation Agreement and (ii) any other payment received by the Owner Trustee, as Owner Trustee hereunder, shall be applied as provided in Article V of the Indenture. Excepted Payments received by the Owner Trustee, as Owner Trustee hereunder, for the Owner Participant shall be paid to the Owner Participant as provided in Schedule A to the Participation Agreement or as otherwise directed by the Owner Participant in writing. Excepted Payments payable to WTC shall be retained by WTC. After the Indenture shall have been terminated pursuant to Section 14.01 thereof, any payment (other than Excepted Payments) received by the Owner Trustee, as Owner Trustee hereunder, any payments received from the Indenture Trustee and any other amount received for the application or distribution of which no provision -6- is made herein, shall be distributed forthwith upon receipt by the Owner Trustee in the following order of priority: first, so much of such payment as shall be ----- required to reimburse the Owner Trustee for any expenses not otherwise reimbursed as to which the Owner Trustee is entitled to be so reimbursed pursuant to the provisions hereof, or indemnified from the Trust Estate pursuant to the penultimate sentence of Section 8.01 hereof, shall be retained by the Owner Trustee; and second, the balance, if any, shall be paid to the Owner ------ Participant as provided in Schedule A to the Participation Agreement or as otherwise directed by the Owner Participant in writing. ARTICLE 6. DUTIES OF THE OWNER TRUSTEE SECTION 6.01 Notice of Event of Default or Indenture Event of Default. In -------------------------------------------------------- the event the Owner Trustee shall have knowledge of an Indenture Event of Default or an Event of Default or an event or condition which after notice or lapse of time or both would become an Indenture Event of Default or an Event of Default, the Owner Trustee shall give written notice, upon first knowledge thereof and in no event later than five Business Days after the Owner Trustee shall have such knowledge of such Event of Default or Indenture Event of Default or such event or condition to the Owner Participant, Lessee and the Indenture Trustee by telegram, telex or other written telecommunication or by telephone followed by prompt written notice thereof by first-class registered or certified mail, postage prepaid, provided that in the case of an event which with the -------- passage of time would constitute an Indenture Event of Default referred to in paragraph (c) or (e) of Section 7.01 of the Indenture relating to the Owner Trustee, such notice shall in no event be furnished later than ten days after the Owner Trustee shall first have knowledge of such event. Subject to the terms of Section 6.03 hereof, the Owner Trustee shall take such action or refrain from taking such action with respect to such Event of Default or Indenture Event of Default or such event or condition, not inconsistent with the provisions of the Indenture, as the Owner Trustee shall be instructed in writing by the Owner Participant. For all purposes of this Trust Agreement, in the absence of actual knowledge of an officer of the Owner Trustee in its Corporate Trust Administration Department, the Owner Trustee shall not be deemed to have knowledge of an Event of Default or an Indenture Event of Default or of any event or condition which after notice or lapse of time or both would become an Event of Default or an Indenture Event of Default, unless notified in writing in the manner and at the address specified in Section 12.05 hereof by the Owner Participant, the Indenture Trustee or Lessee. -7- SECTION 6.02 Action Upon Instructions. Subject to the terms of Sections ------------------------ 6.01 and 6.03 hereof, upon the written instructions at any time and from time to time of the Owner Participant, the Owner Trustee shall take or refrain from taking such action, not inconsistent with provisions of the Indenture, as may be specified in such instructions. SECTION 6.03 Indemnification. The Owner Trustee shall not be required to --------------- take any action or refrain from taking any action under Section 6.01 or 6.02 hereof (other than as specified in the second and fourth sentences of Section 5.01 hereof and the first sentence of Section 6.01) unless the Owner Trustee shall have been indemnified by Lessee or the Owner Participant, in manner and form and to the extent reasonably satisfactory to the Owner Trustee, against any liability, cost or expense (including reasonable legal fees and expenses) which may be incurred in connection therewith, provided that the written undertaking of indemnification by the Owner Participant shall be satisfactory to the Owner Trustee. The Owner Trustee shall not be required to take any action under Section 6.01 or 6.02 hereof (other than as specified in the second and fourth sentences of Section 5.01 hereof and the first sentence of Section 6.01 hereof), nor shall any other provision of this Trust Agreement be deemed to impose a duty on the Owner Trustee to take any action, if the Owner Trustee shall have been advised by counsel that such action is contrary to the terms hereof or of the Lease or the Indenture or is contrary to law and the Owner Trustee has delivered to the Owner Participant written notice of the basis of its refusal to act. SECTION 6.04 No Duties Except as Specified in Trust Agreement or --------------------------------------------------- Instructions. The Owner Trustee shall not have any duty or obligation to manage, - ------------ control, use, sell, dispose of or otherwise deal with the Aircraft or any other part of the Trust Estate, or otherwise to take or to refrain from taking any action under, or in connection with, the Lease except as expressly provided by the terms of the Lease, the Indenture, this Trust Agreement, the Purchase Agreement Assignment or as expressly provided in written instructions from the Owner Participant received pursuant to the terms of Section 6.01 or 6.02 hereof; and no implied duties or obligations shall be read into this Trust Agreement against the Owner Trustee. WTC nevertheless agrees that, upon a Responsible Officer of the Owner Trustee obtaining actual knowledge thereof, it will, at its own cost and expense, promptly take such action as may be necessary to discharge duly all Lessor's Liens attributable to it in its individual capacity and will claim no indemnity therefor hereunder or under the Participation Agreement. SECTION 6.05 No Action Except Under Lease, Trust Agreement or ------------------------------------------------ Instructions. The Owner Trustee shall have no power, right or authority to, and - ------------ the Owner Trustee agrees that it will not, manage, control, use, sell, dispose of or otherwise deal with the Aircraft or any other property which is part of the Trust Estate except (i) as expressly required by the terms hereof or of the -8- Participation Agreement, the Lease, the Indenture or the Purchase Agreement Assignment or (ii) in accordance with the express terms hereof or with written instructions from the Owner Participant pursuant to Section 6.01 or 6.02 hereof. SECTION 6.06 Preparation of Tax Returns. The Owner Trustee shall be -------------------------- responsible for the keeping of all appropriate books and records relating to the receipt and disbursement of all monies under this Trust Agreement or any agreement contemplated hereby. The Owner Trustee agrees at the expense of the Lessee to file an application with the Internal Revenue Service for a taxpayer identification number with respect to the trust created by this Trust Agreement. The Owner Trustee will at the request of the Owner Participant and at the expense of the Lessee cause to be prepared all income tax returns required to be filed with respect to the trust created hereby and shall execute and file such returns; provided, however, that the Owner Trustee shall send a completed copy -------- ------- of such return to the Owner Participant not more than 60 nor less than 30 days prior to the due date of the return provided that the Owner Trustee shall have -------- timely received all necessary information to complete and deliver to the Owner Participant such return. The Owner Participant, upon request, will furnish the Owner Trustee with all such information as may be required from the Owner Participant in connection with the preparation of such income tax returns. The Owner Trustee shall keep copies of all returns delivered to or filed by it. SECTION 6.07 Satisfaction of Conditions Precedent. Anything herein to the ------------------------------------ contrary notwithstanding, the Owner Trustee shall upon instructions of the Owner Participant comply with the provisions of Section 4.01 hereof upon the satisfaction of all the applicable conditions precedent specified in Section 4.02 hereof and in Section 3 of the Participation Agreement. SECTION 6.08 Fixed Investment Trust. Notwithstanding anything herein to ---------------------- the contrary, the Owner Trustee shall not be authorized and shall have no power to "vary the investment" of the Owner Participant within the meaning of Treasury Regulations Section 301.7701-4(c)(1), it being understood that the Owner Trustee shall have the power and authority to fulfill its obligations under Section 3.02 hereof, Section 22 of the Participation Agreement and Section 24 of the Lease. ARTICLE 7. THE OWNER TRUSTEE SECTION 7.01 Acceptance of Trusts and Duties. WTC accepts the trusts ------------------------------- hereby created and agrees to perform the same as Owner Trustee but only pursuant to the terms of this Trust Agreement and the terms of the Indenture applicable to it. The Owner Trustee also agrees to receive all monies, and to disburse all monies actually received by it, constituting part of the Trust Estate -9- pursuant to the terms of this Trust Agreement. WTC shall not be answerable or accountable under any circumstances, except (a) for its own willful misconduct or gross negligence (including, without limitation, in connection with any activities of the Owner Trustee in violation of Section 6.05 hereof), (b) for the inaccuracy of any representation or breach of any warranty or covenant, made in its individual capacity, set forth in this Trust Agreement, the Participation Agreement, the Indenture or the Lease, (c) as arising from the failure by WTC to perform its obligations under the last sentence of Section 6.04 hereof, (d) for taxes, fees or other charges on, based on, or measured by, any fees, commissions or compensation received by WTC in connection with the transactions contemplated by this Trust Agreement, the Participation Agreement, the Indenture or the Lease, (e) for any failure to use ordinary care in receiving or disbursing funds or in connection with its obligation to invest funds pursuant to Section 22 of the Participation Agreement, Section 24 of the Lease, or Section 3.02 of this Trust Agreement, or (f) for any liability on the part of the Owner Trustee arising out of its negligence or willful or negligent misconduct in connection with its obligations under Section 6.01, 6.06 or 10.02 of this Trust Agreement or Section 3.05(a) or 3.05(b) of the Indenture. Unless otherwise expressly provided herein or in the Participation Agreement or the Indenture, WTC shall have no obligation to advance its individual funds for any purpose, and the Owner Trustee shall have no obligation to distribute to the Owner Participant, Lessee or any third party any amounts to be paid to the Owner Trustee until such amounts are collected by the Owner Trustee. SECTION 7.02 Absence of Duties. Except in accordance with written ----------------- instructions furnished pursuant to Section 6.01 or 6.02 hereof and except as explicitly provided in, and without limiting the generality of, Sections 4.01 and 6.04 hereof, and subject to Section 3.05(b) of the Indenture, the Owner Trustee shall have no duty (i) to see to any registration of the Aircraft or any recording or filing of the Lease or of this Trust Agreement or of any other Operative Document, or to see to the maintenance of any such registration, recording or filing, except that the Owner Trustee shall complete, on the basis of information timely furnished to the Owner Trustee or the Owner Participant pursuant to the Participation Agreement or the Lease, and submit on a timely basis reports relating to the continued eligibility for registration, identification and activity of the Aircraft or similar reports, which may from time to time be required by the FAA or other government or governmental authority having jurisdiction (with copies to the Owner Participant), (ii) to see to any insurance on the Aircraft or to effect or maintain any such insurance, whether or not Lessee shall be in default with respect thereto, (iii) except as provided in Section 7(h) of the Participation Agreement, Section 3.05(a) or (b) of the Indenture or Section 6.04 or 7.01 hereof, to see to the payment or discharge of any tax, assessment or other governmental charge or any Lien of any kind owing with respect to, or assessed or levied against, any -10- part of the Trust Estate or the Indenture Estate, or, except as provided in Section 6.06 hereof, the filing of any returns or reports in connection therewith, (iv) to confirm or verify any financial statements of Lessee or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of Lessee's covenants under the Lease with respect to the Aircraft. Notwithstanding the foregoing, the Owner Trustee will furnish to the Indenture Trustee (so long as the Indenture is in effect) and to the Owner Participant, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to or by the Owner Trustee under the Lease or any other Operative Document except to the extent an Operative Document requires delivery thereof by some other person directly to the Owner Participant or the Indenture Trustee. SECTION 7.03 No Representations or Warranties as to Aircraft or Documents. ------------------------------------------------------------ THE OWNER TRUSTEE AND WTC MAKE (i) NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OR PARTICULAR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, THE ABSENCE OF ANY STRICT LIABILITY OBLIGATION OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that WTC hereby represents and warrants to the Owner Participant that (a) on the Delivery Date the Owner Trustee received whatever title was conveyed to it by Lessee and that (b) the Aircraft was on the Delivery Date and shall be on the Refunding Date free of Lessor's Liens attributable to WTC and (ii) no representation or warranty as to the validity, legality or enforceability of this Trust Agreement, the Indenture, the Trust Agreement and Trust Indenture Supplement, the Participation Agreement, the Certificates, the Lease or the Lease Supplement, the Purchase Agreement or the Purchase Agreement Assignment or any other document or instrument referred to herein or as to the correctness of any statement contained in any thereof, except to the extent that any such statement is expressly made herein or therein as a representation by WTC and except that WTC hereby represents and warrants to the Owner Participant that (x) this Trust Agreement has been, and, assuming the due authorization, execution and delivery of this Trust Agreement by the Owner Participant, each of said other specified documents has been or will be, executed and delivered by one of its officers who is and will be duly authorized to execute and deliver such document on its behalf, both in its individual capacity and as Owner Trustee and (y) WTC has all corporate power and authority to execute, deliver and perform this Trust Agreement and (z) assuming the due authorization, execution and delivery of this Trust Agreement by the Owner Participant, this Trust Agreement constitutes the legal, valid and binding obligation of WTC enforceable against WTC in accordance with its terms except as such enforceability may be limited by general equitable principles -11- and by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors rights generally from time to time in effect. SECTION 7.04 No Segregation of Monies; No Interest. Monies received by the ------------------------------------- Owner Trustee hereunder need not be segregated in any manner except to the extent required by law, or except as provided in written instructions from the Owner Participant, and shall be invested as provided in Section 3.02 hereof, Section 22 of the Participation Agreement or Section 24 of the Lease. SECTION 7.05 Reliance; Agent; Advice of Counsel. The Owner Trustee shall ---------------------------------- incur no liability in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper reasonably believed by it to be genuine and reasonably believed by it to be signed by the proper party or parties. The Owner Trustee may accept a copy of a resolution of the Board of Directors of any party to the Participation Agreement, certified by the Secretary or an Assistant Secretary of such party as duly adopted and in full force and effect, as conclusive evidence that such resolution has been duly adopted by said Board and that the same is in full force and effect. As to any fact or matter the manner of ascertainment of which is not specifically described herein, the Owner Trustee may, absent actual knowledge to the contrary, for all purposes hereof rely on a certificate, signed by the President, or by any Senior Vice President or Vice President, signing with the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, of Lessee, as to such fact or matter, and such certificate shall constitute full protection to the Owner Trustee for any action taken or omitted to be taken by it in good faith in reliance thereon. In the administration of the trusts hereunder, the Owner Trustee may execute any of the trusts or powers hereof and perform its powers and duties hereunder directly or through agents or attorneys and, at the expense of the Trust Estate, consult with independent counsel, accountants and other skilled persons to be selected and employed by it, and the Owner Trustee shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the written advice or opinion of any such counsel, accountants or other skilled persons appointed by it with due care hereunder. SECTION 7.06 Not Acting in Individual Capacity. In carrying out the trusts --------------------------------- hereby created, the Owner Trustee will act solely as owner trustee hereunder and not in its individual capacity except as expressly provided herein or in the other Operative Documents to which it is a party; and all persons, other than the Owner Participant as provided in this Trust Agreement and the Indenture, having any claim against the Owner Trustee by reason of the transactions contemplated hereby shall look only to the Trust Estate for payment or satisfaction thereof, except to the extent provided in the penultimate sentence of Section 7.01 hereof. -12- SECTION 7.07 Compensation. Except as provided in Section 6.03 or Section ------------ 8.01 hereof, each of WTC and the Owner Trustee agrees that it shall have no right against the Owner Participant or the Trust Estate for any fee as compensation for its services hereunder. ARTICLE 8. INDEMNIFICATION OF WTC BY OWNER PARTICIPANT SECTION 8.01 Owner Participant to Indemnify WTC. Whether or not any of the ---------------------------------- transactions contemplated hereby or by the Participation Agreement shall be consummated, the Owner Participant shall assume liability for, and shall indemnify, protect, save and keep harmless WTC and its successors, assigns, agents and servants, from and against any and all liabilities, obligations, losses, damages, penalties, taxes (excluding any Taxes, as defined in the Participation Agreement, which are not required to be indemnified by Lessee pursuant to Section 6(b) of the Participation Agreement (disregarding for purposes of this Section 8.01, clause (ix)(to the extent such voluntary transfer or disposition by the Owner Trustee is made at the direction of the Owner Participant) and clause (xi) of Section 6(b)) and excluding any taxes payable by WTC on or measured by any compensation received by WTC for its services hereunder), claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees and expenses) of any kind and nature whatsoever which may be imposed on, incurred by or asserted against WTC (whether or not also indemnified against by any other person under any other document) relating to or arising out of the Original Documents, this Trust Agreement, the Indenture, the Trust Agreement and Trust Indenture Supplement, the Certificates, the Lease or the Participation Agreement or the enforcement of any of the terms of any thereof, or relating to or arising out of the manufacture, purchase, acceptance, non-acceptance, rejection, ownership, delivery, lease, possession, use, operation, condition, sale, return or other disposition of the Aircraft (including, without limitation, latent and other defects, whether or not discoverable, and any claim for patent, trademark or copyright infringement), or relating to or arising out of the administration of the Trust Estate or the action or inaction of the Owner Trustee hereunder, or under the Indenture or under the Lease, except only in the case of (i) gross negligence or willful misconduct on the part of the Owner Trustee or WTC or (ii) the breach or inaccuracy of any of WTC's representations or warranties or covenants referred to in Section 7.01(b) or 7.03 hereof or in the second sentence of Section 6.04 hereof, or (iii) the breach or inaccuracy of any of the representations or warranties or covenants of WTC in any of the other Operative Documents, or (iv) for the failure to use ordinary care to receive or disburse funds or in connection with its obligation to invest funds pursuant to Section 22 of the Participation Agreement, Section 24 of the Lease or Section 3.02 of this Trust Agreement, or (v) any liability on the part of the -13- Owner Trustee arising out of its negligence or willful or negligent misconduct in connection with its obligations under Section 6.01, 6.06 or 10.02 of this Trust Agreement or Section 3.05(a) or (b)(ii) or (iii) of the Indenture, or (vi) as otherwise excluded by the terms of Section 6(c) of the Participation Agreement from the Lessee's general indemnity to the Owner Trustee under said Section; provided that none of the foregoing exceptions shall limit the -------- obligation of the Owner Participant to indemnify WTC for actions taken in accordance with the written instructions of the Owner Participant; and provided, -------- further, that before asserting its right to indemnification, if any, pursuant to - ------- this Section 8.01, WTC shall first demand its corresponding right to indemnification pursuant to Section 6 of the Participation Agreement (but need not exhaust any or all remedies available thereunder). The indemnities contained in this Section 8.01 extend to WTC and shall not be construed as part of the Trust Estate or the Indenture Estate (except to the extent, if any, that WTC has been reimbursed from the Trust Estate or Indenture Estate for amounts covered by the indemnities in this Section 8.01). The indemnities contained in this Section 8.01 shall survive the termination of this Trust Agreement. In addition, if necessary, WTC shall be entitled to indemnification from the Trust Estate for any liability, obligation, loss, damage, penalty, tax, claim, action, suit, cost, expense or disbursements indemnified against pursuant to this Section 8.01 to the extent not reimbursed by Lessee, the Owner Participant or others, but without releasing any of them from their respective agreements of reimbursement; and to secure the same WTC shall have a Lien on the Trust Estate, which shall be subject to any interest therein of the Indenture Trustee or any Holder, but which shall be prior to any interest therein of the Owner Participant. The payor of any indemnity under this Section 8.01 shall be subrogated to any right of the person indemnified in respect of the matter as to which such indemnity was paid. ARTICLE 9. TRANSFER OF OWNER PARTICIPANT'S INTERESTS SECTION 9.01 Conditions. Prior to the termination or expiration of the ---------- Lease, the Owner Participant shall not assign, convey or otherwise transfer any of its right, title or interest in and to this Trust Agreement, the properties of the Owner Trustee pledged or mortgaged as part of the Indenture Estate, the Participation Agreement or the Indemnity Agreement; provided, however, that the -------- ------- Owner Participant may after the Delivery Date convey to any one person (hereinafter in this Article 9 referred to as the "Transferee") all, but not less than all, of its right, title and interest in and to this Trust Agreement, the properties of the Owner Trustee pledged or mortgaged as part of the Indenture Estate, the Participation Agreement or the Indemnity Agreement, but only if (i) the Transferee is a Citizen of the United States -14- (if and so long as such citizenship is required under the Act to permit the United States registration of the Aircraft (it being understood that the existence of any such requirement shall be determined without giving consideration to any provision of the Act (or any superseding statute) which permits United States registration of an Aircraft based on conditions which impose restrictions on the location and use of the Aircraft or otherwise restrict the ability of an air carrier to operate the Aircraft in the ordinary course of its business)), or shall use a voting powers trust or similar arrangement in order to hold the Trust Estate such that the Aircraft can be registered in the United States without imposing restrictions on the location or use of the Aircraft, the ability of an air carrier to operate the Aircraft in the ordinary course of its business or the ability of Lessee to exercise its rights under the Operative Documents, and has the requisite power and authority to enter into and carry out the transactions contemplated hereby, (ii) the Transferee enters into an agreement or agreements (such agreement to include representations and warranties (and, with respect to citizenship, to reflect whether or not the Transferee is making use of a voting powers trust or similar arrangement) substantially similar to those made by the original Owner Participant in the Participation Agreement as reasonably requested by the Indenture Trustee, including but not limited to, the representation and warranty contained in Sections 7(b)(iii), (iv) and (viii) of the Participation Agreement, assuming the truth of the representations, warranties and covenants contained in the Certificates, Sections 6(a)(xx) and 7(e) of the Participation Agreement, Section 10.06 of the Indenture and Section 6.06 of the Pass Through Agreement and to be accompanied by a favorable opinion of counsel with respect to the due authorization, execution, delivery and enforceability of such agreement and such other matters as may be reasonably requested), whereby the Transferee confirms that it shall be deemed a party to the Participation Agreement and a party to this Trust Agreement and agrees to be bound by all the terms of, and to undertake all of the obligations of, the Owner Participant making such conveyance contained in the Participation Agreement and this Trust Agreement to the extent of the right, title or interest being conveyed and, if not otherwise amenable to service of process in the State of New York, appoints CT Corporation System, 1633 Broadway, New York, N.Y. 10019, as its agent for service of process in connection with the Participation Agreement and this Trust Agreement, (iii) such conveyance does not violate any provision of the Act, or other law or regulation or create a relationship which would be in violation thereof, assuming the truth of the representations, warranties and covenants contained in Sections 6(a)(xx) and 7(e) of the Participation Agreement, Section 10.06 of the Indenture and Section 6.06 of the Pass Through Agreement and the Certificates, (iv) the Transferee is not an employee benefit plan subject to ERISA or an individual retirement account or a plan subject to Section 4975 of the Code and (v) the Transferee is not, without the consent of Lessee (which consent shall not be unreasonably withheld), an airline (or other commercial aircraft operator or -15- Affiliate thereof) which is in direct competition with Lessee, and (vi) the Transferee is (A) a bank, trust company, insurance company, pension trust, finance or leasing corporation or other corporation or financial institution, in each case with a combined capital and surplus or net worth, as the case may be, of at least $75,000,000 (a "Permitted Institution"), or (B) (i) a corporation which is a member of the same consolidated group for tax purposes as such original Owner Participant (a "Permitted Affiliate"), or (ii) a corporation which is the subsidiary of a Permitted Institution, under either case in this clause (B) the obligations of which are guaranteed by the original Owner Participant or a Permitted Institution, as the case may be, pursuant to a written guaranty together with a favorable opinion of counsel to the guarantor (such guaranty and opinion to be in form and substance reasonably satisfactory to Lessee, WTC and, so long as the Lien of the Indenture has not been released, the Indenture Trustee) unless such transferee corporation has a combined capital and surplus or net worth, as the case may be, of at least $75,000,000. Upon any such conveyance by the Owner Participant as above provided and as provided in Section 16 of the Participation Agreement, the Transferee shall be deemed an Owner Participant for all purposes of this Trust Agreement, and shall be deemed to have made that portion of the Commitment for the Aircraft previously made by the Owner Participant making such conveyance and represented by the interest being conveyed and each reference herein to the Owner Participant making such conveyance shall thereafter be deemed a reference to the Transferee for all purposes. If the Owner Participant shall make any conveyance to a Transferee meeting the requirements of clause (A) or (B) above, the Owner Participant shall be released (except to the extent of any guaranty provided by it under clause (vi)(B) of the preceding paragraph) from all liabilities and obligations under this Trust Agreement and any other Operative Document to the extent such liabilities and obligations arise after such transfer; provided that -------- the Owner Participant (and its Affiliates, successors, assigns, agents, servants, representatives, directors and officers) will continue to have the benefit of any rights or indemnities vested or relating to events prior to such transfer. Notwithstanding anything to the contrary contained in this Section 9.01, the merger or consolidation of the Owner Participant with any other corporation or association (the "New Corporation") shall not constitute an assignment, conveyance or transfer for purposes of this Section 9.01; provided, -------- however, the Owner Participant shall give notice as promptly as practicable to - ------- the Owner Trustee, the Indenture Trustee, and Lessee of the consummation of the merger or consolidation, which notice shall be given, subject to any applicable securities laws, upon the earliest of (i) such information becoming publicly available, (ii) any action or consent by the Owner Participant or Lessee under the Operative Documents required in connection with such merger or consolidation, and (iii) the consummation of such merger or consolidation; provided, however, that such merger or consolidation shall not cause any right, - -------- ------- title or interest of the -16- Owner Participant in and to this Trust Agreement, the properties of the Owner Trustee pledged or mortgaged as part of the Indenture Estate, the Participation Agreement or the Indemnity Agreement to become an asset (within the meaning of ERISA and any applicable rules and regulations) of an employee benefit plan subject to Title I of ERISA or of an individual retirement account or a plan subject to Section 4975 of the Code. If the New Corporation is an airline operating regularly scheduled commercial jet passenger or cargo transport service on domestic United States routes or an Affiliate of such an airline and Lessee does not approve of the New Corporation as the Transferee of the Owner Participant, the Owner Participant and Lessee shall have the respective rights and obligations set forth in Section 16 of the Participation Agreement. All expenses in connection with any such transfer shall be for the account of the Owner Participant. The Owner Participant may at any time assign, convey or otherwise transfer any or all of its right, title or interest in and to the residual value of the Aircraft (including without limitation a transfer of all or a portion of (1) any net proceeds from a sale or re-lease of the Aircraft whether at the end of the Basic Term or the Renewal Term, if any, or pursuant to any provision of the Lease or otherwise or (2) the net proceeds received as a result of an Event of Loss or an Event of Default) and any transferee thereof need not satisfy the requirements for a "Transferee" hereunder so long as the Owner Participant otherwise remains the holder of the beneficial interest in the Trust Estate. If there is more than one Owner Participant, no assignment, conveyance or other transfer by an Owner Participant of any of its right, title or interest in and to this Trust Agreement or the Trust Estate shall be valid unless each other Owner Participant's prior written consent is given to such assignment, conveyance or other transfer, which consent may be withheld in such other Owner Participant's sole discretion. SECTION 9.02 Notice. Any Owner Participant proposing to transfer its ------ interests hereunder pursuant to Section 9.01 hereof shall give written notice to Lessee, the Owner Trustee and the Indenture Trustee, specifying the name and address of the Transferee and the facts necessary to determine compliance with Section 9.01 hereof, provided, however, that in the case of a transfer to a -------- ------- Permitted Affiliate or in the case of a transfer of all or a substantial portion of the Owner Participant's aircraft lease portfolio to an entity that is not an airline or commercial operator of aircraft or an Affiliate thereof, such notice may be given not more than 10 days following such transfer. -17- ARTICLE 10. SUCCESSOR OWNER TRUSTEES; APPOINTMENT OF SEPARATE TRUSTEES SECTION 10.01 Resignation of Owner Trustee; Appointment of Successor. (a) ------------------------------------------------------ The Owner Trustee or any successor Owner Trustee shall resign immediately upon obtaining actual knowledge of any facts which would cast reasonable doubt upon its continuing status as a Citizen of the United States (in which case the Owner Participant will promptly appoint a successor Owner Trustee pursuant to Section 15(g)(C) of the Participation Agreement), and may resign at any time, by giving at least 60 days' prior written notice to the Indenture Trustee and to each Owner Participant, such resignation in each such case to be effective on the date the trusts hereunder are assumed by a successor Owner Trustee. In addition, the Owner Participant may at any time remove the Owner Trustee without cause by an instrument in writing delivered to the Owner Trustee and the Indenture Trustee. In case of the resignation or removal of the Owner Trustee, the Owner Participant may appoint a successor Owner Trustee by an instrument signed by the Owner Participant. If a successor Owner Trustee shall not have been appointed within 30 days after such resignation or removal, the Owner Trustee, the Owner Participant or the Indenture Trustee may apply to any court of competent jurisdiction to appoint a successor Owner Trustee to act until such time, if any, as a successor shall have been appointed as above provided. Any successor Owner Trustee so appointed by such court shall immediately and without further act be superseded by any successor Owner Trustee appointed as above provided. (b) Any successor Owner Trustee, whether appointed by a court or by the Owner Participant, shall execute and deliver to the predecessor Owner Trustee, with a copy to the Owner Participant and the Indenture Trustee, an instrument accepting such appointment, and thereupon such successor Owner Trustee, without further act, shall become vested with all the estates, properties, rights, powers, duties and trusts of the predecessor Owner Trustee hereunder in the trusts hereunder, with like effect as if originally named the Owner Trustee herein; but nevertheless, upon the written request of such successor Owner Trustee, such predecessor Owner Trustee shall execute and deliver an instrument transferring to such successor Owner Trustee, and such predecessor Owner Trustee shall duly assign, transfer, deliver and pay over to such successor Owner Trustee, all the estates, rights, powers, duties, monies or other property then held by such predecessor Owner Trustee hereunder, upon the trusts herein expressed. Upon the appointment of any successor Owner Trustee hereunder, the predecessor Owner Trustee will use its best efforts to cause registration of the Aircraft included in the Trust Estate to be transferred upon the records of the FAA, or other governmental authority having jurisdiction, into the name of the successor Owner Trustee. -18- (c) Any successor Owner Trustee, however appointed, shall (i) be a Citizen of the United States, and (ii) be a bank or trust company organized under the laws of the United States or any State and having its principal place of business in the United States of America, and having a combined capital and surplus of at least $100,000,000, if there be such an institution willing, able and legally qualified to perform the duties of the Owner Trustee hereunder upon reasonable or customary terms. (d) Any corporation into which the Owner Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Owner Trustee shall be a party, or any corporation to which substantially all the corporate trust business of the Owner Trustee may be transferred, shall, subject to the terms of paragraph (c) of this Section 10.01, be the Owner Trustee under this Trust Agreement without further act, provided that such corporation shall not also be -------- the Indenture Trustee. (e) The 60-day notice period specified in the first sentence of paragraph (a) of this Section 10.01 shall be reduced as necessary so that any resignation of the Owner Trustee or any successor Owner Trustee shall be effective prior to the date such Owner Trustee no longer qualifies, or is expected no longer to qualify, as a Citizen of the United States. SECTION 10.02 Appointment of Separate Trustees. (a) At any time or times, -------------------------------- in the event that the Owner Trustee or the Owner Participant shall deem it necessary or prudent or desirable in order to conform to the legal requirements of any jurisdiction in which any part of the Trust Estate may at such time or times be located, the Owner Trustee by an instrument in writing signed by it, shall appoint one or more individuals or corporations approved by the Owner Participant to act as separate trustee or separate trustees of all or any part of the Trust Estate to the full extent that local law makes it necessary or prudent or desirable for such separate trustee or separate trustees to act. (b) The Owner Trustee and the Owner Participant shall execute, acknowledge and deliver all such instruments as may be required by any such separate trustee or separate trustees for more fully confirming such title, rights or duties to such separate trustee or separate trustees. Upon the acceptance in writing of such appointment by any such separate trustee or separate trustees, it, he or they shall be vested with such title to the Trust Estate or any part thereof, and with such rights and duties, as shall be specified in the instrument of appointment, jointly with the Owner Trustee (except insofar as local law makes it necessary or prudent or desirable for any such separate trustee or separate trustees to act alone) subject to all the terms of this Trust Agreement. Any separate trustee or separate trustees may, at any time by an instrument in writing, constitute the Owner Trustee its, their or his attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all -19- discretion on its, their or his behalf and in its, their or his name. Every additional trustee hereunder shall be a Citizen of the United States and, to the extent permitted by law, be appointed and act, and the Owner Trustee and its successors shall act, subject to the following provisions and conditions: (A) all powers, duties, obligations and rights conferred upon the Owner Trustee in respect of the custody, control and management of monies, the Aircraft or documents authorized to be delivered hereunder or under the Participation Agreement shall be exercised solely by the Owner Trustee; (B) all other rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred or imposed upon and exercised or performed by the Owner Trustee and such additional trustee jointly, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (including the holding of title to the Trust Estate) the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by such additional trustee; (C) no power given to, or which it is provided hereby may be exercised by, any such additional trustee shall be exercised hereunder by such additional trustee, except jointly with, or with the consent in writing of, the Owner Trustee; (D) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; (E) the Owner Participant, at any time, by an instrument in writing may remove any such additional trustee. In the event that the Owner Participant shall not have joined in the execution of any such instrument within ten days after the receipt of a written request from the Owner Trustee so to do, the Owner Trustee shall have the power to remove any such additional trustee without the concurrence of the Owner Participant; and the Owner Participant hereby appoints the Owner Trustee its agent and attorney-in-fact for it in such connection in such contingency; and (F) no appointment of, or action by, any additional trustee will relieve the Owner Trustee of any of its obligations under, or otherwise affect any of the terms of, the Indenture or affect the interests of the Indenture Trustee or the Holders in the Indenture Estate. In case such separate trustee shall die, become incapable of acting, resign or be removed, the title to the Trust Estate and all rights and duties of such separate trustee shall, so far as -20- permitted by law, vest in and be exercised by the Owner Trustee, without the appointment of a successor to such separate trustee. (c) All provisions of this Trust Agreement which are for the benefit of the Owner Trustee shall extend to and apply to each separate trustee appointed pursuant to the foregoing provisions of this Section 10.02, including without limitation Article 8 hereof. ARTICLE 11. SUPPLEMENTS AND AMENDMENTS TO THIS TRUST AGREEMENT AND OTHER DOCUMENTS SECTION 11.01 Instructions of Owner Participant; Limitations. At any time ---------------------------------------------- and from time to time, upon the written request of the Owner Participant and subject to the requirements of Section 8(c) of the Participation Agreement (i) the Owner Trustee, together with the Owner Participant making such request, shall execute a supplement hereto for the purposes of adding provisions to, or changing or eliminating provisions of, this Trust Agreement (except Section 12.12 hereof) as specified in such request, (ii) the Owner Trustee shall enter into such amendment of or supplement to the Participation Agreement as specified in such request and (iii) the Owner Trustee shall, subject to compliance with any applicable provisions of the Indenture, enter into such written amendment of or supplement to the Indenture, the Lease, the Purchase Agreement or the Purchase Agreement Assignment as the other parties thereto may agree to and as may be specified in such request, or execute and deliver such written waiver or modification of the terms of the Indenture or the Lease, as may be specified in such request. Without the written consent of the Owner Participant, the Owner Trustee shall not execute any such supplement, amendment, waiver or modification. Without the consent of Lessee, no such supplement or amendment to this Trust Agreement or waiver or modification of the terms hereof shall permit or require any action contrary to, or disturb, Lessee's rights under the Lease or amend or modify the terms of Section 10.01(a) or 10.01(c) hereof relating to the status of the Owner Trustee as a Citizen of the United States. Without the consent of the Indenture Trustee, this Article and Sections 12.01, 12.02, 12.03, 12.04, 12.12 and 12.13 hereof shall not be amended, and compliance with any provisions thereof shall not be waived by the Owner Participant or the Owner Trustee (unless such amendment or waiver is consented to by the Indenture Trustee) until the final satisfaction and discharge of the Indenture pursuant to the terms thereof. The provisions of this Section 11.01 notwithstanding, the Owner Trustee shall not be required to, and the Owner Trustee agrees for the benefit of the Holders that it will not, execute any amendment which in the reasonable judgment of the Owner Trustee might result in the trusts created hereunder being terminated prior to the release of the Lien of the Indenture on the Trust Estate or prior to the payment in full, as of the date of payment thereof, of the aggregate unpaid principal amount of -21- the Certificates outstanding on such date of payment, together with the accrued and unpaid interest and to premium, if any, thereon and the aggregate amount, if any, of all sums which, if Section 5.03 of the Indenture were applicable, would be entitled to be paid in priority to or on a parity with the payment of principal and interest on such Certificates. A signed copy of each amendment or supplement to this Trust Agreement shall be delivered by the Owner Trustee to the Indenture Trustee, without in any way affecting the Indenture or the Certificates and without imposing any duty on the Indenture Trustee with respect to such amendment or supplement. SECTION 11.02 Owner Trustee Protected. If, in the reasonable opinion of ----------------------- the Owner Trustee, any document required to be executed pursuant to the terms of Section 11.01 hereof adversely affects any right, duty, immunity or indemnity in favor of the Owner Trustee under this Trust Agreement, the Indenture or the Lease, the Owner Trustee may in its discretion decline to execute such document, unless the Owner Trustee is furnished with indemnification from the Lessee or any other party upon terms and in amounts reasonably satisfactory to the Owner Trustee to protect the Trust Estate and the Owner Trustee against any and all liabilities, costs and expenses arising out of the execution of such documents. SECTION 11.03 Request of Substance, Not Form. It shall not be necessary ------------------------------ for any written request furnished pursuant to Section 11.01 hereof to specify the particular form of the proposed documents to be executed pursuant to said Section 11.01, but it shall be sufficient if such request shall indicate the substance thereof. ARTICLE 12. MISCELLANEOUS SECTION 12.01 Termination of Trust Agreement. (a) This Trust Agreement and ------------------------------ the trusts created hereby shall terminate and this Trust Agreement shall be of no further force or effect upon the earlier of (i) the sale or other final disposition by the Owner Trustee of all property constituting part of the Trust Estate and the final distribution by the Owner Trustee of all monies or other property or proceeds constituting part of the Trust Estate in accordance with the terms of Article 5 hereof or (ii) the effective date of the revocation and termination of the trusts as stated in a notice in writing given by the Owner Participant to the Owner Trustee, which date shall not be less than ten nor more than thirty days from the date of mailing such notice; provided, however, that -------- ------- such notice of revocation and termination shall be of no force or effect unless either the Indenture shall have been terminated or the Indenture Trustee shall have consented in writing to such termination and -22- revocation. Notwithstanding the foregoing, this Trust Agreement and the trusts created hereby shall terminate no later than 110 years from the earlier execution of this Trust Agreement by either party hereto; provided, however, -------- ------- that if the trust shall be or become valid under applicable law for a period subsequent to 110 years from the earlier execution of this Trust Agreement by either party hereto or, without limiting the generality of the foregoing, if legislation shall become effective providing for the validity or permitting the effective grant of such trust for a period, in gross, exceeding the period for which such trust is hereinabove stated to extend and be valid, then such trust shall not terminate as provided in the first part of this sentence but shall extend to and continue in effect until, but only if such nontermination and extension shall then be valid under applicable law, such time as the same shall, under applicable law, cease to be valid, whereupon all monies or other property or proceeds constituting part of the Trust Estate shall be distributed in accordance with the terms of Article 5 hereof; otherwise this Trust Agreement and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. (b) Notwithstanding any provisions herein to the contrary, the Owner Participant shall not revoke or terminate this Trust Agreement without the consent of the Indenture Trustee (which consent shall not be unreasonably withheld) until the final satisfaction and discharge of the Indenture pursuant to the terms thereof. In addition, except as otherwise expressly provided herein, the Owner Participant may not withdraw any part of the Trust Estate subject to the Lien of the Indenture prior to the discharge of such Lien with respect to such part of the Trust Estate pursuant to the Indenture, without the consent of the Indenture Trustee. SECTION 12.02 No Legal Title to Trust Estate in Owner Participant. The --------------------------------------------------- Owner Participant shall not have legal title to any part of the Trust Estate. No transfer, by operation of law or otherwise, of any right, title and interest of the Owner Participant in and to the Trust Estate hereunder shall operate to terminate this Trust Agreement or the trusts hereunder or entitle any successor or transferee of the Owner Participant to an accounting or to the transfer to it of legal title to any part of the Trust Estate. SECTION 12.03 Sale of Aircraft by Owner Trustee Is Binding. Any sale or -------------------------------------------- other conveyance of the Aircraft by the Owner Trustee made pursuant to the terms of this Trust Agreement, the Participation Agreement or the Lease shall bind the Owner Participant and shall be effective to transfer or convey all right, title and interest of the Owner Trustee and such Owner Participant in and to the Aircraft sold or conveyed but shall be subject to the Indenture and the rights of the Holders. No purchaser or other grantee shall be required to inquire as to the authorization, necessity, expediency or regularity of such sale or -23- conveyance or as to the application of any sale or other proceeds with respect thereto by the Owner Trustee. SECTION 12.04 Trust Agreement for Benefit of Owner Trustee, the Indenture ----------------------------------------------------------- Trustee and Owner Participant Only. Except as expressly provided herein, - ---------------------------------- nothing in this Trust Agreement, whether express or implied, shall be construed to give to any person other than the Owner Trustee, the Indenture Trustee and the Owner Participant any legal or equitable right, remedy or claim under or in respect of this Trust Agreement; this Trust Agreement shall be held for the sole and exclusive benefit of the Owner Trustee and the Owner Participant and, solely with respect to Sections 5.01, 11.01, 12.01, 12.02, 12.03 and 12.04 hereof and to the extent provided therein, the Indenture Trustee. SECTION 12.05 Notices. Unless otherwise specifically provided herein, all ------- notices required or permitted by the terms hereof shall be in writing and shall be delivered personally or by prepaid courier service or, if promptly confirmed as provided above, dispatched by telegram, telex or other written telecommunication, addressed (i) if to the Owner Trustee, at its office at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration, or at such other address as the Owner Trustee shall from time to time designate in writing to the Owner Participant, (ii) if to the Indenture Trustee, at its office at 101 Barclay Street, New York, New York 10286 Attention: Corporate Trust-Corporate Finance Group with a copy to it c/o BNY Business Center, Inc., 100 Ashford Center North, Suite 520, Atlanta, Georgia 30338, Attention: Corporate Trust Lease Administration, or at such other address as the Indenture Trustee shall from time to time designate in writing to the Owner Trustee and the Owner Participant, and (iii) if to the Owner Participant, at such address as the Owner Participant shall have furnished by notice to the Owner Trustee or, until an address is so furnished, at its address set forth on Annex II to the Participation Agreement. All notices delivered, mailed or dispatched pursuant to this Section 12.05 shall become effective when received, except with respect to any notice given by telegram, telecopy, telex or other written telecommunication, in which case notice shall be deemed received when confirmation is received. In the case of a telex, an answer-back and in the case of courier service, a return receipt will be the conclusive evidence as receipt. SECTION 12.06 Severability. Any provision of this Trust Agreement which ------------ is prohibited or unenforceable in any jurisdiction shall, as to be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. -24- SECTION 12.07 Limitation on Owner Participant's Liability. The Owner ------------------------------------------- Participant shall not have any liability for the performance of this Trust Agreement, except as expressly set forth herein. SECTION 12.08 Separate Counterparts. This Trust Agreement may be executed --------------------- by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. It shall not be necessary, when making proof of this Trust Agreement, to produce or account for more than one counterpart. SECTION 12.09 Successors and Assigns. All covenants and agreements ---------------------- contained herein shall be binding upon, and inure to the benefit of, the Owner Trustee and its successors and assigns, the Owner Participant and its successors and, to the extent permitted by Article 9 hereof, its assigns, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Owner Participant shall bind the successors and assigns of such Owner Participant. SECTION 12.10 Headings. The headings of the various Articles and Sections -------- herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. SECTION 12.11 Governing Law. This Trust Agreement shall in all respects be ------------- governed by, and construed in accordance with, the laws of the State of Delaware, excluding any conflict of laws rules that would subject the matter to the laws of another jurisdiction, including all matters of construction, validity and performance. SECTION 12.12 Authorization to Owner Trustee for Indenture. -------------------------------------------- Notwithstanding any contrary provision in this Trust Agreement, the Owner Trustee is hereby authorized and instructed to enter into and perform fully the Indenture. This provision is for the benefit of the Owner Trustee, the Indenture Trustee and the Holders and shall not be changed prior to the termination of the Indenture pursuant to Section 14.01 thereof. SECTION 12.13 Waivers, etc. No term or provision hereof may be changed, ------------- waived, discharged or terminated orally, but only by an instrument in writing entered into in compliance with the terms of Article 11 hereof; and any waiver of the terms hereof shall be effective only in the specific instance and for the specific purpose given. -25- SECTION 12.14 Performance by Owner Participant. Any obligation of the -------------------------------- Owner Trustee in its individual capacity or as Owner Trustee hereunder or under any of the other Operative Documents or other documents contemplated herein may be performed by the Owner Participant, and any such performance shall not be construed as a revocation of the trusts created hereby. IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed by their respective officers thereunto duly authorized, as of the day and year first written above. OWNER PARTICIPANT ____________________________ By:________________________________ Title: OWNER TRUSTEE WILMINGTON TRUST COMPANY By:________________________________ Title: -26- EX-4.(F) 6 FORMS OF LEASE AGREEMENT KING & SPALDING DRAFT: 2/28/96 All right, title and interest in and to this Lease Agreement and the Aircraft covered hereby on the part of Wilmington Trust Company, as Owner Trustee, has been assigned to and is subject to a security interest in favor of The Bank of New York, as Indenture Trustee, under the Trust Indenture and Security Agreement (Delta 1994-1) dated as of April 1, 1994, as amended and restated as of March 1, 1996 (with the exceptions specified therein and as amended or supplemented as permitted thereby), for the benefit of the holders of the Certificates referred to in such Trust Indenture and Security Agreement. This Lease Agreement has been executed in several counterparts. The sole executed original counterpart containing the receipt therefor executed by The Bank of New York, as Indenture Trustee, on the signature pages thereof is the only original counterpart for purposes of applying Article 9 of the Uniform Commercial Code, and no security interest herein may be perfected by delivery and possession of any counterpart other than such original counterpart. ================================================================================ LEASE AGREEMENT (DELTA 1994-1) dated as of April 1, 1994 Amended and Restated as of March 1, 1996 BETWEEN WILMINGTON TRUST COMPANY, as Owner Trustee, LESSOR AND DELTA AIR LINES, INC., LESSEE One McDonnell Douglas MD-11 ================================================================================ TABLE OF CONTENTS
Page ---- SECTION 1. Definitions............................................... 1 SECTION 2. Acceptance Under Participation Agreement and Lease................................................. 13 SECTION 3. Term, Rent and Rent Adjustment............................ 13 SECTION 4. Covenants, Representations and Warranties; Lessor's Disclaimer of Warranties; Lessor's Representations and Warranties............................ 16 SECTION 5. Renewal Options; Purchase Options; Return of Aircraft........................................ 17 SECTION 6. Mortgages, Liens.......................................... 24 SECTION 7. Maintenance, Operation, Registration and Insignia; Possession...................................... 24 SECTION 8. Replacement and Addition of Parts......................... 32 SECTION 9. Voluntary Termination..................................... 34 SECTION 10. Loss, Destruction, Requisition, etc....................... 37 SECTION 11. Insurance................................................. 44 SECTION 12. Inspection................................................ 48 SECTION 13. Assignment, Citizenship, etc.............................. 49 SECTION 14. Events of Default......................................... 49 SECTION 15. Remedies.................................................. 51 SECTION 16. Lessor's Right to Perform for Lessee...................... 54 SECTION 17. Covenant of Quiet Enjoyment............................... 55 SECTION 18. Further Assurances........................................ 55 SECTION 19. Notices................................................... 55 SECTION 20. No Set-Off, Counterclaim, etc............................. 56 SECTION 21. Successor Trustees and Rights of Trustees as Lessor................................................. 56 SECTION 22. Miscellaneous............................................. 57
-i-
Page ---- SECTION 23. Trust Estate as Security for Lessor's Obligations to Holders.................................... 57 SECTION 24. Investment of Security Funds.............................. 58 SECTION 25. Separate Counterparts..................................... 59 SECTION 26. Incorporation by Reference................................ 60 ANNEX I - Description of Trust Indenture and Security Agreement and Lease Agreement As Previously Entered Into EXHIBIT A - Termination Value and Stipulated Loss Value Tables EXHIBIT B - List of Foreign Air Carriers EXHIBIT C - Basic Rent Table EXHIBIT D - Redelivery Certificate
-ii- The interest of Lessor under this Lease Agreement is subject to a security interest. LEASE AGREEMENT (DELTA 1994-1) This LEASE AGREEMENT (DELTA 1994-1) dated as of April 1, 1994, as amended and restated as of March 1, 1996, between WILMINGTON TRUST COMPANY, a Delaware banking corporation, with its principal place of business at Rodney Square North, Wilmington, Delaware, not in its individual capacity, except as otherwise expressly set forth herein, but solely as Owner Trustee under the Trust Agreement referred to in Section 1 hereof (herein called "Lessor"), and DELTA AIR LINES, INC., a Delaware corporation, with its principal place of business at Hartsfield Atlanta International Airport, Atlanta, Georgia (herein called "Lessee"). WHEREAS, capitalized terms used herein but not otherwise defined have the respective meanings set forth or referred to in Section 1 hereof; WHEREAS, Lessor and Lessee have heretofore entered into the Original Lease, as more fully described in Annex I hereto; WHEREAS, the Interim Refinancing Loan Participant participated in the payment of Lessor's Cost by providing an interim loan as evidenced by the Interim Refinancing Loan Certificate issued to it; WHEREAS, pursuant to Section 20 of the Original Participation Agreement, Lessee, the Owner Participant, the Indenture Trustee and Lessor desire that the Interim Refinancing Loan Certificate be prepaid with the proceeds from the Certificates to be issued under the Indenture; and WHEREAS, in connection with such refunding, Lessee, the Owner Participant, Lessor and the Indenture Trustee desire that the Original Lease be amended and restated as provided herein. NOW THEREFORE, in consideration of the premises and the mutual agreements contained herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, Lessor and Lessee hereby agree that the Original Lease be and the same is hereby amended and restated in its entirety as follows: W I T N E S S E T H : - - - - - - - - - - - SECTION 1. Definitions. The following terms have the following ----------- meanings for all purposes of this Lease Agreement, such definitions to be equally applicable both to the singular and plural forms of the terms herein defined: "Act" means Subtitle VII of Title 49 of the United States Code. --- "Affiliate" means, with respect to any person, any other person --------- directly or indirectly controlling, controlled by or under common control with such person. For the purposes of this definition, "control" (including "controlled by" and "under common control with") means the power, directly or indirectly, to direct or cause the direction of the management and policies of such person whether through the ownership of voting securities or by contract or otherwise. "Aircraft" means the Airframe together with the three Engines -------- described in the Lease Supplement, or any engine transferred to Lessor in substitution for any of said Engines pursuant to Section 5(c), 9(b), 10(a) or 10(b), whether or not any of such initial or substituted Engines may from time to time be installed on the Airframe or on any other airframe. "Airframe" means and includes: (i) the McDonnell Douglas MD-11 -------- airframe (excluding the Engines or engines from time to time installed thereon) to be sold by Lessee to Lessor pursuant to the Participation Agreement and leased by Lessor to Lessee hereunder and under the Lease Supplement pursuant to Section 2 of the Original Lease and having the United States FAA Registration Number and Manufacturer's serial number specified in such Lease Supplement; (ii) any replacement airframe substituted for the Airframe pursuant to Section 10; and (iii) except as otherwise provided in Section 8, any and all Parts from time to time incorporated in, installed on or attached to the Airframe, or removed therefrom so long as title thereto remains vested in Lessor in accordance with the terms of Section 8 after removal from the Airframe. Except as otherwise set forth herein, when a replacement airframe is so substituted and the Airframe is released from the Lien of the Indenture, the replaced Airframe shall cease to be the Airframe. "Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as amended --------------- from time to time. "Bankruptcy Default" means any event specified in Section 14(f), 14(g) ------------------ or 14(h) which with the giving of notice or lapse of time or both would constitute an Event of Default. "Basic Rent" means the rent payable throughout the Term for the ---------- Aircraft pursuant to Sections 3(a) with respect to the Basic Term, as adjusted pursuant to the provisions of Section 3(c), and any rent payable pursuant to Section 5(a) with respect to the Renewal Term, if any. - 2 - "Basic Term" has the meaning specified in Section 3(a). ---------- "Basic Term Commencement Date" means October 11, 1994. ---------------------------- "Business Day" means any day other than a Saturday, Sunday or other ------------ day on which commercial banks in the States of New York, Georgia or Delaware are authorized or required by law to close. "Certificate" or "Certificates" has the meaning specified in the ----------------------------- Indenture. "Citizen of the United States" has the meaning set forth in 49 U.S.C. ---------------------------- Section 40102(a)(15) (and the regulations thereunder) or any analogous part of any successor or superseding regulation or statute. "Closing Date" has the meaning specified in the Participation ------------ Agreement. "Code" means the Internal Revenue Code of 1986, as amended from time ---- to time, except as otherwise provided herein. "Consent and Agreement" means the Consent and Agreement (Delta 1994-1) --------------------- dated as of April 1, 1994 executed by the Manufacturer, as the same may be amended, modified or supplemented from time to time. "CRAF" means the Civil Reserve Air Fleet Program established pursuant ---- to 10 U.S.C. (S)(S) 9511-13 or any similar substitute program. "Debt Rate" has the meaning specified in the Participation Agreement. --------- "Default" means any event which with the giving of notice or lapse of ------- time or both would constitute an Event of Default. "Delivery Date" means April 12, 1994. ------------- "EBO Date" has the meaning specified in Schedule A to the -------- Participation Agreement. "EBO Percentage" has the meaning specified in Schedule A to the -------------- Participation Agreement. An "Engine" means and includes: (i) each of the three Pratt & Whitney ------ PW4460 engines listed by manufacturer's serial numbers in the Lease Supplement, whether or not from time to time installed on the Airframe or any other airframe, and (ii) any replacement engine substituted, pursuant to Section 5(c), 9(b), 10(a) or 10(b), for any Engine; together in each case with any and all Parts from time to time incorporated in, - 3 - installed on or attached thereto, or removed therefrom as long as title thereto remains vested in Lessor in accordance with Section 8 after removal from such Engine. Except as otherwise set forth herein, when a replacement engine is so substituted and the Engine for which the substitution is made is released from the Lien of the Indenture, such replaced Engine shall cease to be an Engine. The term "Engines" means, as of any date of determination, the three Engines then leased hereunder. "Engine Consent and Agreement" means the Engine Consent and Agreement ---------------------------- (Delta 1994-1) dated as of April 1, 1994 and executed by the Engine Manufacturer, as the same may be amended, modified or supplemented from time to time. "Engine Manufacturer" means United Technologies Corporation, a ------------------- Delaware corporation, and its successors and assigns. "Event of Default" means each of the events specified in Section 14. ---------------- "Event of Loss" means any of the following events which occur during ------------- the Term with respect to the Aircraft, the Airframe or any Engine: (i) loss of such property or the use thereof due to theft or disappearance of such property for a period of 120 days, or such longer period not to exceed one year (or 180 days if Lessee's senior unsecured long-term debt is not rated Investment Grade) from the time such loss initially occurred, but only so long as the location of such property is known and Lessee is diligently pursuing the recovery of such property (unless such loss constitutes an Event of Loss under clause (ii) or clause (iii) below), or in any event if such loss is continuing on the last day of the Term; (ii) loss of such property due to destruction, damage beyond repair or rendition of such property permanently unfit for normal use by Lessee for any reason whatsoever; (iii) any damage to such property or other event which results in an insurance settlement with respect to such property on the basis of a total loss or constructive or compromised total loss; (iv) any seizure, condemnation, confiscation or taking of, or requisition of title to or use of, such property by any governmental authority or purported governmental authority, but, in any case involving loss of use but not of title, only if such loss of use continues for a period of twelve months or until the last day of the Term, whichever occurs first, provided that if such loss of use -------- results from action by the United States or any agency thereof, the obligations of which have the full faith and credit of the United States, only if such loss of use continues beyond the last day of the Term; (v) as a result of any law, rule, regulation, order, or other action by the FAA, the United States Department of Transportation or any other governmental body (including any court) having jurisdiction, the use of such property in the - 4 - normal course of Lessee's business shall have been prohibited for a period of six consecutive months, unless Lessee, prior to the expiration of such six-month period, shall have undertaken and shall be diligently carrying forward all steps which are necessary or desirable to permit the normal use of such property by Lessee, but in any event if such prohibition is continuing on the last day of the Term; or (vi) Lessee ceases to be a "certificated air carrier" within the meaning of Section 1110 of the Bankruptcy Code and, as a result thereof, the benefits of Section 1110 of the Bankruptcy Code have, in the reasonable opinion of counsel chosen by the Owner Participant or the Indenture Trustee, ceased to be available to Lessor and the Indenture Trustee with respect to the Aircraft. An Event of Loss with respect to the Aircraft shall be deemed to have occurred if an Event of Loss occurs with respect to the Airframe. The date of any Event of Loss shall be the date of such loss, damage, insurance settlement, seizure, condemnation, confiscation, taking or requisition of title or use or prohibition, except that for the purposes of clauses (i), (iv) and (v) above, no Event of Loss shall be deemed to have occurred until the expiration of all applicable periods referred to therein. Notwithstanding the foregoing, (a) at the election of Lessee, any loss of use described in clause (iv) above resulting from action by the United States or any agency thereof continuing for a period of twelve months shall be an Event of Loss upon the giving of notice by Lessee to Lessor within 30 days following the end of such twelve-month period and (b) if an Event of Loss described in any of clauses (i), (iv) or (v) above shall have occurred (including by reason of the foregoing clause (a)), Lessor may elect, on or within 30 days following the date upon which such Event of Loss is deemed to have occurred, that no Event of Loss has occurred, in which case the Owner Participant shall be deemed to have elected irrevocably to terminate this Lease pursuant to the fourth paragraph of Section 9(a). "Excepted Payments" has the meaning specified in the Indenture. ----------------- "FAA" means the Federal Aviation Administration, or its successors. --- "Fair Market Rent" has the meaning specified in Section 5(a)(ii). ---------------- "Fair Market Value" has the meaning specified in Section 5(b)(ii). ----------------- "FSC" means Larkspur International Sales, Inc., a Virgin Islands --- foreign sales corporation. - 5 - "GTA" has the meaning specified in the Purchase Agreement Assignment. --- "Holder" has the meaning specified in the Indenture. ------ "Indemnity Agreement" means the Indemnity Agreement (Delta 1994-1) ------------------- dated as of April 1, 1994, as amended and restated as of March 28, 1995, and as further amended and restated as of March 1, 1996, between Lessee and the Owner Participant, as amended or supplemented from time to time. "Indenture" means the Trust Indenture and Security Agreement (Delta --------- 1994-1) dated as of April 1, 1994, as amended and restated as of March 1, 1996, between Lessor (not in its individual capacity, except as expressly provided therein, but solely as Owner Trustee) and the Indenture Trustee (not in its individual capacity, except as expressly provided therein, but solely as Indenture Trustee) relating to the Aircraft, as supplemented or amended from time to time, including as supplemented by the Trust Agreement and Trust Indenture Supplement. "Indenture Estate" has the meaning specified in the Indenture. ---------------- "Indenture Trustee" means The Bank of New York, a New York banking ----------------- corporation, not in its individual capacity but solely in its capacity as indenture trustee under the Indenture, and its permitted successors and assigns as trustee thereunder. "Indenture Trustee's Lien" means any Lien on the Indenture Estate ------------------------ resulting from (i) claims against the Indenture Trustee or The Bank of New York in its individual capacity not related to the administration of the Indenture Estate or any transactions contemplated by the Indenture or any other Operative Document, (ii) any act or omission of the Indenture Trustee or The Bank of New York in its individual capacity which is not related to the transactions contemplated by the Operative Documents or is in violation (to the extent any violation by The Bank of New York in its individual capacity results from its negligence or negligent or willful misconduct) of any of the terms of the Operative Documents or (iii) taxes or other claims against the Indenture Trustee or The Bank of New York in its individual capacity, not indemnified by Lessee under the Participation Agreement or the Indemnity Agreement. "Initial Indemnity Agreement" means the Indemnity Agreement (Delta --------------------------- 1994-1) dated as of April 1, 1994 between the Lessee and the Owner Participant. "Interim Refinancing Loan Certificate" means the Loan Certificate in ------------------------------------ the initial outstanding principal amount of - 6 - $79,600,000 issued on March 28, 1995 to the Interim Refinancing Loan Participant pursuant to the Original Indenture. "Interim Refinancing Loan Participant" means The Mitsubishi Trust and ------------------------------------ Banking Corporation, New York Branch, its successors and permitted assigns. "Interim Term" has the meaning specified in Section 3(a). ------------ "Investment Grade" means a combination of any two of the following ---------------- ratings: (i) a Moody's Investors Service, Inc. rating of Baa3 or better, (ii) a Standard & Poor's Corporation rating of BBB- or better and (iii) a Duff & Phelps rating of BBB- or better, each as defined on the date hereof. If any of the foregoing rating organizations withdraws from the business of rating corporate debt obligations, another nationally recognized statistical rating organization making a rating on the relevant corporate debt obligations may be substituted for the withdrawn rating organization for the purpose of giving effect to the foregoing sentence, in which event the rating of such other rating organization that is the equivalent of the ratings specified in the foregoing sentence shall be used as the appropriate standard. "Lease Agreement", "this Lease Agreement", "this Lease", "this --------------- -------------------- ---------- ---- Agreement", "herein", "hereunder" or other like words means and includes --------- ------ --------- this Lease Agreement (Delta 1994-1) and the Lease Supplement and any amendment or supplement hereto or thereto entered into from time to time. "Lease Supplement" means the Lease Supplement (Delta 1994-1) No. 1 ---------------- dated the Delivery Date, including any amendments or supplements thereto (including, without limitation, Lease Supplement No. 2 dated October 10, 1994). "Lessor's Cost" means the amount set forth in Item 4 of Schedule A to ------------- the Participation Agreement. "Lessor's Lien" means any Lien on the Indenture Estate or the Trust ------------- Estate resulting from (i) claims against Lessor, in its individual capacity or as Owner Trustee, not related to Lessor's ownership of the Aircraft or the administration of the Trust Estate or the Indenture Estate or any transactions contemplated by the Trust Agreement, the Indenture or any other Operative Document, (ii) any act or omission of Lessor, in its individual capacity or as Owner Trustee, which is not related to the transactions contemplated by the Operative Documents or is in violation (to the extent any violation by the Owner Trustee in its individual capacity results from its negligence or negligent or willful misconduct) of any of the terms of the Operative Documents or (iii) taxes or other claims against Lessor, in its individual capacity or as Owner - 7 - Trustee, not indemnified by Lessee under the Participation Agreement or the Indemnity Agreement. "Lien" means any mortgage, pledge, lien, charge, encumbrance, lease or ---- security interest. "Manufacturer" means McDonnell Douglas Corporation, a Maryland ------------ corporation, and its successors and assigns. "Net Economic Return" means the Owner Participant's anticipated after- ------------------- tax yield, utilizing the multiple investment sinking fund method of analysis, aggregate after-tax cash flow and no less than 85% of the amount of annual FASB 13 earnings, in each case computed on the basis of the same methodology and assumptions as were utilized by the Owner Participant in determining Basic Rent, Stipulated Loss Value and Termination Value percentages and the EBO Percentage in the schedules hereto and to the Participation Agreement as of the Refunding Date, as such assumptions may be adjusted for events which have been the basis of adjustments to Rent pursuant to Section 3(c). "Net Present Value of Rents" as of any date means the net present cost -------------------------- to Lessee, discounted at [9.054%] per annum (computed on the basis of a 360-day year composed of twelve 30-day months and assuming that Basic Rent due on a day which is not a Business Day is payable on the next succeeding Business Day (without further accrual of interest)) compounded semi- annually to such date, and expressed as a percentage of Lessor's Cost of all unpaid Basic Rent payments during the Basic Term, as set forth in Exhibit C, as amended from time to time. "Operative Documents" means the following documents: ------------------- (i) this Lease; (ii) the Lease Supplement; (iii) the Participation Agreement; (iv) the Trust Agreement; (v) the Indenture and the Certificates issued thereunder; (vi) the Trust Agreement and Trust Indenture Supplement; (vii) an AC Form 8050-2 Bill of Sale for the Aircraft (the "FAA Bill of Sale"), executed by Lessee in favor of Lessor and dated the Delivery Date; - 8 - (viii) an additional full warranty bill of sale for the Aircraft (together with the FAA Bill of Sale referred to in clause (vii) above collectively called "Bills of Sale"), executed by Lessee in favor of Lessor, dated the Delivery Date and specifically referring to each Engine and the Airframe constituting such Aircraft; (ix) the Indemnity Agreement; (x) the Purchase Agreement; (xi) the Purchase Agreement Assignment; (xii) the Consent and Agreement; (xiii) the Engine Consent and Agreement; and (xiv) the Pass Through Agreement. "Original Documents" means the documents and instruments executed or ------------------ delivered on or prior to the Delivery Date in connection with the transactions contemplated by the Original Participation Agreement, including, without limitation, the Original Indenture, the Original Lease, the Original Loan Certificate, the Interim Refunding Loan Certificate, the Original Participation Agreement, the Original Trust Agreement, the Initial Indemnity Agreement, and the Original Indemnity Agreement. "Original Indenture" means the Trust Indenture and Security Agreement ------------------ (Delta 1994-1) between the Owner Trustee and the Original Indenture Trustee, as it was originally executed as of April 1, 1994 and delivered by the parties thereto, as amended and supplemented as described in Annex I hereto. "Original Indenture Trustee" means NationsBank of Georgia, National -------------------------- Association. "Original Lease" means the Lease Agreement (Delta 1994-1) between -------------- Lessor and Lessee, as it was originally executed as of April 1, 1994 and delivered by the parties thereto, as amended and supplemented as described in Annex I hereto. "Original Loan Certificate" means the Loan Certificate issued to the ------------------------- Original Loan Participant pursuant to the Original Participation Agreement and the Original Indenture on the Delivery Date. "Original Loan Participant" means The Sumitomo Bank, Limited, Atlanta ------------------------- Agency. - 9 - "Original Participation Agreement" has the meaning specified in the -------------------------------- Participation Agreement. "Original Trust Agreement" means the Trust Agreement (Delta 1994-1) as ------------------------ it was originally executed as of April 1, 1994, between the Owner Participant and Lessor in its individual capacity, as supplemented by the Trust Agreement and Trust Indenture Supplement. "Owner Participant" means the entity executing the Participation ----------------- Agreement as the Owner Participant and each permitted successor and assign thereof pursuant to Section 9.01 of the Trust Agreement and Section 16 of the Participation Agreement. "Owner Participant's Lien" means any Lien on the Indenture Estate or ------------------------ the Trust Estate resulting from (i) claims against the Owner Participant not related to the Owner Participant's beneficial interest in the Aircraft or any transactions contemplated by any of the Operative Documents, (ii) any act or omission of the Owner Participant which is not related to the transactions contemplated by the Operative Documents or is in violation of any of the terms of the Operative Documents or (iii) taxes or other claims against the Owner Participant or the Trust Estate not indemnified by Lessee under the Participation Agreement or the Indemnity Agreement. "Owner Trustee" has the meaning specified in the Participation ------------- Agreement. "Part" or "Parts" means all appliances, instruments, accessories, ---- ----- seats or other equipment or parts of whatever nature, except Engines or engines, which are from time to time a part of or installed on or attached to the Airframe or any Engine. "Participation Agreement" means the Participation Agreement (Delta ----------------------- 1994-1) dated as of April 1, 1994, as amended and restated as of March 1, 1996, among Lessee, Lessor (not in its individual capacity, except as expressly provided therein, but solely as Owner Trustee), the Owner Participant, the Original Loan Participant, the Pass Through Trustee and the Indenture Trustee (not in its individual capacity, except as expressly provided therein, but solely as Indenture Trustee), as amended or supplemented from time to time. "Pass Through Agreement" has the meaning specified in the ---------------------- Participation Agreement. "Pass Through Trustee" has the meaning specified in the Participation -------------------- Agreement. - 10 - "Past Due Rate" means a fluctuating rate of interest per annum equal ------------- to the rate of interest announced publicly by Citibank, N.A. in New York, New York from time to time as such bank's base rate plus 2%, each change in such fluctuating rate to take effect simultaneously with the corresponding change in such rate (in each case, calculated on the basis of a 365 or 366 day year, as the case may be, and the actual number of days elapsed). "Payment Date" has the meaning specified in Section 3(a). ------------ "Payment Default" means any event specified in Section 14(a) or 14(b) --------------- which with the giving of notice or lapse of time or both would constitute an Event of Default. "Permitted Air Carrier" has the meaning specified in Section 7(b)(A). --------------------- "Permitted Lien" means any Lien to the extent excepted from the -------------- Lessee's obligation to remove Liens pursuant to Section 6. "Permitted Sublessee" means any sublessee or transferee under any ------------------- sublease or transfer permitted pursuant to Section 7(b). "Purchase Agreement" has the meaning specified in the Purchase ------------------ Agreement Assignment. "Purchase Agreement Assignment" means the Purchase Agreement ----------------------------- Assignment (Delta 1994-1) dated as of April 1, 1994 between Lessee and Lessor, as amended or supplemented from time to time. "Recapture Period" means the period beginning on the Delivery Date and ---------------- ending on September 30, 2001 or such longer period over which the Owner Participant may be required to claim depreciation deductions for federal income tax purposes as a result of a "Loss" (as defined in the Indemnity Agreement). "Refunding Date" has the meaning specified in the Participation -------------- Agreement. "Renewal Term" means the extension of the term of this Lease provided ------------ for in Section 5(a). "Rent" means Basic Rent and Supplemental Rent, collectively. ---- "Requisitioning Government" means any governmental agency or ------------------------- instrumentality that requisitions the Airframe or any Engine during the Term. - 11 - "Responsible Officer" has the meaning specified in the Participation ------------------- Agreement. "Seller" has the meaning specified in the Participation Agreement. ------ "Stipulated Loss Value" for the Aircraft as of any particular date of --------------------- computation means the greater of (x) the amount determined for such date in accordance with Section 10, as increased or reduced in accordance with the terms of Section 3(c), and (y) an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon. It is understood and agreed that the amounts set forth on Exhibit A, for dates other than Payment Dates, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and accordingly no further accrual or credit shall be required whenever Stipulated Loss Value is calculated with reference to any such date. To the extent that an event giving rise to an obligation to pay Stipulated Loss Value occurs and the actual date on which the loss of tax benefits resulting from such event occurs shall be earlier or later than the date assumed in calculating the United States federal income tax consequences reflected in the applicable Stipulated Loss Value, such Stipulated Loss Value shall be appropriately adjusted upwards or downwards to reflect the actual date of such loss of tax benefits but shall be otherwise based on the original assumptions used in determining such Stipulated Loss Value; provided, however, that in no event shall an -------- ------- adjustment hereunder or contemplated by Section 3(c) result in a Stipulated Loss Value lower than as provided by clause (y) above. During the Renewal Term, if any, "Stipulated Loss Value" means the amount determined pursuant to Section 5. "Supplemental Rent" means any and all amounts liabilities and ----------------- obligations (other than Basic Rent) which Lessee assumes, becomes obligated to or agrees to pay hereunder, under the Participation Agreement, under the Indemnity Agreement and under any other Operative Document to Lessor or others including, without limitation, Termination Value and Stipulated Loss Value payments, indemnity payments, any premium payable pursuant to the Indenture, and any amount payable by the Owner Trustee in respect of the Certificates or the Indenture (excluding principal and interest) and the Trust Agreement. "Term" means and includes the Interim Term, the Basic Term and the ---- Renewal Term, if any, for the Aircraft. "Termination Date" has the meaning set forth in Section 9(a). ---------------- - 12 - "Termination Value" for the Aircraft as of any particular date of ----------------- computation means the greater of (x) the amount determined for such date in accordance with Section 9, as increased or reduced in accordance with the terms of Section 3(c), and (y) an amount at least sufficient to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon. It is understood and agreed that the amounts set forth on Exhibit A, for dates other than Payment Dates, fully reflect appropriate Basic Rent accruals and credits of unearned Basic Rent and accordingly no further accrual or credit shall be required whenever Termination Value is calculated with reference to any such date. To the extent that an event giving rise to an obligation to pay Termination Value occurs and the actual date on which the loss of tax benefits resulting from such event occurs shall be earlier or later than the date assumed in calculating the United States federal income tax consequences reflected in the applicable Termination Value, such Termination Value shall be appropriately adjusted upwards or downwards to reflect the actual date of such loss of tax benefits but shall be otherwise based on the original assumptions used in determining such Termination Value; provided, however, that in no event shall such an adjustment or any -------- ------- adjustment contemplated by Section 3(c) result in a Termination Value lower than as provided by clause (y) above. During the Re-newal Term, if any, "Termination Value" means the amount specified pursuant to Section 5. "Trust Agreement" means the Trust Agreement (Delta 1994-1) dated as of --------------- April 1, 1994, as amended and restated as of March 1, 1996, between the Owner Participant and Lessor in its individual capacity (receipt of an executed counterpart of which is hereby acknowledged by Lessee), as supplemented or amended from time to time, including as supplemented by the Trust Agreement and Trust Indenture Supplement. "Trust Agreement and Indenture Supplement" means the Trust Agreement ---------------------------------------- and Trust Indenture Supplement (Delta 1994-1) dated as of the Delivery Date. "Trust Estate" has the meaning specified in the Trust Agreement. ------------ SECTION 2. Affirmation of Acceptance and Lease. Each of Lessor, having ----------------------------------- accepted delivery of the Aircraft from Lessee on the Delivery Date and having simultaneously leased the Aircraft to Lessee, and Lessee, having leased the Aircraft from Lessor on the Delivery Date, as evidenced by the execution by Lessor and Lessee of the Lease Supplement (which is incorporated by reference herein), hereby affirms the terms and conditions of the Original Lease as herein amended and restated and of the Purchase Agreement Assignment. - 13 - SECTION 3. Term, Rent and Rent Adjustment. (a) Term and Basic Rent. The ------------------------------ ------------------- Interim Term commenced on the Delivery Date and ended at 12:01 a.m. EST or EDT, as the case may be, on the Basic Term Commencement Date. The Basic Term shall commence upon the expiration of the Interim Term and shall end at 11:59 pm. EST or EDT, as the case may be, on the twenty-third anniversary of the Basic Term Commencement Date, or such earlier date on which this Lease is terminated as provided herein. Throughout the Basic Term on each semi-annual date that corresponds to the Basic Term Commencement Date (each such date and, if Lessee exercises its option to renew this Lease pursuant to Section 5(a), the corresponding dates in April and October during the Renewal Term, if any, being referred to herein as a "Payment Date"), Lessee shall pay to Lessor in immediately available funds Basic Rent in the amount specified in Exhibit C for such date as such amount may be adjusted pursuant to Section 3(c). Anything herein or in the Participation Agreement to the contrary notwithstanding, on each Payment Date, Lessee shall pay as Basic Rent that amount which, under the circumstances and in any event, is at least sufficient to pay in full, as of such Payment Date, the aggregate principal amount of due and unpaid installments on the Certificates outstanding on such Payment Date, together with the accrued and unpaid interest thereon. (b) Supplemental Rent. Lessee also shall pay any and all Supplemental ----------------- Rent promptly as it shall become due and owing (such payment to be made to the party entitled thereto or, if the payee is not specified, then to Lessor). If Lessee fails to pay any Supplemental Rent, Lessor, or any other party to the Operative Documents entitled to payment thereunder, shall have the same rights, powers and remedies provided for herein or by law or equity or otherwise as in the case of nonpayment of Basic Rent. Lessee shall also pay as and when due as Supplemental Rent any premium payable by Lessor upon a prepayment or purchase of the Certificates pursuant to the Indenture. Lessee will also pay interest on demand as Supplemental Rent, to the extent permitted by applicable law, as follows: (i) with respect to payments of Supplemental Rent to, or to be received by, any Holder, and with respect to the portion of a Basic Rent payment scheduled to be applied to Lessor's payments of principal and interest on the Certificates, at a rate per annum equal to (and computed on the same basis as) the rate applicable to the Certificates during the relevant period or overdue period, as the case may be, and (ii) with respect to all other payments of Supplemental Rent and with respect to the portion of a Basic Rent payment not scheduled to be applied to Lessor's payments of principal and interest on the Certificates, at the Past Due Rate, on any part of any installment of Basic Rent not paid when due for the period during which the same is overdue and on any payment of Supplemental Rent payable but not paid when due or demanded by the recipient entitled thereto for the period until the same is paid. (c) Adjustments. The amounts of Basic Rent set forth in Exhibit C ----------- hereto and the percentages for Stipulated Loss Value and - 14 - Termination Value set forth in Exhibit A hereto and the EBO Percentage shall be adjusted from time to time (upward or downward) in the manner set forth in Section 3(e) to reflect (i) any refunding of the Certificates pursuant to Section 20 of the Participation Agreement, and (ii) [intentionally omitted]. Any such adjustment shall be set forth in an amendment or supplement complying with the last sentence of Section 3(a); provided, however, that the execution and -------- ------- delivery of such an amendment or supplement shall not be a condition to the effectiveness of any adjustment required by the terms hereof. (d) Manner of Making Payments; Payment to Indenture Trustee. All ------------------------------------------------------- payments pursuant to this Lease shall be received by 12:00 noon Eastern Standard (or Daylight) Time on the date payment is due in U.S. dollars and in immediately available funds. If any Payment Date is not a Business Day, then payment shall be due on the next succeeding Business Day without interest or penalty. All payments of Rent and all other amounts payable by Lessee hereunder (other than Excepted Payments, which shall be paid to the person entitled thereto), shall be paid by Lessee to Lessor at its office at 1100 North Market Street, Rodney Square North, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration, or as Lessor may otherwise specify by notice. So long as the Indenture has not been discharged pursuant to Section 14.01 thereof, Lessor hereby directs, and Lessee agrees, that all payments of Rent and all other amounts payable by Lessee hereunder (other than Excepted Payments, which shall be paid to the person entitled thereto) shall be paid directly to the Indenture Trustee at its office at 100 Ashford Center North, Suite 520, Atlanta, Georgia 30338, Attention: Corporate Trust Lease Administration, or as the Indenture Trustee may otherwise specify by notice, at such time so as to be received by the Indenture Trustee prior to 12:00 noon Eastern Standard Time or Eastern Daylight Time on the date of payment. (e) Manner of Making Adjustments. All adjustments pursuant to Section ---------------------------- 3(c) shall be made as promptly as practicable after either the Owner Participant or Lessee gives written notice to the other that an event has occurred which might require an adjustment. All adjustments shall be made in a manner which (A) maintains the Owner Participant's Net Economic Return, (B) to the extent possible consistent with clause (A), minimizes the Net Present Value of Rents and (C) complies with the requirements of the last sentence of Section 3(a); provided, however, that the EBO Percentage will in all cases be adjusted to the percentage which, when multiplied by Lessor's Cost, is the greatest of (i) the Termination Value as of the EBO Date, (ii) [$__________] and (iii) the present value as of the EBO Date of (A) the remaining Basic Rent plus (B) [$__________] (using a 14.55% discount rate assuming semi-annual payments). Any recalculation of Basic Rent, Stipulated Loss Value percentages and Termination Value percentages and the EBO Percentage shall be calculated by the Owner Participant, subject to verification by Lessee and Babcock & Brown Financial Corporation, on the basis of the same methodology and assumptions - 15 - used by the Owner Participant in determining the Basic Rent, Stipulated Loss Value percentages and Termination Value percentages and the EBO Percentage as of the Refunding Date (including compliance with Revenue Procedures 75-21 and 75-28 and Section 467 of the Code), except as such assumptions have been modified hereunder. All adjustments (i) shall be made so as to avoid characterization of the Lease as a "disqualified leaseback or long-term agreement" within the meaning of Section 467 of the Code (to the extent of compliance with Section 467 of the Code as in effect on the Delivery Date, it being understood that, to the extent that the schedule of Basic Rent complies on the Delivery Date with any grandfather or similar provisions in any regulations under Section 467 or other administrative pronouncement interpreting Section 467 promulgated or issued after the Delivery Date, such structure shall be deemed to be in compliance with Section 467 on the Delivery Date) and to avoid any additional risk of such characterization and (ii) shall be in compliance with the requirements of Revenue Procedure 75-21 and Sections 4.02(5), 4.07(1), 4.07(2) and, on a prospective basis, 4.08(1) of Rev. Proc. 75-28. If Lessee believes that such calculations by the Owner Participant are in error and after consultation Lessee and Owner Participant are unable to agree on the proper adjustment, then a nationally recognized firm of accountants selected by the Owner Participant and reasonably acceptable to Lessee shall verify the Owner Participant's final calculations. The Owner Participant will make available to such firm the methodology and assumptions referred to above and any changes thereto made hereunder (subject to the execution by such firm of a confidentiality agreement reasonably acceptable to the Owner Participant prohibiting disclosure of such methodology and assumptions to any third party including Lessee). The determination by such firm of accountants shall be final. The Owner Participant will pay the reasonable costs and expenses of the verification if it results in a decrease in Basic Rent which decreases the Net Present Value of Rents by more than ten basis points from the Net Present Value of Rents as recalculated by the Owner Participant. In all other cases, Lessee will pay such costs and expenses. (f) Obligations at Lessee's Expense. All obligations of Lessee or any ------------------------------- sublessee or transferee in this Lease shall be done, performed or complied with at Lessee's cost and expense, unless otherwise expressly stated. SECTION 4. Covenants, Representations and Warranties; Lessor's Disclaimer -------------------------------------------------------------- of Warranties; Lessor's Representations and Warranties. NONE OF LESSOR (IN ITS - ------------------------------------------------------ INDIVIDUAL CAPACITY OR AS OWNER TRUSTEE), THE OWNER PARTICIPANT, ANY HOLDER OR THE INDENTURE TRUSTEE MAKES, HAS MADE OR SHALL BE DEEMED TO MAKE OR HAVE MADE, AND EACH HAS AND WILL BE DEEMED TO HAVE EXPRESSLY DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY OR FITNESS OR SUITABILITY FOR PARTICULAR USE OR PURPOSE OF THE AIRCRAFT OR ANY PART THEREOF, AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE ABSENCE OF ANY - 16 - INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE ABSENCE OF ANY OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT OR ANY PART THEREOF, except that Lessor, in its individual capacity, hereby represents and warrants that (i) on the Delivery Date it received whatever title was conveyed to it by Lessee, (ii) on the Delivery Date and the Refunding Date, the Aircraft was and is free of Lessor's Liens attributable to Lessor in its individual capacity, and (iii) on the date of any transfer of Lessor's right, title and interest in the Airframe or in an Engine or the Engines or in the Aircraft pursuant to Section 5, 9 or 10, the Aircraft, Airframe, or the Engine or Engines, as the case may be, shall be free of Lessor's Liens attributable to Lessor in its individual capacity. None of the provisions of this Section 4 or any other provision of this Agreement shall amend, modify or otherwise affect the representations, warranties or other obligations (express or implied) of the Manufacturer or the Engine Manufacturer or any subcontractor or supplier of the Manufacturer or the Engine Manufacturer with respect to the Airframe, the Engines, or any Parts or release the Manufacturer or the Engine Manufacturer or any such subcontractor or supplier from any such representation, warranty or obligation. Unless an Event of Default shall have occurred and be continuing, Lessor shall assign or otherwise make available to Lessee such rights as Lessor may have under any representation, warranty or other obligation with respect to the Aircraft made by the Manufacturer or any of its subcontractors or suppliers or any other claims against the Manufacturer or any such subcontractor or supplier with respect to the Aircraft; provided that any proceeds held while any -------- Event of Default or Payment Default shall have occurred and be continuing shall be held pursuant to Section 24 hereof as security for Lessee's obligations hereunder and under the Participation Agreement and the Indemnity Agreement. Lessor represents and warrants in its individual capacity that it is a Citizen of the United States. SECTION 5. Renewal Options; Purchase Options; Return of Aircraft. ----------------------------------------------------- (a) Renewal Option. (i) Not more than 540 days nor less than 180 days prior to -------------- the last day of the Basic Term, Lessee may provide irrevocable written notice (a "Preliminary Notice") to Lessor that it shall exercise either the option to renew this Lease under this Section 5(a) or the option to purchase the Aircraft at the end of the Basic Term under Section 5(b). If such Preliminary Notice is given by Lessee, then at least 30 days prior to the end of the Basic Term Lessee shall provide a further notice (a "Definitive Notice") specifying which option it intends to elect. A Definitive Notice may be given only if no Event of Default or Payment Default has occurred and is continuing at the time such Definitive Notice is given, and provided that this Lease has not otherwise -------- expired or terminated. Lessee may elect in such Definitive Notice to extend the term of this Lease for a Renewal Term, if any, under all the terms, provisions and conditions of this Lease, for a period selected by Lessee of not less than one year nor more than three years, commencing on the expiration of the - 17 - Basic Term. The Basic Rent for the Aircraft during the Renewal Term, if any, shall be payable semi-annually in advance on each Payment Date during the Renewal Term, if any, and shall be the Fair Market Rent. The Stipulated Loss Value as of any date during the Renewal Term, if any, shall be equal to the Fair Market Value of the Aircraft, as defined in paragraph (b)(ii) of this Section 5, determined as of the commencement date of the Renewal Term, if any, minus, if such date is not a Payment Date, the pro rata amount of Basic Rent paid on the preceding Payment Date and attributable to the period from such date to the next Payment Date (or the last day of the Renewal Term, as the case may be). If no Preliminary Notice is delivered by Lessee to Lessor pursuant to this Section 5(a) on or before the day specified therefor, Lessee shall be deemed to have waived any right to renew this Lease. If after having given a Preliminary Notice Lessee fails to deliver a Definitive Notice pursuant to this Section 5(a) or Section 5(b), and on the last date on which a Definitive Notice could have been given pursuant to this Section 5(a) or 5(b) no Event of Default or Payment Default has occurred and is continuing, Lessee shall be deemed to have elected to renew the Lease under this Section 5(a) for a period of one year. (ii) The term "Fair Market Rent" means an amount determined in accordance with the provisions of Section 5(d) on the basis of, and equal in amount to, the rent which would be obtained in an arm's-length net lease transaction between an informed and willing lessee and an informed and willing lessor, neither being under any compulsion to lease. In such determination, it shall be assumed that the Aircraft is in (and registered in) the United States and is in the better of its actual condition or the condition required under this Lease in the case of return of the Aircraft pursuant to Section 5(c). Such determination shall also reflect the fact that Basic Rent during the Renewal Term, if any, is payable semi-annually in advance. (b) Purchase Options. (i) If this Lease has not otherwise expired or ---------------- terminated, Lessee may elect (A) by notice delivered to Lessor not more than 180 or less than 90 days prior to the EBO Date, to purchase the Aircraft on the EBO Date, (B) in the Definitive Notice referred to in Section 5(a), to purchase the Aircraft at the end of the Basic Term or (C) if no Event of Default or Payment Default has occurred and is continuing on the date of such notice, by irrevocable written notice given at least 180 days prior to the end of the Renewal Term, if any, to purchase the Aircraft at the end of the Renewal Term, if any. The purchase price on the EBO Date shall be an amount equal to Lessor's Cost multiplied by the EBO Percentage. The purchase price at the end of the Basic Term and at the end of the Renewal Term, if any, shall be Fair Market Value (calculated as at the end of the Basic Term or the Renewal Term, as the case may be). On any such purchase date, and as a condition to the sale of the Aircraft on such date, Lessee shall also pay all other amounts, whether past due Basic Rent, Supplemental Rent (including premium, if any), or otherwise, owing by Lessee to Lessor or any other Person under the Operative - 18 - Documents on such purchase date, including the installment of Basic Rent due on the EBO Date if such installment is designated on Exhibit C as payable in arrears. In the case of any purchase pursuant to clause (A) above on the EBO Date, if Lessee shall have caused the indebtedness represented by the Certificates to be a direct and full recourse obligation of Lessee in accordance with clause (B) of Section 16(c) of the Participation Agreement, the principal amount of, and accrued interest on, the Certificates outstanding on the EBO Date shall be credited against the purchase price payable on the EBO Date. If Lessee fails to deliver to Lessor the Preliminary Notice pursuant to Section 5(a) or the notice referred to in either clause (A) or (C) of this Section 5(b), in any such case on or before the day specified therefor, Lessee shall be deemed to have waived the applicable right to purchase the Aircraft hereunder. (ii) The term "Fair Market Value" means an amount determined in accordance with the provisions of Section 5(d) on the basis of, and equal in amount to, the value which would be obtained in an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller under no compulsion to sell. In such determination, it shall be assumed that the Aircraft is in (and registered in) the United States and is in the better of its actual condition or the condition required under this Lease in the case of return of the Aircraft pursuant to Section 5(c) except that for purposes of Section 15(c), Fair Market Value shall be determined on an "as is, where-is" basis, and if Lessor does not obtain possession of the Aircraft pursuant to Section 15(a), Fair Market Value for purposes of Section 15(c) shall be deemed to be zero. (iii) If Lessee elects to purchase the Aircraft, upon timely payment to Lessor of an amount equal to the purchase price for the Aircraft and all other amounts owing by Lessee to Lessor and the other parties to the Participation Agreement (whether as Supplemental Rent or otherwise) hereunder, under the Participation Agreement or under the Indemnity Agreement, Lessor will transfer to Lessee, without recourse or warranty, except as set forth in Section 4, all of Lessor's right, title and interest in and to the Aircraft. In connection with such transfer, Lessee shall prepare and Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a termination of this Lease, a release of the Indenture and such other documents (including Uniform Commercial Code termination statements and opinions of counsel) as Lessee may reasonably request. (c) Return of Aircraft. Unless the Aircraft is purchased by Lessee, ------------------ upon the termination or expiration of this Lease (including termination as a result of a rejection hereof pursuant to any provision of the Bankruptcy Code or upon demand for the Aircraft pursuant to Section 15), Lessee will return the Aircraft by delivering it to Lessor on the last day of the Term (including the date specified in any court order authorizing such a - 19 - rejection) or on the Termination Date, or on the date specified under Section 15(c), as the case may be, at Hartsfield Atlanta International Airport or at one of Lessee's domestic United States McDonnell Douglas MD-11 maintenance facilities having the capability to maintain avionics equipment as selected by Lessor at least 30 days, or 10 days in the case of a return pursuant to Section 15 or in connection with such a rejection, prior to such return. Upon such return, the Aircraft (i) shall be in good operating condition and shall possess a valid certificate of airworthiness for commercial passenger operation issued by the FAA, (ii) shall be clean by airline standards and in the condition required to be maintained hereunder, (iii) shall, unless otherwise requested by Lessor to retain the then existing registration of the Aircraft, be duly registered with the FAA in the name of Lessor or its designee, (iv) shall be in a passenger configuration generally used by Lessee in scheduled international commercial service, (v) shall be free and clear of all Liens (except Owner Participant's Liens and Lessor's Liens) including any rights of third parties under pooling, interchange, overhaul, repair or similar agreements or arrangements and (vi) shall be in compliance with Sections 7 and 8 hereof and with all laws, rules, regulations and orders (including airworthiness directives) of any government or governmental authority having jurisdiction (domestic or foreign) over the Aircraft. For purposes of clause (vi) above, the Aircraft shall not be considered to be in compliance with an airworthiness directive if the maintenance or alteration prescribed in such directive has not been accomplished and would have been required to be accomplished on or prior to the end of the Term or the Termination Date, as the case may be, pursuant to the provisions of clause (ii) of the first sentence, and pursuant to the second and third sentences, of Section 7(a). Upon such return, the Aircraft shall be fully equipped and have installed thereon the Engines or the same number of engines owned by Lessee of the same make and model as the Engines which were described in the Lease Supplement (or other engines of the same or another manufacturer suitable for installation and use on the Airframe, provided that replacement -------- engines shall be of identical make and model (and if one replacement engine is being returned, such engine shall be of the make and model identical to that of the Engines being returned together therewith and any engines of a different manufacturer than the original Engines shall be then commonly used in the commercial passenger aviation industry on MD-11 series airframes) and be in at least as good operating condition and have at least the same value and utility as the Engines being replaced, assuming such Engines were in the condition required hereunder) free and clear of all Liens (other than Lessor's Liens and Owner Participant's Liens) including any rights of third parties under pooling, interchange, overhaul, repair or similar agreements or arrangements. Lessee will provide no storage for the Aircraft following the last day of the Term or the Termination Date. In connection with any return of the Aircraft pursuant to the preceding paragraph, Lessee will comply with any request made by Lessor at least 10 Business Days prior to such return to the - 20 - effect that, subsequent to compliance with (or waiver by Lessor of) the preceding paragraph, Lessee will fly the Aircraft (on a route determined by Lessee) to a location either inside or outside the United States reasonably selected by Lessor at which physical possession will be turned over to Lessor. Lessee shall not be required to commence any such flight until Lessor shall have executed and delivered to Lessee a certificate in the form of Exhibit D. The costs of insurance, landing fees, fuel and crew for such flight shall be borne (i) by Lessee, if the final destination of such flight is a location within the 48 contiguous states of the United States and (ii) by Lessor if the final destination of such flight is any other location. All other costs and expenses shall be for Lessor's account. Lessee shall not be required to begin or continue any such flight if doing so would in Lessee's opinion require any further maintenance, modifications, repairs or other activities by Lessee not required upon delivery of the Aircraft pursuant to the preceding paragraph or if doing so would require any export certificate of airworthiness or governmental approval (domestic or foreign) which has not been obtained by Lessor at Lessor's expense. Lessee represents that it has adopted a time-related maintenance visit program with respect to the Airframe and a condition monitoring program with respect to the Engines. On return, (i) the Airframe shall have at least 1,400 hours of operation remaining to each of the next scheduled letter check (or if, under Lessee's FAA approved maintenance program the maximum number of hours of operation permitted between letter checks is less then 1,400, Lessee shall perform the next required letter check on the Airframe) and the next scheduled heavy maintenance visit, and (ii) the cycles of operation remaining on the lowest life limited Part on each Engine shall be not less than 700 cycles per Engine and 2,800 cycles in the aggregate. If Lessee adopts a maintenance program other than a time-related maintenance program with respect to the Airframe or a condition monitoring program with respect to the Engines, Lessee promptly shall notify Lessor of the adoption of such maintenance program, and Lessee and Lessor in good faith shall negotiate provisions with respect to such maintenance program substantially equivalent to the return conditions set forth in this Section 5(c). It is understood and agreed that a letter check shall have the same work content as a "C" check and that a heavy maintenance visit shall have the same work content as a "4C" check. If any engines not owned by Lessor are returned with the Airframe, Lessee will, at its own expense and concurrently with such delivery, (i) furnish Lessor with a full warranty bill of sale, in form and substance satisfactory to Lessor and the Indenture Trustee, if the Lien of the Indenture is still in effect, covering each such engine and with evidence of Lessee's title to such engine (including an opinion of counsel for Lessee, reasonably satisfactory to Lessor, which may rely on an attached opinion of counsel for any Permitted Sublessee with respect to any engine previously owned by such Permitted Sublessee, as to such title and - 21 - the absence of all Liens) and (ii) take such other action as Lessor reasonably requests in order that title to such engine shall be duly and properly vested in Lessor free and clear of all Liens (other than Lessor's Liens) and otherwise comply with Section 10(b) hereof. Upon full compliance with the terms of this Section 5(c), Lessor will transfer to Lessee, without recourse or warranty, except as set forth in Section 4, all Lessor's right, title and interest in and to the Engines not returned with the Airframe. Upon any return of the Aircraft (i) all letters, paint or marks on such Aircraft identifying the interest of Lessee or any Permitted Sublessee shall have been removed or painted over in a workmanlike manner with areas thereof refinished to match adjacent areas; and (ii) Lessee shall deliver to Lessor all relevant original (or photocopied or microfilmed copies thereof) logs and all original (or photocopied or microfilmed copies thereof) inspection, modification and maintenance records required to be maintained or actually maintained with respect to such Aircraft under Lessee's or any Permitted Sublessee's FAA approved maintenance program and, to the extent such records are necessary for the purpose of reregistration of the Aircraft with the FAA upon return, all original (or photocopied or microfilmed copies thereof) records maintained with respect to the Aircraft under the maintenance program approved by the aeronautical authority of any other country of registry of the Aircraft. Lessee shall invoice Lessor, and Lessor shall pay to Lessee, provided no Event of Default, Payment Default or Bankruptcy Default shall have occurred and be continuing, the amount of Lessee's cost for any fuel and oil on board the Aircraft when returned. During the last twelve months of the Term (unless Lessee shall have irrevocably elected to purchase the Aircraft or renew this Lease in accordance with the terms of this Lease), with reasonable notice, Lessee will cooperate, and cause any Permitted Sublessee to cooperate, at Lessor's sole cost, in all reasonable respects with the efforts of Lessor to (1) sell or lease the Aircraft, including without limitation, permitting prospective purchasers or lessees to inspect the Aircraft and any original (or photocopied or microfilmed copies thereof) logs and inspection, modification and maintenance records relating to the Aircraft then required to be retained by the FAA or by the comparable government agency of the country in which the Aircraft is registered, all in accordance with Section 12 hereof and (2) preserve Owner Participant's ability to have income realized from the remarketing of the Aircraft qualify as "exempt foreign trade income" under Section 923 of the Code or as income eligible for exemption or exclusion pursuant to any successor or other provision of the Code; provided that any such cooperation shall not interfere with the -------- normal operation or maintenance of the Aircraft by, or the business of, Lessee or any Permitted Sublessee. (d) Appraisal. Whenever Fair Market Rent or Fair Market Value of the --------- Aircraft is required to be determined (except under Section 15(c)), they shall be determined promptly by the mutual - 22 - agreement of the Owner Participant and Lessee in accordance with the definitions of such terms in subparagraph 5 (a) (ii) and (b)(ii), respectively, of this Section 5. Lessee may, by written notice delivered to the Owner Participant not more than 540 days, nor less than 270 days before the end of the Basic Term or the Renewal Term, if any, require that such determination be made. If Lessee and the Owner Participant cannot agree within 20 days after Lessee's request for a determination, such amount shall be determined by a qualified independent appraiser mutually satisfactory to Lessee and the Owner Participant. If Lessee and the Owner Participant fail to agree upon a satisfactory independent appraiser within 8 days following the end of the 20-day period referred to above, Lessee and the Owner Participant shall each appoint a qualified independent appraiser within the next succeeding 8 days and such appraisers shall jointly determine such amount. If either Lessee or the Owner Participant fails to appoint an appraiser within such 8-day period, the determination of the single appraiser appointed shall be final. If two appraisers are appointed and within 20 days after the appointment of the latter of such two appraisers, such two appraisers cannot agree upon such amount, such two appraisers shall, within 8 days after such 20-day period, appoint a third appraiser and such amount shall be determined by such three appraisers, who shall make their separate appraisals within 10 days following the appointment of the third appraiser, and any determination so made shall be conclusive and binding upon the Owner Participant and Lessee, as determined below. If no such third appraiser is appointed within the 8 days specified therefor, either Lessee or the Owner Participant may apply to the American Arbitration Association to make such appointment, and both parties shall be bound by such appointment. Each of Lessee and the Owner Participant may submit to the appraisers (and also to each other) any bids from third parties and the appraisers shall accord such bids the weight such appraisers deem such bids to merit. If three appraisers are appointed and the difference between the determination which is farther from the middle determination and the middle determination is more than 125% of the difference between the middle determination and the third determination, then such farther determination shall be excluded, the remaining two determinations shall be averaged and such average shall be final and binding upon the Owner Participant and Lessee. Otherwise, the average of all three determinations shall be final and binding upon the Owner Participant and Lessee. The expenses of the appraisal procedure shall be borne equally by Lessee and the Owner Participant, except (i) Lessee and the Owner Participant shall each bear any fees, costs and expenses of its respective attorneys and experts (including its appraiser) and (ii) as otherwise provided in this Lease. If Fair Market Value is required to be determined under Section 15(c), such determination shall be made by a qualified independent appraiser selected by Lessor and the costs and expenses of the appraisal shall be borne by Lessee, unless Lessor does not obtain possession of the Aircraft pursuant to Section 15(a), in - 23 - which case an appraiser shall not be appointed and the Fair Market Value for purposes of Section 15(a) shall be deemed to be zero. SECTION 6. Mortgages, Liens. Lessee will not directly or indirectly ---------------- create, incur, assume or suffer to exist any Lien on or with respect to the Airframe or any Engine, Lessor's title thereto or any interest therein or in, to or under this Lease or any other Operative Document or any interest of Lessor in any Rent, except (a)(i) the respective rights of Lessor and Lessee as provided herein and (ii) the rights of the Indenture Trustee under the Indenture, (b) the rights of others to the extent expressly permitted by Section 7(b), (c) Lessor's Liens, Owner Participant's Liens or Indenture Trustee's Liens, (d) Liens for taxes either not yet due or being contested in good faith and by appropriate proceedings, so long as such proceedings do not involve any material danger of the sale, forfeiture or loss (or loss of use) of the Aircraft, the Airframe or any Engine, or any interest therein or any risk of the assertion of criminal charges against Owner Participant or Lessor, (e) materialmen's, mechanics', workmen's, repairmen's, employees' or other like Liens arising in the ordinary course of business for amounts the payment of which either is not yet delinquent or is being contested in good faith by appropriate proceedings so long as there is not, and such proceedings do not involve, any material danger of the sale, forfeiture or loss (or loss of use) of the Aircraft, the Airframe or any Engine, or any interest therein or any risk of the assertion of criminal charges against Owner Participant or Lessor, and (f) Liens arising out of judgments or awards so long as (i) an appeal or proceeding for review is timely initiated (and in any event within 60 days after entry of such judgment or award) and is being prosecuted in good faith by appropriate proceedings and enforcement of such judgment or award has been stayed pending such review and (ii) there is not, and such proceedings do not involve, any material danger of the sale, forfeiture, loss or loss of use of the Aircraft, Airframe and any Engine, or any interests therein. Lessee will promptly, at its own expense, take or cause to be taken such action as may be necessary to discharge any Lien not excepted above when such Lien arises and shall promptly furnish evidence of such discharge to Lessor. SECTION 7. Maintenance, Operation, Registration and Insignia; -------------------------------------------------- Possession. (a) Maintenance, Etc. Lessee shall (i) forthwith upon delivery - ---------- ---------------- thereof to Lessor, cause the Aircraft to be and to remain duly registered under the laws of the United States or such other country of registry as permitted under Section 19 of the Participation Agreement at all times in the name of Lessor as owner and cause the Indenture to be duly recorded and maintained of record as a first mortgage on the Aircraft; (ii) inspect, modify, test, service, repair, operate and maintain the Aircraft, (A) while the Aircraft is registered in the United States, in compliance with the applicable regulations of the FAA and with Lessee's written FAA-approved maintenance program or, while the Aircraft is registered in another country, in compliance with the applicable requirements of the aeronautical authority of such country and - 24 - Lessee's (or the Permitted Sublessee's) written maintenance program approved by the aeronautical authority of such country, (B) so as to keep the Aircraft in good operating condition, (C) as may be necessary to enable the airworthiness certification of the Aircraft to be maintained in good standing at all times under the Act (or under the applicable requirements of the aeronautical authority of another country of registry), except when the Aircraft is being maintained, serviced, repaired, tested or modified as permitted or required by this Lease or when the Aircraft has been grounded by the FAA or any other governmental authority having jurisdiction (otherwise than by reason of a breach by Lessee of its obligations hereunder) prior to the expiration or termination of this Lease, subject, however, to compliance with Section 5(c) hereof, at the end of the Term and (D) so as to keep the Aircraft maintained in the same manner and with the same care and diligence and to the same standards as used by Lessee with respect to other similar aircraft owned or operated by Lessee; and (iii) maintain all records, logs and other materials required by Lessee's FAA-approved maintenance program or, while the Aircraft is registered in another country, by applicable requirements of the aeronautical authority of such country of registry, in respect of the Aircraft, all such records, logs and other materials to be maintained in the English language. Lessee will not discriminate against the Aircraft (as compared to other similar aircraft owned or operated by Lessee) with respect to its use, operation or maintenance in contemplation of the expiration or termination of this Lease other than withdrawal of the Aircraft from use and operation as is necessary to prepare the Aircraft for return to Lessor upon such expiration or termination and except that Lessee may, to the extent permitted by Section 8, replace Parts installed on the Aircraft prior to such expiration or termination with Parts equivalent to those installed on the Aircraft as of the Delivery Date. Without limiting the generality of the preceding sentence, if an airworthiness directive by its terms is not required to be accomplished prior to the Aircraft's return pursuant to Section 5(c), Lessee shall nevertheless accomplish such directive if prior to such return, (x) Lessee is generally accomplishing such directive with respect to other McDonnell Douglas MD-11 series aircraft affected by such directive and operated by the Lessee and (y) the Aircraft is, in accordance with Lessee's McDonnell Douglas MD-11 series maintenance program, subjected to the maintenance check at the point in time at which such directive would be accomplished. Lessee will not permit the Aircraft to be maintained, used or operated in violation of any law or any rule, regulation or order (including airworthiness directives) of any government or governmental authority having jurisdiction (domestic or foreign), or in violation of any airworthiness certificate, license or registration relating to the Aircraft issued by any such authority. If such laws, rules, regulations or orders require alteration of the Aircraft, Lessee will conform thereto or obtain conformance therewith at no expense to Lessor and will maintain or cause the same to be maintained in proper operating condition under such laws, rules, regulations and orders. Subject to the provisions of Section 5(c), Lessee may in good faith contest the validity or application of any such law, - 25 - rule, regulation or order in any reasonable manner that does not adversely affect Lessor's title or interest in the Aircraft, Owner Participant's interest in the Aircraft or the Lien of the Indenture or incur a risk of the assertion of criminal charges against Lessor, Owner Participant or Indenture Trustee or any danger of material civil liability against the Indenture Trustee or the Owner Participant. Lessee shall promptly furnish or cause to be furnished to Lessor or the Indenture Trustee such information as may be required to enable Lessor or the Indenture Trustee to file any reports required to be filed by Lessor or the Indenture Trustee with any governmental authority because of Lessor's ownership of the Aircraft or Owner Participant's interest in the Aircraft or required (or appropriate) to be filed by the Indenture Trustee to establish or maintain the Lien of the Indenture with respect to the Aircraft. Subject to compliance by Lessee with the terms of Section 19 of the Participation Agreement, Lessor shall at the request and expense of Lessee cooperate with Lessee and take all actions requested by Lessee to change the registration of the Aircraft to another country. Lessee will not fly or locate the Airframe or any Engine, or suffer the Airframe or any Engine to be flown or located in any area excluded from coverage by any insurance policy in effect with respect to the Airframe or Engine required by the terms of Section 11, unless Lessee has obtained, prior to the operation or location of the Airframe or any Engine in such area, indemnification from the United States government, or other insurance, against the risks and in the amounts required by, and in compliance with, Section 11 covering such area (except, in the case of a requisition for use by the United States government, to the extent that Lessee certifies that such insurance is unobtainable after diligent effort by Lessee or is obtainable only at unreasonably high rates or on unduly burdensome terms and conditions) (and naming Lessor, or so long as this Lease is assigned to the Indenture Trustee, the Indenture Trustee, as loss payee in respect of indemnification or insurance payable in respect of casualties to the Aircraft) or unless the Aircraft is only temporarily located in such area as a result of an emergency or other similar unforeseen circumstances and Lessee is using its good faith efforts to remove the Aircraft from such area. On or prior to the Delivery Date or as soon thereafter as practicable, Lessee will cause to be affixed to, and maintained in, the cockpit of the Airframe and on each Engine in a clearly visible location a plate of a reasonable size and shape bearing the following legend: "Wilmington Trust Company, as Owner Trustee, Owner and Lessor." and while the Lien of the Indenture is in effect the plate shall bear the following additional legend: - 26 - The Bank of New York, as Indenture Trustee, Mortgagee." During the Term, Lessee may letter, paint or mark the Aircraft with the name and logo of Lessee or any permitted sublessee or transferee pursuant to Section 7(b) and may cause the Aircraft to bear insignia plates or other markings identifying the supplier or manufacturer of the Airframe or the Engines or any Parts thereof. Except as provided above, Lessee will not allow the name of any person, corporation or association to be placed on the Airframe or on any Engine as a designation that might be interpreted as a claim of ownership. (b) Possession and Subleasing. Lessee will not, without the prior ------------------------- written consent of Lessor, sublease or otherwise in any manner deliver, transfer or relinquish possession of the Aircraft, the Airframe or any Engine or install any Engine, or permit any Engine to be installed, on any airframe other than the Airframe; provided that, so long as no Event of Default (and in the case of -------- subparagraphs (C), (F), (G) and (H) below, no Payment Default or Bankruptcy Default) shall have occurred and be continuing and, so long as such action does not deprive the Indenture Trustee of the perfected Lien of the Indenture on the Airframe or, subject to the penultimate sentence of subparagraph (A) below, any Engine, Lessee may, without the prior written consent of Lessor, do anything set forth in the following subparagraphs (A) through (H): (A) Subject the Airframe or permit the Airframe to be subjected to normal interchange agreements, or subject any Engine or permit any Engine to be subjected to normal interchange or pooling agreements or arrangements, in each case entered into by Lessee (or any permitted sublessee or transferee pursuant to this Section 7(b) under a sublease or transfer then in effect) in the ordinary course of its business with a vendor domiciled in the United States or in a country with which the United States then maintains "normal" diplomatic relations or, so long as such carrier is not the subject of any bankruptcy, liquidation or similar proceeding and is not insolvent (by reference to such carrier's most recently available financial statements), (x) with any United States air carrier certificated under Section 41101 of the Act or any successor provision or (y) with any "foreign air carrier" (as such term is defined in the Act) listed in Exhibit B hereto organized in a country with which the United States then maintains "normal" diplomatic relations and which is either a party to the Convention on the International Recognition of Rights in Aircraft or otherwise provides equivalent protection to owners, lessors and mortgagees of aircraft (any such certificated United States air carrier and any such foreign air carrier being hereinafter called a "Permitted Air Carrier") and which are customary in the airline industry. No such agreement or arrangement may contemplate, require or result in transfer of title or registration to the Airframe or any Engine. If Lessor's title - 27 - to any such Engine is divested under any such agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect to such Engine and Lessee shall comply with Section 10(b) in respect thereof. If Lessee's senior unsecured debt is not Investment Grade at the time of the commencement of any such agreement or arrangement with a foreign air carrier, Lessee shall furnish to Lessor and the Indenture Trustee the opinion described in clause (G) below. (B) Deliver or permit the delivery of possession of the Airframe or any Engine to the manufacturer thereof for testing or other similar purposes or to any organization for service, repair or maintenance work on the Airframe or Engine or any Part or for alterations or modifications in or additions to the Airframe or Engine to the extent required or permitted by the terms of Section 8. (C) Subject the Airframe or any Engine, or permit the Airframe or any Engine to be subjected, to CRAF and transfer or permit the transfer of possession of the Airframe or any Engine to the United States of America or any instrumentality thereof pursuant to CRAF. Such transfer of possession shall not continue beyond the end of the Term. Lessee (or any Permitted Sublessee) shall promptly notify Lessor upon such transfer of possession and provide Lessor with the name and address of the Contracting Office Representative for the Military Airlift Command of the United States Air Force to whom notices must be given. (D) Install or permit the installation of an Engine on an airframe which is owned by Lessee or any Permitted Sublessee free and clear of all Liens except (x) those permitted under paragraphs (d), (e) and (f) of Section 6 or those which do not apply to such Engine or to substantially all of such airframe, (y) the rights of other Permitted Air Carriers under normal interchange agreements which are customary in the airline industry and which do not result in the transfer of title to such airframe or the Engines installed thereon and (z) the Lien of any mortgage which expressly and effectively provides that each Engine leased to Lessee hereby shall not become subject to the Lien thereof, notwithstanding the installation thereof on an airframe subject to the Lien of such mortgage, unless Lessee or such Permitted Sublessee, as the case may be, shall become the owner of such Engine. (E) Install or permit the installation of an Engine on an airframe leased to, or purchased by, Lessee or any Permitted Sublessee, which airframe may or may not be subject to a conditional sale or other security agreement. Such airframe must be free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement and their purchasers and mortgagees covering such airframe and except Liens permitted by clauses (x) and (y) of subparagraph (D) above, and Lessee or such Permitted - 28 - Sublessee, as the case may be, must have received from the lessor, conditional vendor or secured party of such airframe a written agreement (which may be the lease or conditional sale agreement covering such airframe), whereby such lessor, conditional vendor or secured party expressly and effectively agrees that neither it nor its successors and assigns will acquire or claim any right, title or interest in any Engine by reason of such Engine being installed on such airframe. (F) Install or permit the installation of an Engine on an airframe owned by, leased to, or purchased by, Lessee or any Permitted Sublessee subject to a conditional sale agreement in any such case under circumstances where neither subparagraph (D) nor (E) above is applicable, provided such installation shall be deemed an Event of Loss with respect to -------- such Engine and Lessee shall comply with Section 10(b) in respect thereof. Until Section 10(b) has been fully complied with, Lessor's interest in such Engine shall continue in full force and effect. (G) So long as the proposed sublessee is not the subject of any bankruptcy, liquidation or similar proceeding and is not insolvent (by reference to such proposed sublessee's most recently available financial statement), sublease the Airframe or any Engine to any certificated United States air carrier or, after the end of the Recapture Period, to any Permitted Air Carrier, provided that Lessee shall notify Lessor, the -------- Indenture Trustee and the Owner Participant of any such sublease as provided below. Any such sublease (1) shall include provisions for the maintenance, operation and insurance of the subleased equipment which are substantially the same as, or (from a lessor's perspective) better than, the provisions of Sections 7(a), 7(b), 11 and 12, (2) shall provide that the sublessee may not further sublease the subleased equipment and (3) shall not be for a period greater than the remaining Term. In the case of any sublease to a foreign Permitted Air Carrier, (i) all necessary governmental approvals required for the subleased equipment, the Airframe or any Engine, as the case may be, to be imported and, to the extent reasonably obtainable, exported from the applicable country of domicile upon repossession of such subleased equipment by the Lessor (and Lessee as sublessor) shall have been obtained prior to commencement of any such sublease and any exchange permits necessary to allow all rent and other payments provided for under any sublease assigned to Lessor hereunder shall be in full force and effect; (ii) Lessee shall have furnished Lessor and the Indenture Trustee (if the Indenture is then in effect) a favorable opinion of counsel in the country of domicile of such foreign air carrier reasonably satisfactory to Lessor and the Indenture Trustee (if the Indenture is then in effect), that (a) the terms of the Lease and the Indenture are the legal, valid and binding obligations of the parties thereto enforceable under the laws of such jurisdiction, (b) it is not necessary for the Owner - 29 - Participant, the Lessor or the Indenture Trustee to register or qualify to do business in such jurisdiction solely as a result of the proposed sublease (based solely upon a review of the Operative Documents, and the other agreements, instruments and documents delivered in connection therewith, and written statements of the Owner Participant, the Lessor and the Indenture Trustee describing the presence and activity of each of those parties in such jurisdiction of domicile, and such other factual matters as such counsel may reasonably request), (c) the Lessor's title to the subleased equipment and the Indenture Trustee's Lien on the subleased equipment will be recognized, (d) the laws of such jurisdiction of domicile require fair compensation by the government of such jurisdiction payable in a currency freely convertible into United States dollars for the loss of use or of the title to the subleased equipment in the event of the requisition by such government of such use or title (unless Lessee shall provide insurance covering the requisition of use of or title to the subleased equipment, as the case may be, by the government of such jurisdiction so long as the subleased equipment is subject to such sublease) and (e) the required agreement of such foreign air carrier that its rights under the sublease are subject and subordinate to all the terms of this Lease is enforceable against such foreign air carrier under applicable law (subject only to customary exceptions to enforceability); and (iii) Lessee shall furnish to Lessor evidence reasonably satisfactory to Lessor that the insurance required by Section 11 remains in effect. No sublease pursuant to this subparagraph (G) may be entered into unless Lessor and the Indenture Trustee (if the Indenture is then in effect) shall have received assurances reasonably satisfactory to them that all necessary action shall have been taken to continue the perfection of Lessor's title to and interest in the subleased equipment, Airframe and any Engine, the Indenture Trustee's first priority perfected security interest therein, Lessor's and the Indenture Trustee's rights under this Lease and all other necessary documents shall have been duly filed, registered or recorded in such public offices as may be required fully to preserve the title of, and the priority of the interest of, Lessor and the Indenture Trustee in the subleased equipment, Airframe and Engines. Any sublease entered into by Lessee and having a term longer than 18 months shall be assigned by Lessee to Lessor as security for the performance of all Lessee's obligations under this Lease (and Lessee acknowledges that, if the Indenture is then in effect, any such sublease has been assigned by Lessor to the Indenture Trustee as security for the performance of all the Owner Trustee's obligations under the Indenture); provided that except during the -------- continuance of an Event of Default neither (x) the rentals payable thereunder shall be required to be paid to Lessor or to the Indenture Trustee, as the case may be, nor (y) the rights as lessor under any such sublease shall vest (to the exclusion of Lessee as lessor thereunder) in Lessor or the Indenture Trustee, as the case may be. - 30 - (H) Transfer or permit the transfer of possession of the Airframe or any Engine to the United States of America (directly or acting through any instrumentality or agency thereof whose obligations bear the full faith and credit thereof) pursuant to a sublease, a copy of which shall be promptly furnished to Lessor and the Indenture Trustee. Any such sublease shall comply with the requirements of the second sentence of subparagraph (G) above (in the case of clause (2) thereof, to the extent not prohibited by applicable law). No interchange agreement, transfer, sublease or other relinquishment of possession permitted hereunder shall affect the registration of the Aircraft, except to the extent permitted by Section 19 of the Participation Agreement. By request of Lessee or Lessor and with the consent of the other (such consent not to be unreasonably withheld after the requesting party provides any information regarding such foreign air carrier or its domicile reasonably requested by the other), any foreign air carrier may be added to or deleted from Exhibit B hereto. The rights of any Permitted Sublessee (other than a transferee of an Engine in a situation which is deemed an Event of Loss, once Lessee complies with Section 10(b) in respect thereof) shall be subject and subordinate to all the terms of this Lease. Any sublease permitted by subparagraph (G) or (H) of this paragraph (b) shall be made expressly subject and subordinate to all the restrictions and other terms of this Lease and, while the Indenture is in effect, the Indenture, including, without limitation, in each instance the covenants contained in Section 7(a) and Lessor's rights to repossession pursuant to Section 15 and to avoid such sublease upon repossession and the Indenture Trustee's rights to possession under the Indenture and hereunder (as Lessor's assignee). No sublease or other transfer contemplated by this Section 7(b) shall in any way affect Lessee's liabilities and obligations hereunder or under the Participation Agreement or the Indemnity Agreement and, as between Lessor and Lessee, Lessee shall continue to be primarily liable on all such obligations, as if no such sublease or other transfer had occurred. No interchange agreement, sublease or other relinquishment of possession of the Airframe or any Engine permitted by this Section 7(b) shall in any way discharge or diminish any of Lessee's obligations to Lessor hereunder or under the Participation Agreement or the Indemnity Agreement or constitute a waiver of any of Lessor's rights and remedies hereunder or thereunder. Lessee shall notify Lessor, Owner Participant and Indenture Trustee of any sublease of the Airframe at least 30 days before the execution and delivery thereof. Lessee shall provide Lessor and, so long as the Indenture is in effect, the Indenture Trustee with a copy of any sublease of the Aircraft having a term (including any renewal terms) of one year or more within 15 days after execution and delivery thereof and of any other sublease within 15 days after a request by Lessor. If Lessee or any Permitted Sublessee receives from the lessor or secured party of any airframe leased to, or purchased by, Lessee or any such sublessee or transferee, which airframe may or - 31 - may not be subject to a conditional sale or other security agreement, a written agreement complying with the last sentence of subparagraph (E) of this Section 7(b), and the lease or conditional sale or other security agreement covering such airframe also covers an engine or engines owned or leased by the lessor under such lease or subject to a security interest in favor of the secured party under such conditional sale or other security agreement, Lessor agrees for the benefit of such lessor or secured party that neither Lessor nor the Indenture Trustee, respectively, nor their respective successors and assigns will acquire or claim, as against such lessor or secured party, any right, title or interest in any such engine as the result of such engine being installed on the Airframe at any time while such engine is subject to such lease or conditional sale or other security agreement and owned or leased by such lessor or subject to a security interest in favor of such secured party. This paragraph (b) shall not apply to a merger, consolidation, sale or assignment permitted by Section 13. SECTION 8. Replacement and Addition of Parts. (a) Replacement of --------------------------------- -------------- Parts. Except as otherwise provided in paragraph (c) of this Section 8, Lessee - ----- will replace or cause to be replaced as promptly as practicable all Parts which may from time to time become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use for any reason whatsoever. In addition, Lessee or any Permitted Sublessee may remove in the ordinary course of maintenance, service, repair or testing, any Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use, provided that except as -------- otherwise provided in Section 8(c) Lessee or such Permitted Sublessee shall replace such Parts or cause them to be promptly replaced. All such replacement parts shall be free and clear of all Liens (except in the case of replacement parts temporarily installed and except for pooling arrangements permitted by paragraph (b) of this Section 8 and Permitted Liens) and shall be in at least as good operating condition and have at least the same value and utility as either the Part being replaced or the equivalent Part originally included on the Aircraft as of the Delivery Date (assuming the replaced Part was in at least as good condition as required to be maintained hereunder). All such replacement parts (except in the case of replacement parts temporarily installed and except for parts subject to pooling arrangements permitted by paragraph (b) of this Section 8) shall become the property of Lessor, shall constitute Parts hereunder and shall immediately become subject to this Lease and shall be deemed part of the Airframe or an Engine, as the case may be, for all purposes hereof to the same extent as the Parts originally comprising, or installed on, such Airframe or such Engine. The Parts replaced thereby shall become Lessee's property. (b) Title to Parts. Any Part removed from the Airframe or any Engine -------------- as provided in paragraph (a) of this Section 8 may be - 32 - subjected by Lessee or any Permitted Sublessee to normal pooling arrangements customary in the airline industry entered into in the ordinary course of the business of Lessee or such Permitted Sublessee with vendors or with other air carriers. The Part replacing such removed Part shall be incorporated or installed in or attached to the Airframe or Engine in accordance with paragraph (a) of this Section 8 promptly after the removal of such removed Part. In addition, any replacement Part when incorporated or installed in or attached to the Airframe or any Engine in accordance with paragraph (a) of this Section 8 may be owned by another air carrier subject to such a normal pooling arrangement; provided that Lessee or such Permitted Sublessee shall, promptly thereafter, either (i) cause title to such replacement Part to vest in Lessor in accordance with said paragraph (a) by Lessee or such Permitted Sublessee acquiring title thereto for the benefit of Lessor free and clear of all Liens except Permitted Liens or (ii) replace such replacement Part by incorporating or installing in or attaching to the Airframe or Engine a further replacement Part owned by Lessee or such Permitted Sublessee free and clear of all Liens except Permitted Liens and shall cause title to such further replacement Part to vest in Lessor in accordance with paragraph (a) of this Section 8. (c) Alterations and Modifications. Lessee shall make or cause to be ----------------------------- made such alterations and modifications in and additions to the Airframe and each Engine as may be required from time to time to meet applicable requirements of the FAA and any other governmental authority with jurisdiction (domestic or foreign) over the Aircraft. Lessee or any Permitted Sublessee may in good faith contest the validity or application of any such requirements in any reasonable manner which does not adversely affect Lessor's title or interest in the Aircraft or the Lien of the Indenture or incur a risk of the assertion of criminal charges against Owner Participant or Lessor. In addition, Lessee or, with Lessee's approval, any such Permitted Sublessee, at its own expense, may from time to time make such alterations and modifications, including removal (without replacement) of Parts which Lessee or such Permitted Sublessee deems obsolete or no longer appropriate or suitable for use in the Airframe or such Engine, and additions to the Airframe and each Engine as Lessee or such Permitted Sublessee may in its reasonable judgment deem desirable in the proper conduct of its business so long as such alterations, modifications, removals or additions do not materially decrease the value, utility or remaining useful life of the Aircraft or cause the Aircraft to become limited use property within the meaning of Revenue Procedure 76-30 except that Lessee may in any event remove any Part from the Aircraft, so long as it replaces such removed Part with a Part equivalent to the corresponding Part installed on the Aircraft as of the Delivery Date. Lessee shall monitor the removal of Parts in a manner sufficient to comply with the foregoing. Title to each Part incorporated or installed in or attached or added to the Airframe or such Engine as the result of such alteration, modification, removal or addition shall remain in Lessee or such Permitted - 33 - Sublessee, as the case may be, and may be removed at any time during the Term; provided that (i) such Part is in addition to, and not in replacement of or - -------- substitution for, any Part originally incorporated or installed in or attached or added to the Airframe or such Engine at the time of the delivery thereof hereunder or any Part in replacement of, or substitution for, any such Part, (ii) such Part is not required to be incorporated or installed in or attached to the Airframe or such Engine pursuant to the terms of Section 7 or the first sentence of this paragraph (c), (iii) such Part can be removed from the Airframe or such Engine without diminishing the value, remaining useful life or utility of the Airframe or the value or utility of such Engine and without impairing the airworthiness which the Airframe would have had at such time had such alteration, modification, removal or addition not occurred, assuming the Aircraft or such Engine was otherwise maintained in the condition required by the terms of this Lease, (iv) the cost of such Part was not paid by Lessor and (v) no Event of Default shall have occurred and be continuing. Title to all other such Parts shall, without further act, vest in Lessor. Upon the removal of any Part title to which is retained by Lessee or any Permitted Sublessee, Lessee shall promptly repair any damage to the Airframe or Engine from which it was removed which resulted from such removal and such Part shall no longer be deemed part of the Airframe or such Engine from which it was removed. Any Part not removed as provided above prior to the return to Lessor (including pursuant to the exercise of remedies under Section 15) of the Airframe or such Engine including such Part shall, without further act, become the property of Lessor free and clear of all Liens except Permitted Liens. Title to any auxiliary fuel tanks installed on the Airframe at the time of delivery of the Airframe from the Manufacturer to Seller shall, whether or not such tanks are from time to time installed on the Airframe, be vested in Lessor until such time, if any, as such tanks (1) become unnecessary to operate the Aircraft at the range specified by the Manufacturer in the Purchase Agreement and (2) are not otherwise required modifications under this Section 8. SECTION 9. Voluntary Termination. (a) Obsolete or Surplus Aircraft. --------------------- ---------------------------- At any time after the end of the Recapture Period, so long as no Event of Default or Payment Default shall have occurred and be continuing, Lessee may at its option, on at least 90 days' prior written notice to Lessor, the Owner Participant and the Indenture Trustee, terminate this Lease with respect to the Aircraft on the date in any month specified in Exhibit A or, if not a Business Day, the next succeeding Business Day (the "Termination Date"); provided that -------- the Chief Financial Officer or Treasurer of Lessee certifies that the Aircraft has become obsolete or surplus with respect to Lessee's requirements. Lessee shall not revoke a notice of termination more than three times during the Basic Term. A notice of termination shall not be treated as revoked if (i) Lessee receives no bids for the cash purchase of the Aircraft on the Termination Date, (ii) the only such bids are received from the Owner Participant, any Affiliate thereof or any Person acting for the Owner Participant or such - 34 - Affiliate and are less than Termination Value or (iii) no sale occurs on the Termination Date by reason of default by the potential purchaser. Unless Lessee receives notice from the Owner Participant pursuant to the next to last paragraph of this Section 9(a), Lessee, as non-exclusive broker for Lessor, shall use reasonable efforts to obtain bids for the cash purchase of the Aircraft on the Termination Date. Lessor may also independently obtain bids for such purchase and certify to Lessee the terms and amounts of each such bid and the name and address of the person submitting the bid. Neither Lessee nor any of its Affiliates may submit a bid, nor may Lessee accept a bid from any person acting for or affiliated with Lessee or having any arrangement regarding Lessee's or any of its Affiliates purchase or continued use of the Aircraft. Lessee shall promptly certify to Lessor the terms and amount of each bid received by Lessee and the name and address of the person submitting the bid; provided that Lessee shall not be obligated to provide such a certification, nor - -------- shall the Owner Participant inspect the bids received by Lessee with respect to the Aircraft, unless the Owner Participant has given to Lessee binding and irrevocable notice that neither the Owner Participant nor any of its Affiliates nor any Person acting for the Owner Participant or such Affiliate will submit a bid for the purchase of the Aircraft. Lessee may reject each bid (i) which is in an amount less than the sum of the Termination Value computed as of the Termination Date specified in Exhibit A plus all expenses incurred by Lessor, the Owner Participant and the Indenture Trustee in connection with the sale and (ii) which is from a purchaser unwilling or unable to use the Aircraft (including use outside the United States) in a manner that will enable Termination Value to be determined by reference to Schedule 1 to the Indemnity Agreement. Subject to the foregoing, on the Termination Date, Lessor shall sell the Aircraft for cash to whomever shall have submitted the highest bid. The total sales price realized at such sale, net of all expenses of the sale (including commissions and any sales or transfer taxes) (the "Net Sales Price") shall be retained by Lessor. In addition, on the date of such sale Lessee shall pay to Lessor, or, in the case of Supplemental Rent, to the person entitled thereto (subject in each case to Section 3(d) hereof), the sum of: (A) the amount, if any, by which the Termination Value computed as of the Termination Date exceeds the Net Sales Price, (B) the installment of Basic Rent (if designated as payable in arrears, but not if payable in advance), if any, due on the Termination Date if such Termination Date is a Payment Date, and (C) all other amounts, whether Basic Rent, Supplemental Rent (including an amount equal to the premium, if any, owing by Lessor in respect of the Certificates) or otherwise, owing by Lessee to Lessor, the Owner Participant, the Indenture Trustee and the Holders hereunder, under the Participation Agreement and the Indemnity Agreement other than any installment of Basic Rent due after the Termination Date. Upon such payment by Lessee and Lessor's payment in full of the aggregate unpaid principal amount - 35 - of all Certificates then outstanding, together with accrued interest thereon to the date of payment, plus such premium, if any, thereon and all other sums due and payable on such date to the Indenture Trustee and the Holders hereunder or under the Indenture, the Participation Agreement or the Certificates and compliance by Lessor with the provisions of this Section 9(a) and Section 14.01 of the Indenture, this Lease shall terminate and Lessor will transfer without recourse or warranty, except as set forth in Section 4, to the purchaser thereof, all of Lessor's right, title and interest in and to the Airframe and such Engines as are then installed thereon and to Lessee, all of Lessor's right, title and interest in any Engines not then installed on the Airframe. Except as provided above, if no sale occurs on the Termination Date and the Owner Participant does not notify Lessee pursuant to the next to last paragraph of this Section 9(a), this Lease shall continue in full force and effect as to the Aircraft and Lessee shall pay the expenses incurred by Lessee, Lessor, the Owner Participant and the Indenture Trustee in connection with the proposed sale. Lessor and the Owner Participant may, but shall be under no duty to, solicit bids, inquire into the efforts of Lessee to obtain bids or otherwise take action in connection with any such sale other than, with respect to Lessor, to transfer to the purchaser named in the highest cash bid certified by Lessee to Lessor against payment therefor, without recourse or warranty (except that Lessor shall make the same warranty to such purchaser as is set forth in Section 4 with respect to title and Liens, as of the date of delivery of the Aircraft to such purchaser), all Lessor's right, title and interest in and to such Aircraft. The Owner Participant may, at any time within 45 days after it has received a termination notice from Lessee, give written notice to Lessee and the Indenture Trustee that the Owner Participant elects irrevocably to terminate this Lease with respect to the Aircraft. On the Termination Date the Owner Participant shall pay to the Indenture Trustee sufficient funds to enable it to pay in full the aggregate unpaid principal amount of all Certificates then outstanding, together with accrued interest thereon to such Termination Date. Effective on full payment to the Indenture Trustee of all the foregoing amounts and on Lessee's full payment of the installment of Basic Rent, if any, due on such Termination Date (if designated as payable in arrears but not if payable in advance) plus all other amounts of Rent (including an amount equal to the premium, if any, owing by Lessor in respect of the Certificates) and other amounts payable by Lessee hereunder or under the Participation Agreement due on or prior to such Termination Date other than any installment of Basic Rent due after the Termination Date, this Lease shall terminate with respect to the Aircraft; provided that this Lease shall continue in full force and effect -------- unless such amounts are paid in full. If after giving an irrevocable notice the Owner Participant fails to make the required payment on the Termination Date, Lessee may complete the pending termination procedure hereunder by giving at least 30 days prior written notice to Lessor of a new Termination Date (without - 36 - regard to the 90-day limitation and without regard to Owner Participant's right to terminate under this paragraph). If this Lease terminates pursuant to this Section 9(a), Lessee shall deliver the Airframe and the Engines or engines to or at the direction of Lessor in the same condition and manner as if return were being made to Lessor pursuant to Section 5(c), and shall duly transfer to Lessor title to any such engines installed on the Airframe on the Termination Date not owned by Lessor, all in accordance with the terms of said Section 5(c), and Lessor shall, subject to Lessee's compliance with the provisions of this Section 9(a), duly transfer to Lessee title to any Engines not installed on the Airframe on the Termination Date. (b) Replacement Engines. So long as no Event of Default shall have ------------------- occurred and be continuing, Lessee may at any time, on at least 30 days' prior written notice to Lessor, terminate this Lease with respect to any Engine not then installed or held for use on the Airframe by replacing such Engine in accordance with the terms of paragraph (b) of Section 10 to the same extent as if an Event of Loss had occurred with respect to such Engine. SECTION 10. Loss, Destruction, Requisition, etc. (a) Event of Loss ----------------------------------- ------------- with Respect to the Airframe. Lessee shall notify Lessor promptly and in any - ---------------------------- event within 15 days of the occurrence of an Event of Loss with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe. By written notice to Lessor, the Indenture Trustee and the Owner Participant given within 60 days after the occurrence of such Event of Loss, Lessee shall elect one of the following two alternatives (failure by Lessee to make such election within said 60 days being deemed an election of alternative (i)): (i) pay to Lessor on a date as provided in the last paragraph of this Section 10(a), (A) the Stipulated Loss Value for the Aircraft, computed as of the date specified in Exhibit A coinciding with or next preceding the date of payment, plus interest at the Debt Rate from such date specified in Exhibit A to the date of payment, (B) the Basic Rent installment payment, if any, due on such date of payment (if payable in arrears but not if payable in advance), plus any other amounts of Basic Rent which shall be due and unpaid other than any installment of Basic Rent due after such date, (C) all other amounts, whether Supplemental Rent (including an amount equal to the premium, if any, owing by Lessor in respect of the Certificates) or otherwise, owing by Lessee to Lessor, the Owner Participant, the Indenture Trustee and the Holders hereunder, under the Participation Agreement, the Indenture, the Certificates or the Indemnity Agreement and (D) any reasonable out-of-pocket costs or expenses incurred in connection with such Event of Loss and the related prepayment of the Certificates by Lessor, the Owner Participant, the Holders or the Indenture Trustee. Upon payment in full of such amounts, (x) this Lease, including the obligation of - 37 - Lessee hereunder to pay all succeeding installments of Basic Rent, shall terminate and (y) provided that no Event of Default has occurred and is -------- continuing, Lessor shall transfer to Lessee (subject to any insurer's salvage rights and in accordance with the provisions of Section 9.08 of the Indenture), without recourse or warranty, except as set forth in Section 4, all of Lessor's right, title and interest, if any, in and to the Aircraft. In connection with such transfer, Lessee shall prepare and Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a termination of this Lease, a release of the Indenture and such other documents (including Uniform Commercial Code termination statements) as Lessee reasonably requests, or (ii) provided that no Event of Default or Payment or Bankruptcy -------- Default shall have occurred and be continuing and that Lessee shall have reimbursed the reasonable expenses of all parties entitled thereto pursuant to this clause (ii), Lessee shall cause to be duly conveyed to Lessor, as replacement for the Airframe and Engines with respect to which such Event of Loss occurred, title to a McDonnell Douglas MD-11 airframe which was delivered initially by the Manufacturer no earlier than 1993 and having at least the equivalent value, utility and remaining useful life as the Airframe being replaced had immediately prior to the occurrence of such Event of Loss (assuming the Airframe had been maintained in accordance with this Lease), and title to a number of engines equal to the number of Engines with respect to which such Event of Loss has occurred of the same make and model (or engines of another manufacturer suitable for installation and use on the Airframe, provided that all three replacement -------- engines shall be of identical make and model and any replacement engines of a different manufacturer than the original Engines shall be then commonly used in the commercial passenger aviation industry on MD-11 series airframes) and in at least as good operating condition and having at least the same value and utility as the Engine being replaced had immediately before such Event of Loss occurred, assuming such Engine is in at least as good condition as required to be maintained hereunder, in each case to be owned by Lessee free and clear of all Liens whatsoever (other than Permitted Liens), in passenger configuration, duly certified as an airworthy aircraft by the FAA and being in good operating condition, but in all events in at least as good operating condition and repair as required by the terms hereof, in each such case, immediately prior to the occurrence of such Event of Loss. In such case Lessee will promptly (A) furnish Lessor with bills of sale, in form and substance satisfactory to Lessor, covering such replacement airframe, engine or engines, as the case may be, (B) cause such replacement airframe to be duly registered in the name of Lessor pursuant to the Act or the laws of such other jurisdiction in which registration is - 38 - permitted pursuant to Section 19 of the Participation Agreement, (C) cause supplements hereto and to the Trust Agreement and the Indenture, in form and substance satisfactory to Lessor, covering such replacement airframe, engine or engines, as the case may be, under this Lease, to be, in the case of the supplement to this Lease, duly executed by Lessee and, in the case of each such supplement, recorded pursuant to the Act or such laws, (D) furnish Lessor with such evidence (which shall be in the form of an appraisal or other report, as the case may be, from a qualified independent expert or experts reasonably satisfactory to Lessor) of the value and utility of, and good title to, such replacement airframe, engine or engines, and airworthiness, residual value and remaining useful life of such replacement airframe and the airworthiness after replacement of the Aircraft, and of compliance with the insurance provisions of Section 11 with respect to such replacement airframe, engine or engines, as the case may be, as Lessor reasonably requests, (E) furnish Lessor with all documents, certificates and opinions necessary to enable Lessor to comply with the requirements of Section 9.08 of the Indenture, (F) furnish Lessor and the Owner Participant with an opinion in form and substance satisfactory to the Owner Participant of tax counsel chosen by the Owner Participant and reasonably acceptable to the Lessee as to the absence of any risk of adverse tax consequences to Lessor and the Owner Participant of such replacement or if such opinion cannot be given, an indemnity in form and substance satisfactory to the Owner Participant against such adverse tax consequences, (G) assign to Lessor all manufacturer's and vendor's warranties with respect to such replacement, (H) furnish Lessor, the Indenture Trustee and the Owner Participant with an opinion addressed to each of them, of counsel reasonably acceptable to them to the effect that the benefits of Section 1110 of the Bankruptcy Code would be available to Lessor and Indenture Trustee with respect to such replacement airframe, engine or engines and (I) take such other action as Lessor reasonably requests in order that title to such replacement airframe, engine or engines, as the case may be, is duly and properly vested in Lessor, leased hereunder and subjected to the Lien of the Indenture to the same extent as the Airframe, Engine or Engines replaced thereby. Upon full compliance by Lessee with the terms of this subparagraph (a) (ii), Lessor will transfer to Lessee (subject to any insurer's salvage rights and in accordance with the provisions of Section 9.08 of the Indenture), without recourse or warranty, except as set forth in Section 4, all of Lessor's right, title and interest, if any, in and to the Airframe, Engine or Engines with respect to which such Event of Loss occurred. In connection with such transfer, Lessee shall prepare and Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of - 39 - the Airframe and Engines with respect to which such Event of Loss occurred from the Indenture and such other documents (including Uniform Commercial Code amending statements) as Lessee reasonably requests. Any Engine not installed on the Airframe when such Event of Loss occurred shall continue to be the property of Lessor and leased hereunder as part of the replacement aircraft. For all purposes hereof, the replacement airframe and each replacement engine shall be deemed part of the property leased hereunder; the replacement airframe shall be deemed an "Airframe" as defined herein; each replacement engine shall be deemed an "Engine" as defined herein; and the replacement airframe and each replacement engine shall be deemed part of the Aircraft to the same extent as was the Airframe or Engine, as the case may be, replaced thereby. Nothing contained in this subparagraph (a) (ii) shall change Basic Rent, Stipulated Loss Values or Termination Values, other than any adjustments made pursuant to the Indemnity Agreement. Any such adjustment shall be subject to clause (y) of the definitions of "Stipulated Loss Value" and "Termination Value." If alternative (i) above is elected or deemed to be elected by Lessee, Lessee shall fully perform the same not later than the earlier of (x) 120 days following the occurrence of such Event of Loss and (y) 15 days following the date of receipt of insurance proceeds with respect to such occurrence. If alternative (ii) above is elected by Lessee and Lessee has not fully performed the same within 120 days of the occurrence of such Event of Loss, in the event that any amounts held by Lessor (or, so long as the Indenture shall be in effect, the Indenture Trustee) in respect of such Event of Loss are less than the Stipulated Loss Value thereof, Lessee will deposit with Lessor or the Indenture Trustee, as the case may be, the amount of any deficiency as security on such 120th day; provided, however, that if Lessee has not fully performed -------- ------- alternative (ii) above within 180 days following the occurrence of such Event of Loss, Lessee shall be deemed to have elected alternative (i) and shall immediately perform its obligations thereunder, and the Indenture Trustee, or Lessor if the Indenture shall have been discharged, shall apply the aforesaid amounts held by it as a credit against such obligations. (b) Event of Loss with Respect to an Engine. Upon the occurrence of --------------------------------------- an Event of Loss with respect to an Engine in any case where the provisions of paragraph (a) of this Section 10 are not applicable, Lessee shall give Lessor prompt written notice thereof and shall, within 60 days after the occurrence of such Event of Loss, duly convey to Lessor, as replacement for the Engine with respect to which such Event of Loss occurred, title to another engine of the same make and model (or engines of another manufacturer suitable for installation and use on the Airframe) having at least the same value and utility as the respective Engine being replaced had immediately prior to the occurrence of such Event of Loss (assuming such Engine had been maintained in accordance with the terms of this Lease), owned by Lessee free and - 40 - clear of all Liens whatsoever and in at least as good operating condition as the Engine with respect to which such Event of Loss occurred, but in all events in at least as good condition and repair as required by the terms hereof immediately prior to the occurrence of such Event of Loss, provided that after -------- any replacement all three Engines shall be of identical make and model and any replacement engines of a different manufacturer than the original Engines shall be then commonly in use in the commercial passenger aviation industry on MD-11 series airframes. In such case, Lessee, at its own expense, will promptly (i) furnish Lessor with a bill of sale, in form and substance satisfactory to Lessor with respect to such replacement engine, (ii) cause supplements hereto and to the Trust Agreement and the Indenture, in form and substance satisfactory to Lessor, subjecting such replacement engine to this Lease, in the case of the supplement to this Lease, to be duly executed by Lessee and, in the case of each such supplement, recorded pursuant to the Act, (iii) furnish Lessor with such evidence of compliance with the insurance provisions of Section 11 with respect to such replacement engine as Lessor reasonably requests and furnish Lessor with such evidence of Lessee's title to such replacement engine, (iv) furnish Lessor with all documents, certificates and opinions necessary to enable Lessor to comply with the requirements of Section 9.08 of the Indenture, (v) furnish Lessor and the Owner Participant with an opinion in form and substance satisfactory to Owner Participant of tax counsel chosen by the Owner Participant, and reasonably acceptable to Lessee, as to the absence of any risk of adverse tax consequences to Lessor and the Owner Participant of such replacement, or if such opinion cannot be given, an indemnity satisfactory to the Owner Participant for such tax consequences, (vi) furnish Lessor with an officer's certificate certifying that such replacement engine has the value and utility required by this Section 10(b), (vii) assign to Lessor the benefit of all manufacturer's and vendor's warranties with respect to such replacement engine and (viii) take such other action as Lessor reasonably requests in order that title to such replacement engine be duly and properly vested in Lessor, leased hereunder and subjected to the Lien of the Indenture to the same extent as the Engine replaced thereby. Upon full compliance by Lessee with the terms of this paragraph (b), Lessor will, provided no Event of Default has occurred and is continuing, transfer to Lessee (subject to any insurer's salvage rights and in accordance with the provisions of Section 9.08 of the Indenture), without recourse or warranty except as set forth in Section 4, all of Lessor's right, title and interest, if any, in and to the Engine with respect to which such Event of Loss occurred. In connection with such transfer, Lessee shall prepare and Lessor shall execute or forward to the Indenture Trustee for execution, as the case may be, all in recordable form, a bill of sale evidencing such transfer, a release of the Engine with respect to which such Event of Loss occurred from the Indenture and such other documents (including Uniform Commercial Code amending statements) as Lessee reasonably requests, all at Lessee's sole cost and expense. For all purposes hereof, each such replacement engine shall be deemed part of the property leased hereunder, shall be deemed an "Engine" - 41 - as defined herein and shall be deemed part of the Aircraft to the same extent as was the Engine replaced thereby. An Event of Loss covered by this paragraph (b) shall not result in any change in Basic Rent, Stipulated Loss Value, Termination Value or the EBO Percentage, other than any adjustments made pursuant to the Indem-nity Agreement, and any such adjustment shall be subject to clause (y) of the definitions of "Stipulated Loss Value" and "Termination Value". (c) Application of Payments from Governmental Authorities or Others. --------------------------------------------------------------- Any payments received at any time by Lessor or by Lessee from any governmental authority or other party with respect to an Event of Loss resulting from the condemnation, confiscation, conversion, theft or seizure of, or requisition of title to or use of, the Airframe or any Engine will be applied as follows: (i) If such payments are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and alternative (i) in paragraph (a) of this Section 10 is the alternative performed or to be performed by Lessee, so much of such payments (net of any and all unreimbursed costs, losses and expenses incurred by Lessor, the Owner Participant and the Indenture Trustee) as shall not exceed the Stipulated Loss Value required to be paid by Lessee pursuant to said paragraph (a) shall be paid to Lessor in reduction of Lessee's obligation to pay such Stipulated Loss Value if not already paid in full by Lessee, or, if already paid by Lessee, shall, provided neither -------- an Event of Default nor a Payment Default has occurred and is continuing (otherwise such proceeds shall be held pursuant to Section 24 as security for Lessee's obligations hereunder and under the other Operative Documents), be applied to reimburse Lessee for its payment of such Stipulated Loss Value and the balance, if any, remaining after such application shall be divided between Lessee and Lessor as the respective interests of Lessee and Lessor may appear relative to the values of Lessee's leasehold interest in the Aircraft and Lessor's ownership of the Aircraft subject to this Lease; and (ii) If such payments are received with respect to the Airframe or with respect to the Airframe and the Engines then installed on the Airframe and alternative (ii) in paragraph (a) of this Section 10 is the alternative performed or to be performed by Lessee, or if such payment is received with respect to an Engine not then installed on the Airframe under the circumstances contemplated by paragraph (b) of this Section 10, all such payments (net of any and all unreimbursed costs, losses and expenses incurred by Lessor, the Owner Participant and the Indenture Trustee) shall be paid over to, or retained by, Lessee, provided that Lessee shall have -------- fully performed the terms of this Section 10 with respect to the Event of Loss for which such payments are made, and provided further that neither an -------- ------- Event of Default nor a Payment Default - 42 - shall have occurred and be continuing (otherwise such proceeds shall be held pursuant to Section 24 as security for Lessee's obligations hereunder and under the other Operative Documents). (d) Requisition for Use with Respect to the Airframe and Engines ------------------------------------------------------------ Installed Thereon. If the Airframe or the Airframe and the Engines or engines - ----------------- then installed on the Airframe is requisitioned for use by a Requisitioning Government, Lessee shall promptly notify Lessor of such requisition and all Lessee's obligations under this Lease with respect to the Aircraft shall continue to the same extent as if such requisition had not occurred, except to the extent that any failure or delay in repairing or maintaining the Aircraft shall have been caused by such requisition. All payments received by Lessor, Lessee or any Permitted Sublessee in connection with any such requisition for use (other than any such requisition which constitutes an Event of Loss, as to which the provisions of Section 10(c) shall govern) or pursuant to Section 7(b) under a sublease or transfer then in effect from a Requisitioning Government for the use of the Airframe and Engines or engines during the Term shall be paid over to, or retained by, Lessee and/ or such Permitted Sublessee, provided that -------- neither an Event of Default nor Payment or Bankruptcy Default shall have occurred and be continuing (otherwise such proceeds shall be held pursuant to Section 24 as security for Lessee's obligations hereunder and under the Participation Agreement). All payments received by Lessor, Lessee or any such Permitted Sublessee from a Requisitioning Government for the use of the Airframe and Engines after the Term shall be paid over to, or retained by, Lessor (or Lessee if it shall have purchased Lessor's interest therein). Lessee shall promptly notify Lessor or cause Lessor to be notified in writing of such requisition. In the event of any such requisition for use, Lessee agrees to use its best efforts to obtain reimbursement from the United States government or any agency or instrumentality thereof to Lessor and the Owner Participant for damages suffered by Lessor and the Owner Participant as a result of such requisition for use. Lessee agrees to notify Lessor or cause Lessor to be notified promptly in writing in advance of the time when any negotiations between Lessee and or any such Permitted Sublessee and a Requisitioning Government with respect to any such requisition shall commence and will consult with Lessor regarding methods or procedures that are appropriate to effect recovery from such Requisitioning Government for any damages suffered by Lessor and the Owner Participant by reason of such requisition for use. (e) Requisition for Use by a Requisitioning Government of an Engine --------------------------------------------------------------- Not Installed on the Airframe. If an Engine not then installed on the Airframe - ----------------------------- is requisitioned for use by a Requisitioning Government, Lessee shall replace such engine or cause it to be replaced by complying with the terms of Section 10(b) to the same extent as if an Event of Loss had occurred with respect to such Engine as of the date of such requisition. Any payments received by Lessor, Lessee or any Permitted Sublessee from a Requisitioning Government with respect to such requisition shall - 43 - be paid over to, or retained by, Lessee and/or such assignee, sublessee or transferee, provided that neither an Event of Default nor a Payment Default -------- shall have occurred and be continuing (otherwise such proceeds shall be held pursuant to Section 24 as security for Lessee's obligations hereunder and under the other Operative Documents). SECTION 11. Insurance. Lessee will at all times during the Term --------- cause insurance to be carried and maintained with insurers of recognized responsibility on or with respect to the Aircraft, at its own cost and expense, against such risks (including, without limitation, all-risk hull, public liability, property damage, bodily injury, passenger liability and contractual liability insurance), in such amounts, with such deductibles or self-insurance amounts as Lessee customarily maintains with respect to similar aircraft owned or operated by Lessee operating on similar routes in similar geographic locations. Notwithstanding the foregoing, if Lessee's senior unsecured long-term debt is rated Investment Grade (or, if Lessee has no rated unsecured long-term debt, Lessee has an equivalent credit standing), Lessee may self-insure in any amount (by means of a deductible, self-insured retentions or otherwise) with respect to hull insurance and maintain a deductible in any amount with respect to all other insurance, including liability insurance, required to be carried and maintained hereunder. If Lessee's senior unsecured long-term debt is rated below Investment Grade (or, if Lessee has no rated unsecured long-term debt, Lessee has an equivalent credit standing), Lessee may self-insure with respect to all insurance, including liability insurance, in amounts conforming to the then existing average standard for United States passenger airlines of similar size and standing as determined by an independent aircraft insurance expert designated by Lessee and reasonably satisfactory to Lessor and the Owner Participant. The foregoing sentence shall take effect as from the next scheduled renewal of Lessee's relevant insurance coverage following the time when Lessee's senior unsecured long term debt is downgraded to below Investment Grade. The foregoing shall not permit Lessee to discriminate as between insurance coverage on the Aircraft and insurance which Lessee maintains with respect to similar aircraft owned or operated by Lessee operating on similar routes in similar geographic locations. Unless Lessor and the Owner Participant, in their sole discretion, give their written consent to the contrary, Lessee shall maintain hull insurance in an amount not less than Stipulated Loss Value from time to time and liability insurance in an amount not less than the amount per occurrence set forth on the insurance certificate delivered by Lessee pursuant to Section 3(f) of the Participation Agreement. While Lessee's senior unsecured long-term debt is rated below Investment Grade (or, if Lessee has no rated senior unsecured long-term debt, Lessee has an equivalent credit standing), Lessee may carry and maintain insurance with respect to the Aircraft with Captive Insurance Companies (as hereinafter defined) only to the extent that the sum of (1) the amount which Lessee carries and maintains with Captive Insurance Companies and - 44 - (2) the amount which Lessee otherwise self insures with respect to the Aircraft (whether by means of a deductible, self-insured retention or otherwise) does not exceed the amount of self insurance permitted by the foregoing provisions of this Section. "Captive Insurance Company" means any insurance company which is an Affiliate of Lessee; provided that a Captive Insurance Company shall not include any such insurance company (i) which is itself an insurance company of recognized responsibility or (ii) which fully reinsures (pursuant to contracts of reinsurance which include a cut-through clause in favor of Lessor) all risks with respect to the Aircraft with an insurance company of recognized responsibility. During any period of (i) the requisition for use by the United States government or any agency or instrumentality thereof whose obligations bear the full faith and credit of the United States or (ii) any transfer of possession to the United States of America or any agency or instrumentality thereof pursuant to Section 7(b)(C) or Section 7(b)(H) of the Airframe or the Airframe and the Engines or engines then installed on the Airframe during the Basic Term or the Renewal Term, if any, Lessee shall carry and maintain or cause to be carried and maintained the same insurance required pursuant to this Section 11 (except to the extent that Lessee certifies that such insurance shall be unobtainable after diligent effort by Lessee or shall be obtainable only at unreasonably high rates or on unduly burdensome terms and conditions); provided that Lessor, the Owner -------- Participant and the Indenture Trustee shall accept, in lieu of such insurance coverage, written indemnification or insurance from the United States of America which is substantially the same as otherwise required hereunder and is acceptable to Lessor and the Owner Participant. All insurance policies required to be carried and maintained hereunder shall name Lessee and any Permitted Sublessee as the case may be, as named insured, and shall name Lessor (including in its individual capacity with respect to liability policies only), the Indenture Trustee, and the Owner Participant, as additional insureds (collectively the "Additional Insureds") and shall afford each thereof the rights but not the obligations of a co-insured or additional insured (including any obligation in respect of premiums). All insurance policies required hereunder shall contain a "breach of warranty" clause satisfactory to Lessor, the Indenture Trustee and the Owner Participant providing that in respect of the respective interests of the Additional Insureds in such policies the insurance shall not be invalidated by any action or inaction of Lessee or any such Permitted Sublessee, as the case may be, or others and shall insure the Additional Insureds as their interests may appear, regardless of any breach or violation by Lessee or any such Permitted Sublessee or other person, as the case may be, of any condition, declaration, warranty or provision of any such policies. Each liability policy and hull policy shall be primary without right of contribution from any Additional Insured or any other insurance which is carried by any Additional Insured with respect to its interest as such in the Aircraft. Each such - 45 - policy shall waive any right of subrogation of the insurers against the Additional Insureds and shall waive any right of the insurers to any set-off or counterclaim or any other deduction, whether by attachment or otherwise, in respect of any liability of the Additional Insureds or Lessee. Each such policy shall provide that, if such insurance lapses for nonpayment of any premium or installment when due, or if such insurance is canceled or terminated for any reason whatsoever, or if the scope of coverage or the limits of liability are reduced or any other materially adverse change is made in or to the rights of the Additional Insureds, the insurers will promptly notify Lessee, Lessor, the Indenture Trustee and the Owner Participant in writing and any such lapse, cancellation, termination or change shall not be effective as to Lessor, the Indenture Trustee or the Owner Participant or any other Additional Insured for 30 days after receipt of such notice, and that appropriate certification shall be made to Lessor, the Owner Participant and the Indenture Trustee by each insurer with respect thereto. Each liability policy shall expressly provide that all of the provisions thereof shall operate in the same manner as if there were a separate policy covering each insured; provided that such policies shall not -------- operate to increase the insurer's limit of liability. All policies required hereunder covering loss or damage to the Aircraft shall provide that all losses thereunder (but not in excess of Stipulated Loss Value) shall be payable solely to Lessor (or to the Indenture Trustee, so long as this Lease is assigned to the Indenture Trustee) as sole loss payee. All insurance proceeds under such policies received as the result of the occurrence of an Event of Loss with respect to the Airframe or an Engine will be applied as follows: (a) if such proceeds are received with respect to the Airframe or with respect to the Airframe and the Engines or engines then installed on the Airframe and alternative (i) in Section 10(a) is the alternative performed or to be performed by Lessee, so much of such proceeds as shall not exceed the Stipulated Loss Value and Rent required to be paid by Lessee pursuant to alternative (i) of Section 10(a) shall be applied in reduction of Lessee's obligation to pay such Stipulated Loss Value and Rent if not already paid by Lessee, or, if already paid by Lessee, shall be applied to reimburse Lessee for its payment of such Stipulated Loss Value and Rent, provided that neither an Event of Default nor a Payment Default or -------- Bankruptcy Default shall have occurred and be continuing, and the balance, if any, of such proceeds remaining thereafter will be paid to the order of Lessee; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held pursuant to Section 24 as security for Lessee's obligations hereunder and under the other Operative Documents; and (b) if such proceeds are received with respect to the Airframe or the Airframe and the Engines or engines then - 46 - installed on the Airframe and alternative (ii) in Section 10(a) is the alternative to be performed by Lessee, or if such proceeds are received with respect to an Engine not then installed on the Airframe under the circumstances contemplated by Section 10(b), all such proceeds (minus the net amount, if any, payable by Lessee with respect to such proceeds or such substitution under Section 5 of the Indemnity Agreement) shall be paid to the order of Lessee or any Permitted Sublessee designated by Lessee, provided that Lessee shall have fully performed or caused to be performed -------- the terms of Section 10(a) or (b) with respect to the Event of Loss for which such proceeds are paid and provided further that neither an Event of -------- ------- Default nor a Payment Default or Bankruptcy Default shall have occurred and be continuing; if and so long as the immediately preceding proviso is not satisfied, such proceeds shall be held pursuant to Section 24 as security for Lessee's obligations hereunder and under the other Operative Documents. The proceeds of any property damage loss not constituting an Event of Loss with respect to the Airframe or any Engine will be applied in payment for repairs or for replacement property in accordance with the terms of Sections 7 and 8, if not already paid for by, or to reimburse, Lessee or any Permitted Sublessee (in either case, upon receipt by Indenture Trustee of related invoices) and any balance remaining after compliance with said Sections 7 and 8 with respect to such loss shall be paid to the order of Lessee or any such Permitted Sublessee designated by Lessee, provided that neither an Event of Default nor a Payment -------- Default shall have occurred and be continuing; if and so long as the foregoing proviso is not satisfied, such proceeds shall be held pursuant to Section 24 as security for Lessee's obligations hereunder and under the other Operative Documents. In the first quarter of each calendar year beginning in 1995 and thereafter during the Basic Term and the Renewal Term, if any, a detailed report signed by an aviation insurance broker of nationally recognized standing retained by Lessee or by any Permitted Sublessee shall be furnished to Lessor, the Owner Participant and the Indenture Trustee. Such report shall describe in reasonable detail all insurance carried on or with respect to the Aircraft as required by this Lease, shall state that such insurance is in full force and effect and state that, in the opinion of such insurance broker, the insurance then carried and maintained on or with respect to the Aircraft complies with the terms hereof. Lessee will cause such aviation insurance broker to advise Lessor and the Indenture Trustee in writing of any default in the payment of any premium and of any other act or omission on the part of Lessee or any such Permitted Sublessee, as the case may be, of which such aviation insurance broker has knowledge and which might invalidate or render unenforceable, in whole or in part, any insurance on or with respect to the Aircraft promptly upon the occurrence thereof or at such later time as such broker shall have knowledge thereof. All insurance policies required hereunder shall provide that Lessor and the Indenture Trustee be advised in writing - 47 - of the reduction or termination of coverage at least 30 days prior to the expiration date or termination of any insurance carried and maintained on or with respect to the Aircraft. If any party required to be named as an additional insured under any insurance policies required to be carried and maintained hereunder becomes subject to a claim covered by such insurance, Lessee shall make available any information required by such party in connection with such claims. In the event that Lessee or any Permitted Sublessee shall fail to maintain or cause to be maintained insurance as herein provided, Lessor may, but is under no duty to, at its option obtain such insurance (giving Lessee prompt written notice thereof) and, in such event, Lessee shall, upon demand, reimburse Lessor, as Supplemental Rent, for the cost to Lessor of such insurance, together with interest thereon at the Past Due Rate for the period commencing with the date such cost was paid to the date of reimbursement. Lessee, any Permitted Sublessee, Lessor and the Owner Participant shall each have the right to carry hull and liability insurance on the Aircraft for its own benefit, as its respective interests may appear, in amounts over and above the amounts required by the foregoing provisions, provided that no -------- insurance carried by Lessor or the Owner Participant may effectively limit the amount or type of insurance carried by Lessee. SECTION 12. Inspection. At all reasonable times and upon reasonable ---------- notice, Lessor, the Owner Participant, and the Indenture Trustee or their respective authorized representatives, may inspect the Aircraft and the books and records of Lessee or a Permitted Sublessee relating thereto from time to time and may make copies of those parts of such books and records not reasonably deemed confidential by Lessee. Such inspection of the Aircraft shall be a visual, walk-around inspection which may include going on board the Aircraft but shall not include opening any panels, bays, or other components of the Aircraft (except to the extent any such inspection takes place when any such panels, bays or other components are open) and shall be conducted so as not to unreasonably interfere with Lessee's operation and maintenance of the Aircraft. No Inspecting Party shall have any duty to make any such inspection or incur any liability or obligation by making or not making any such inspection, unless by making such inspection such Inspecting Party wrongfully interferes with Lessee's operation and maintenance of the Aircraft. Any inspection made pursuant to this Section 12 shall be at the sole expense and risk of the relevant Inspecting Party. Lessee shall make any permitted sublease or transfer permitted under Section 7(b) expressly subject to inspection rights consistent with this Section 12. Any inspection made pursuant to this Section 12 shall be made by no more than two authorized representatives of each Inspecting Party. Lessee agrees to respond in a timely fashion to any Inspecting - 48 - Party's inquiries regarding the scheduling of any letter check or heavy maintenance visit with respect to the Aircraft. SECTION 13. Assignment, Citizenship, etc. (a) Merger, etc. Lessee may ----------------------------- ------------ not sell or convey substantially all its property and assets, or consolidate with or merge into, any other corporation, or otherwise assign any of its rights or obligations hereunder without the prior written consent of Lessor, except as provided in Section 12(d) of the Participation Agreement. Lessee will at all times be a duly certificated air carrier under the Act (or, if either the Act or the certification requirements thereunder are superseded, will at all times be authorized under the laws of the United States to be a common carrier of persons by air). (b) Assignment. Except as otherwise provided herein or as expressly ---------- permitted by and subject to the provisions of the Trust Agreement, the Indenture or the Participation Agreement, Lessor will not assign or convey all or any portion of its right, title and interest in and to this Lease and the Aircraft. Any permitted transferee shall be a Citizen of the United States and shall expressly assume in writing all of the obligations of Lessor under this Lease. (c) Successors and Assigns. The terms and provisions of this Lease ---------------------- shall be binding upon and inure to the benefit of Lessor and Lessee and shall inure, to the extent expressly provided herein, to the direct benefit of, and in accordance with the provisions of the Indenture and the Participation Agreement shall be enforceable by, the Indenture Trustee and the Owner Participant, and their respective successors and assigns. SECTION 14. Events of Default. Each of the following events shall ----------------- constitute an Event of Default (whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) Lessee shall fail to make any payment of Basic Rent, Stipulated Loss Value or Termination Value within ten Business Days after the same shall have become due; or (b) Lessee shall fail to make any payment of any other Supplemental Rent (other than payments of Stipulated Loss Value and Termination Value) within ten Business Days after Lessee has received written demand therefor from the person entitled to receive such payment; provided that if such -------- payment is an Excepted Payment such failure shall not constitute an Event of Default until the Owner Participant shall so declare it by notice in writing to Lessee; or (c) any representation, warranty, certification or statement made by Lessee hereunder or under the Participation Agreement or any other Operative Document or made pursuant - 49 - hereto or thereto (other than Lessee's representations made under the Indemnity Agreement) shall prove to have been inaccurate in any material respect when made; provided that if the representation, warranty, -------- certification or statement was originally given by Lessee in good faith, an Event of Default shall not be deemed to exist unless the inaccurate representation, warranty, certification or statement remains material to Lessor at the time discovered and remains uncured for a period of 30 days after receipt by Lessee of a written notice from Lessor advising Lessee of such inaccuracy; or (d) Lessee shall fail to carry and maintain (or cause to be carried and maintained) insurance on or in respect of the Aircraft in accordance with the provisions of Section 11, provided that failure to maintain such -------- insurance for up to 30 days shall not constitute an Event of Default if, during such period, the Aircraft is not operated and appropriate insurance for the Aircraft on the ground is maintained; or (e) Lessee shall fail in any material respect to perform or observe any other covenant, condition or agreement to be performed or observed by it hereunder or under the Participation Agreement or any other Operative Document and, in each case, such failure shall continue unremedied for a period of 30 days after Lessee shall have received written notice of such failure; provided that no such failure shall constitute an Event of Default -------- so long as (i) such failure is capable of being remedied, (ii) Lessee is diligently proceeding to remedy such failure and (iii) such failure does not result in a material risk of loss, sale or forfeiture of the Aircraft, or incur the risk of criminal charges, but in no event shall such failure continue unremedied for more than (i) 180 days after receipt of such written notice or (ii) the end of the Term, whichever is the first to occur; or (f) Lessee shall consent to the appointment of a receiver, trustee or liquidator of itself or of a material part of its property, or Lessee shall admit in writing its inability to pay its debts generally as they come due, or shall make a general assignment for the benefit of creditors, or Lessee shall file or the Board of Directors of Lessee shall authorize Lessee to file, or grant one or more persons authority (at their discretion) to file, a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a case under any bankruptcy laws or other insolvency laws (as in effect at such time) or an answer admitting the material allegations of a petition filed against Lessee in any such case, or Lessee shall or the Board of Directors of Lessee shall authorize Lessee to, or grant one or more persons authority (at their discretion) to, seek relief by voluntary petition, answer or consent, under the provisions of any other bankruptcy or other similar law providing for the reorganization or winding-up of corporations (as in effect at - 50 - such time) or providing for agreement, composition, extension or adjustment with creditors; or (g) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of Lessee, a receiver, trustee or liquidator of Lessee or of any substantial part of its property, or any substantial part of the property of Lessee shall be sequestered, or granting any other relief in respect of Lessee under any bankruptcy laws or other insolvency laws (as in effect at such time), and any such order, judgment or decree of appointment or sequestration shall remain in force undismissed, unstayed or unvacated for a period of 60 days after the date of entry thereof; or (h) a petition against Lessee in a case under any bankruptcy laws or other insolvency laws (as in effect at such time) shall be filed and shall not be withdrawn or dismissed within 60 days thereafter, or if, under the provisions of any law providing for reorganization or winding-up of corporations which may apply to Lessee, any court of competent jurisdiction shall assume jurisdiction, custody or control of Lessee or of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished, unstayed or unterminated for a period of 60 days; or (i) the Lien of the Indenture shall cease, at any time prior to the discharge of the Lien of the Indenture, to be a valid first priority perfected Lien on the Indenture Estate in any jurisdiction (other than the United States) in which Lessee has reregistered the Aircraft pursuant to Section 19 of the Participation Agreement; provided that no such failure shall constitute an Event of Default so long as (i) the Aircraft is accessible to Lessee, (ii) Lessee is diligently proceeding to transfer the Aircraft to the United States and (iii) the Aircraft is reregistered in the United States within a period of thirty days after a Responsible Officer of Lessee has received actual knowledge of such failure. SECTION 15. Remedies. Upon the occurrence of any Event of Default and -------- at any time thereafter so long as the same shall be continuing, Lessor may (unless, prior to the acceleration of any outstanding Certificates, Lessee shall have remedied all outstanding Events of Default) do, and Lessee shall comply with, one or more of the following with respect to all or any part of the Airframe and the Engines, as Lessor in its sole discretion shall elect, subject always to any mandatory requirements of law; provided that during any period -------- that the Airframe or any Engine is subject to CRAF in accordance with the provisions of Section 7(b)(C) Lessor shall not, on account of any Event of Default, exercise its remedies hereunder in such manner as to limit Lessee's control under this Lease (or the control under any sublease of any Permitted Sublessee) of the Airframe or such Engine, unless at least thirty (30) days' (or such other longer or shorter period as - 51 - may be applicable under CRAF) written notice of default hereunder shall have been given by Lessor by registered or certified air mail to Lessee (and any Permitted Sublessee) with a copy to the Contracting Officer Representative for the Military Airlift Command of the United States Air Force or any successor to whom notices must be given under the contract governing Lessee's participation (or that of any Permitted Sublessee) in CRAF: (a) demand in writing that Lessee shall, and upon such written demand Lessee shall, at Lessee's expense, return promptly to Lessor all or such part of the Airframe or the Engines as Lessor may demand in accordance with all of the provisions of Section 5 as if the Airframe or such Engines were being returned at the end of the Term; or Lessor, at its option, may enter upon the premises where the Airframe or any Engine or Engines are located or believed to be located and take immediate possession of and remove the Airframe or Engines without the necessity for first instituting proceedings, or by summary proceedings or otherwise, and Lessee shall comply therewith, all without liability to Lessor for or by reason of such entry or taking possession, whether for the restoration of damage to property caused by such taking or otherwise; or (b) with or without taking possession thereof, sell or otherwise dispose of the Aircraft or any part thereof (including any Engine), at public or private sale and with or without notice to Lessee or advertisement, as Lessor may determine, and Lessor may hold Lessee liable for any installment of Basic Rent due on (if payable in arrears but not if payable in advance) or before the date of such sale, including any accrued but unpaid Basic Rent on a pro-rata basis from the preceding Payment Date to the date of such sale, or hold, use, operate, lease to others or keep idle all or any part of the Airframe or any Engine as Lessor, in its sole discretion, may determine, in any such case free and clear of any rights of Lessee except as set forth below in this Section 15 and without any duty to account to Lessee with respect to such action or inaction or for any proceeds with respect thereto (except to the extent required by paragraph (d) below if Lessor elects to exercise its rights under said paragraph in lieu of its rights under paragraph (c) below); or (c) whether or not Lessor shall have exercised, or shall thereafter at any time exercise, any of its rights under paragraph (a) or (b) above with respect to the Aircraft, Lessor by written notice to Lessee specifying a payment date not earlier than 10 days from the date of such notice, may terminate this Lease with respect to the Aircraft and demand that Lessee pay to Lessor, and Lessee shall pay to Lessor on the payment date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty, any installment of Basic Rent with respect to the Aircraft due on (if payable in arrears but not if payable in advance) or - 52 - before such payment date plus an amount equal to the excess, if any, of (i) the Stipulated Loss Value for the Aircraft computed as of the date specified in Exhibit A coinciding with or next preceding the payment date specified pursuant to this paragraph (c), over (ii) the Fair Market Value for the Aircraft, computed as of the payment date specified pursuant to this paragraph (c) (and calculated assuming that the Aircraft will be in storage for a period of twelve months unless Lessor has arranged for a sale or a new lease of the Aircraft scheduled to be completed or to commence within such twelve month period, in which case such sale or new lease shall be taken into account in determining such Fair Market Value), together with interest, to the extent permitted by applicable law, at the Past Due Rate on the amount of such Stipulated Loss Value, from the date as of which such Stipulated Loss Value is computed to the date of actual payment of such amount; or (d) if Lessor, pursuant to paragraph (b) above, shall have sold the Aircraft, Lessor in lieu of exercising its rights under paragraph (c) above with respect to the Aircraft, may demand that Lessee pay Lessor, and Lessee shall pay to Lessor on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty, in lieu of the Basic Rent for the Aircraft due after the date on which such sale occurs and in addition to any installment of Basic Rent for the Aircraft due up to and including (if payable in arrears but not if payable in advance) the date on which such sale occurs, an amount equal to the excess, if any, of (i) the Stipulated Loss Value for the Aircraft computed as of the date specified in Exhibit A coinciding with or next preceding the date of such sale, over (ii) the net proceeds of such sale (after deduction of all expenses of such sale, including any sales or transfer taxes; provided, however, that Lessor shall -------- ------- use reasonable efforts to minimize any such taxes with respect to such sale consistent with Lessor's right to maximize the proceeds of such sale), together with interest, to the extent permitted by applicable law, at the Past Due Rate on the amount of such Stipulated Loss Value from the date as of which such Stipulated Loss Value is computed to the date of actual payment; or (e) so long as the Aircraft has not been sold pursuant to paragraph (b) above, by notice to Lessee, require Lessee to pay on demand to Lessor, and Lessee shall pay to Lessor, as liquidated damages for loss of a bargain and not as a penalty (in lieu of Basic Rent for the Aircraft for any period commencing on (if payable in advance) or after the date of such notice) any unpaid Basic Rent for the Aircraft for any period prior to and including (if payable in arrears but not if payable in advance) the date of such notice, plus an amount equal to Stipulated Loss Value for the Aircraft computed as of the date specified in Exhibit A coinciding with or next preceding the date of such notice, together with interest, to - 53 - the extent permitted by applicable law, at the Past Due Rate on the amount of such Stipulated Loss Value, from the date as of which such Stipulated Loss Value is computed to the actual payment of such amount; and upon Lessee's payment of liquidated damages and the payment of all other Rent then due hereunder, Lessor shall, if requested by the Owner Participant, return the Aircraft to Lessee, and otherwise shall exercise reasonable efforts promptly to sell the Airframe and each Engine and shall pay over to Lessee the net proceeds of such sale (after deducting from such proceeds, all costs and expenses incurred by Lessor in connection therewith, including any sales or transfer taxes; provided, however, that Lessor shall -------- ------- use reasonable efforts to minimize any such taxes with respect to such sale and all other amounts which may become payable to Lessor or the Owner Participant consistent with Lessor's right to maximize the proceeds of such sale) up to the amount of Stipulated Loss Value actually paid; or (f) terminate this Lease as to the Airframe or any Engine; or (g) exercise any other right or remedy which may be available under applicable law or proceed by appropriate court action to enforce the terms hereof or to recover damages for the breach hereof. In addition, Lessee shall be liable for any and all Supplemental Rent due hereunder and all amounts payable by Lessee under the Participation Agreement before or after any termination hereof, including all costs and expenses (including, to the extent permitted by applicable law, reasonable attorneys' fees and disbursements) incurred as a result of the occurrence of any Event of Default and the exercise of Lessor's remedies with respect thereto, including all costs and expenses incurred in connection with the return of the Airframe or any Engine in accordance with the terms of Section 5. Except as otherwise expressly provided above, no remedy referred to in this Section 15 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to above or otherwise available to Lessor at law or in equity. The exercise or beginning of exercise by Lessor of any one or more of such remedies shall not preclude the simultaneous or later exercise by Lessor of any other remedies. No express or implied waiver by Lessor of any Event of Default hereunder shall constitute a waiver of any future or subsequent Event of Default. Lessor's access to the Aircraft is of the essence of the remedies hereunder and shall not be impaired. SECTION 16. Lessor's Right to Perform for Lessee. If Lessee fails to ------------------------------------ make any payment of Rent or fails to perform or comply with any of its agreements herein, Lessor or the Owner Participant may, but is under no duty to, make such payments or perform or comply with such agreement. The amount of such payment and the amount of the reasonable expenses of Lessor or the Owner Participant, as the case may be, incurred in connection with such - 54 - payment or the performance of or compliance with such agreement, as the case may be, together with interest thereon at the Past Due Rate (to the extent permitted by applicable law), from the date of the making of such payment or the incurring of such expenses to the date of payment of such Rent by Lessee, shall be deemed Rent payable by Lessee upon demand. No such payment or performance by Lessor or the Owner Participant shall be deemed to waive any Default or Event of Default or relieve Lessee of its obligations hereunder. SECTION 17. Covenant of Quiet Enjoyment. So long as no Event of --------------------------- Default shall have occurred and be continuing and notwithstanding any default by Lessor, the Owner Participant or the Indenture Trustee under the Participation Agreement, the Trust Agreement or the Indenture, Lessee shall have the right to the quiet enjoyment of, and the continued possession, use and operation of, the Aircraft during the Term, and this Lease shall not be terminated except as expressly provided herein. The foregoing does not modify in any respect Lessee's obligations pursuant to Section 20, which obligations are absolute and unconditional. SECTION 18. Further Assurances. Lessee will cause this Lease, the ------------------ Trust Agreement and the Indenture to be duly filed and recorded, in each case in accordance with the Act. In addition, Lessee will promptly and duly execute and deliver to Lessor and to such other persons as Lessor shall reasonably designate such further documents and assurances and take such further action as Lessor may from time to time reasonably request in order to carry out more effectively the intent and purpose of this Lease and to establish and protect the rights and remedies created or intended to be created in favor of Lessor hereunder, and in favor of the Indenture Trustee under the Indenture including, without limitation, if requested by Lessor, the execution and delivery of supplements or amendments hereto, in recordable form, subjecting to this Lease any replacement airframe or engine and the recording or filing of counterparts hereof or thereof, or of financing and continuation statements with respect hereto, in accordance with the laws of such jurisdictions as Lessor may from time to time deem advisable. The foregoing sentence does not impose upon Lessor any additional liabilities not otherwise contemplated by this Lease. SECTION 19. Notices. All notices required hereunder shall be in ------- writing and delivered personally or mailed by first class registered or certified mail, postage prepaid, or, if promptly confirmed by mail as provided above, dispatched by telecopy, telegram, telex or other written telecommunication, addressed (a) if to Lessee, at Hartsfield Atlanta International Airport, Atlanta, Georgia 30320, Attention: Chief Financial Officer, with a copy to the General Counsel at the same address, or, in each case, at such other address as Lessee may from time to time designate by notice to Lessor, (b) if to Lessor, at the address set forth on Annex II of the Participation Agreement, or at such other address as Lessor may from time to time designate by notice to Lessee, with copies to (i) the Indenture Trustee at the - 55 - address referred to in clause (d) below and (ii) the Owner Partici-pant, at the address referred to in clause (c) below, (c) if to the Owner Participant, at such address as is set forth on Annex II to the Participation Agreement, or at such other address as the Owner Participant may from time to time designate by notice to Lessee and Lessor, or (d) if to the Indenture Trustee, at the address set forth on Annex II of the Participation Agreement, or at such other address as the Indenture Trustee may from time to time designate by notice to Lessee and Lessor. All notices delivered, mailed or dispatched pursuant to this Section 19 shall become effective when received. In the case of a telex, an answerback and, in the case of mail, a return receipt, will be conclusive evidence of receipt. SECTION 20. No Set-Off, Counterclaim, etc. This Lease is a net lease, ------------------------------ and Lessee's obligations to pay all Rent (including, but not limited to, amounts payable as Supplemental Rent) payable hereunder and all amounts payable by Lessee under the Participation Agreement shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, (a) any set-off, counterclaim, recoupment, defense or other right which Lessee may have against Lessor, the Owner Participant, the Indenture Trustee, any Holder, the Manufacturer or anyone else for any reason (whether in connection with this transaction or any other transaction), (b) any defect in the title, airworthiness, eligibility for registration under the Act (and the regulations thereunder) or under any of the laws or regulations of any other country of registry of the Aircraft, condition, design, operation, or fitness for use of, suitability for a particular purpose of, or any damage to or loss or destruction of, the Aircraft, or any interruption or cessation in the use or possession thereof by Lessee for any reason, including, without limitation, by reason of governmental action, (c) any insolvency, bankruptcy, reorganization or similar proceedings by or against Lessee, Lessor, the Owner Participant, the Owner Trustee, the Indenture Trustee or any other person, or (d) any other circumstances, whether or not unforeseen or similar to any of the foregoing. Lessee hereby waives, to the extent permitted by applicable law, any and all rights which it may now have or which at any time hereafter may be conferred upon it, by statute or otherwise, to terminate, cancel, quit or surrender this Lease except in accordance with the express terms hereof. If for any reason this Lease shall be terminated in whole or in part by operation of law or otherwise except as specifically provided herein, Lessee nonetheless shall pay to the party entitled to such payment pursuant to the provisions hereof an amount equal to each Rent payment at the time such payment would have become due and payable in accordance with the terms hereof had this Lease not been so terminated. SECTION 21. Successor Trustees and Rights of Trustees as Lessor. If --------------------------------------------------- any successor trustee is appointed pursuant to the terms of the Trust Agreement, such successor trustee shall, upon written notice by such successor trustee to Lessee, succeed to all the rights, powers and title of Lessor hereunder and shall be Lessor and the owner of the Aircraft for all purposes hereof, - 56 - without the necessity of any consent or approval by Lessee and without in any way altering the terms of this Lease or Lessee's obligations hereunder. SECTION 22. Miscellaneous. Any provision of this Lease which is ------------- prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or enforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not render such provision unenforceable or invalid in any other jurisdiction. To the extent permitted by applicable law, Lessee hereby waives any provision of law which renders any provision hereof prohibited or unenforceable in any respect. No term or provision of this Lease may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which the enforcement of the change, waiver, discharge or termination is sought; provided, -------- however, that so long as the Indenture remains in effect, no such change, - ------- waiver, discharge or termination shall be made without the prior written consent of the Indenture Trustee, except as expressly provided herein or in the Indenture. This Lease constitutes an agreement of lease and does not convey to Lessee any right, title or interest in the Aircraft except as a lessee. The captions in this Lease are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. THIS LEASE IS BEING DELIVERED IN NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE BUT WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS. Wilmington Trust Company (the "Bank") is entering into this Lease solely as Owner Trustee under the Trust Agreement and not in its individual capacity, and the Bank shall not be personally liable for, or for any loss in respect of, any of the statements, representations, warranties, agreements or obligations of the Owner Trustee hereunder, as to all of which Lessee may proceed only against the Trust Estate; provided, however, that the Bank shall be -------- ------- liable hereunder for its own negligence or negligent or willful misconduct or for a breach of its representations and warranties made in its individual capacity in Section 4 hereof or as otherwise provided in the Participation Agreement. The Bank accepts the benefits of the indemnification granted, and representations and warranties made, to it hereunder. SECTION 23. Trust Estate as Security for Lessor's Obligations to ---------------------------------------------------- Holders. In order to secure the indebtedness evidenced by the Certificates, - ------- Lessor provides in the Indenture, among other things, for the assignment by Lessor to the Indenture Trustee of this Lease Agreement and the Lease Supplement and for the creation of a first mortgage and security interest in favor of the Indenture Trustee on the Airframe and the Engines. Lessee acknowledges the existence of, and consents to, such assignment and the receipt of a copy of the Indenture. Lessee also acknowledges that, so long as - 57 - any Certificates are outstanding, all rights of Lessor under this Lessee shall be exercised only by the Indenture Trustee, as assignee of Lessor's rights under this Lease pursuant to the Indenture, subject, however, to Section 8.01 of the Indenture. Notwithstanding any other provision of this Lease or the Participation Agreement to the contrary, Stipulated Loss Value and Termination Value shall not be adjusted to be below the amounts required to pay in full, as of the date of payment thereof, the aggregate unpaid principal amount of the Certificates outstanding on such date of payment, together with the accrued and unpaid interest thereon. SECTION 24. Investment of Security Funds. Any amounts not payable to ---------------------------- Lessee or any Permitted Sublessee as the case may be (which amounts shall be paid to or retained by Lessor (or, so long as the Indenture shall be in effect, the Indenture Trustee)), (a) pursuant to any provision of Section 10 or 11 or this Section 24 solely because an Event of Default or a Payment or Bankruptcy Default shall have occurred and be continuing or because Lessee shall not have performed in full its obligations under Section 10 or (b) pursuant to the second to the last sentence of Section 4 solely because an Event of Default shall have occurred and be continuing, shall, in each case, be held by Lessor (or, so long as the Indenture shall be in effect, the Indenture Trustee) as security for the obligations of Lessee under this Lease and the other Operative Documents. At such time as no Event of Default, Payment or Bankruptcy Default or failure to perform shall be continuing, such amounts, net of any amounts previously applied to Lessee's obligations hereunder or under the Participation Agreement, shall be paid to Lessee or such sublessee or transferee, as the case may be. Any such amounts which are held by Lessor (or, so long as the Indenture shall be in effect, the Indenture Trustee) pending payment to Lessee or such sublessee or transferee, as the case may be, shall, until paid to Lessee or such sublessee or transferee, as the case may be, as provided hereunder or, as long as the Indenture is in effect, until applied against Lessee's obligations herein and under the Participation Agreement and distributed as provided in the Indenture or (after the Indenture is no longer in effect) in connection with any exercise of remedies hereunder, be invested by Lessor as directed from time to time in writing by Lessee and at the expense and risk of Lessee, in the following securities (which securities shall mature within 30 days of the date of purchase thereof): (a) direct obligations of the United States of America, or (b) obligations fully guaranteed by the United States of America, or (c) certificates of deposit issued by, or bankers' acceptances of, or time deposits or a deposit account with, any bank, trust company or national banking association incorporated or doing business under the laws of the United - 58 - States of America or one of the states thereof (which may include Wilmington Trust Company, the Indenture Trustee or any of their respective Affiliates), having a combined capital and surplus of at least $100,000,000 and a rating of "B" or better from Thomson BankWatch or IBCA Ltd., or (d) commercial paper issued by companies (which may include Wilmington Trust Company, the Indenture Trustee or any of their respective Affiliates) in the United States which directly issue their own commercial paper and which are doing business under the laws of the United States of America or one of the states thereof and having a rating assigned to such commercial paper by a nationally recognized statistical rating organization in the United States of America equal to the highest rating assigned by such organization, or (e) obligations of the type described in clauses (a) through (d) above, purchased from any bank, trust company or banking association referred to in clause (c) above (which may include the Bank, the Indenture Trustee or any of their respective Affiliates) pursuant to fully collateralized repurchase agreements obligating such bank, trust company or banking association to repurchase any such obligation not later than 90 days after the purchase of any such obligation, or (f) overnight federal funds. Any gain (including interest received) realized as the result of any such investment (net of any fees, taxes, commissions and other expenses, if any, incurred in connection with such investment) shall be applied in the same manner as the principal invested. Lessee will promptly pay to Lessor (or, so long as the Indenture shall be in effect, the Indenture Trustee), on demand, the amount of any loss realized as the result of any such investment (together with any fees, taxes, commissions and other expenses, if any, incurred in connection with such investment). SECTION 25. Separate Counterparts. This Lease may be executed by the --------------------- parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. To the extent that this Lease constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Lease may be perfected through the transfer or possession of any counterpart other than the counterpart marked as the "Original" and containing the receipt therefor executed by the Indenture Trustee on the signature page thereof. SECTION 26. Incorporation by Reference. The provisions of Section 6(b) -------------------------- and 6(c) of the Participation Agreement and the provisions of the Indemnity Agreement are incorporated herein by - 59 - reference (but solely for the benefit of the Owner Participant) with the same effect as if set forth herein in their entirety. IN WITNESS WHEREOF, Lessor and Lessee have each caused this Agreement to be duly executed as of the day and year first written above. LESSOR WILMINGTON TRUST COMPANY, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By:____________________________ Title: LESSEE DELTA AIR LINES, INC. By:____________________________ Title: - 60 - EXHIBIT A to Lease Agreement (DELTA 1994-1) TERMINATION VALUES AND ---------------------- STIPULATED LOSS VALUES ---------------------- [Intentionally omitted as containing confidential financial information] A-1 EXHIBIT B to Lease Agreement (Delta 1994-1) LIST OF FOREIGN AIR CARRIERS ---------------------------- (Subject to revision in accordance with Section 7(b) of the Lease) Air Lingus Japan Air Lines Air Canada Japan Air System Air France KLM Air Inter Linjeflyg Air New Zeland Lufthansa Alitalia Luxair All Nippon Airways LTU ALM Maersk Air Ansett Malaysian Airline System Australian Airlines Martinair Austrian Airlines Monarch Braathens S.A.F.E. QANTAS Brittannia Airways Sabena British Airways SAS British Midland Singapore Airlines Canadian Airlines International Swissair Cathay Pacific Airways TAP Air Portugal Condor Flugdienst Thai Airways Finnair UTA Iberia Icelandair B-1 EXHIBIT C to Lease Agreement (DELTA 1994-1) BASIC RENT ---------- [Intentionally omitted as containing confidential financial information] C-1 EXHIBIT D to Lease Agreement (DELTA 1994-1) REDELIVERY CERTIFICATE ---------------------- ACKNOWLEDGMENT - -------------- Wilmington Trust Company, as Owner Trustee (the "Lessor"), hereby acknowledges and certifies to Delta Air Lines, Inc. (the "Lessee") that the condition of the McDonnell Douglas MD-11 airframe, FAA Registration No. N811DE, equipped with three Pratt & Whitney PW4460 jet engines (collectively, the "Aircraft") fully complies with the terms and provisions of the Lease Agreement, dated as of April 1, 1994 (the "Lease"), as amended and restated as of March 1, 1996, between Lessor and Lessee, and does hereby further acknowledge that such Aircraft satisfies the terms and conditions for redelivery under the Lease, including, without limitation, Sections 5 and 7 thereof. Acknowledged this ____ day of _______________. [OWNER PARTICIPANT] WILMINGTON TRUST COMPANY, as Owner Trustee By:___________________ By:___________________ Its:__________________ Its:__________________ ******************************************************************************** RECEIPT - ------- Wilmington Trust Company, as Owner Trustee (the "Lessor"), hereby acknowledges delivery to and receipt by it of one McDonnell Douglas MD-11 airframe, FAA Registration No. N811DE, equipped with three Pratt & Whitney PW4460 jet engines, from Delta Air Lines, Inc. (Lessee) at ___________________________________, on _____________________________. [OWNER PARTICIPANT] WILMINGTON TRUST COMPANY, as Owner Trustee By:___________________ By:___________________ Its:__________________ Its:__________________ D-1 -----END PRIVACY-ENHANCED MESSAGE-----