-----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, SnwaL+DCGDpGo1xgfVaxnhrBN2fqcw1VJo9jlhwWreZdIpgEdtZJJzz5DI+isor5 hHVF9qrgxsGdx4RqYKsKPg== 0000950134-97-004429.txt : 19970605 0000950134-97-004429.hdr.sgml : 19970605 ACCESSION NUMBER: 0000950134-97-004429 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 22 FILED AS OF DATE: 19970604 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICA WEST AIRLINES INC CENTRAL INDEX KEY: 0000706270 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, SCHEDULED [4512] IRS NUMBER: 860418245 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-27351 FILM NUMBER: 97619324 BUSINESS ADDRESS: STREET 1: 4000 E SKY HARBOR BLVD STREET 2: STE 2100 CITY: PHOENIX STATE: AZ ZIP: 85034 BUSINESS PHONE: 6026930800 MAIL ADDRESS: STREET 1: 4000 EAST SKY HARBOR BLVD STREET 2: STE 2100 CITY: PHOENIX STATE: AZ ZIP: 85034 S-3/A 1 AMENDMENT NO. 1 TO FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON , 1997 REGISTRATION NO. 333-27351 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------ Amendment No. 1 to Form S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------------------ AMERICA WEST AIRLINES, INC. (Exact name of registrant as specified in governing instruments) DELAWARE 86-0418245 (State of incorporation) (I.R.S. Employer Identification No.) STEPHEN L. JOHNSON SENIOR VICE PRESIDENT -- LEGAL AFFAIRS AMERICA WEST AIRLINES, INC. 4000 EAST SKY HARBOR BOULEVARD 4000 EAST SKY HARBOR BOULEVARD PHOENIX, ARIZONA 85034 PHOENIX, ARIZONA 85034 (602) 693-0800 (602) 693-0800 (Address of principal executive offices) (Name and address of agent for service)
Copies to: DAVID BARBOUR ELLIOT GEWIRTZ DAVID A. ALLEN ARNOLD B. PEINADO, III ANDREWS & KURTH L.L.P. MILBANK, TWEED, HADLEY & MCCLOY 4400 THANKSGIVING TOWER ONE CHASE MANHATTAN PLAZA DALLAS, TEXAS 75201 NEW YORK, NEW YORK 10005 (214) 979-4400 (212) 530-5000
------------------------------------ Approximate date of commencement of proposed sale to public: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the Prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ------------------------------------ CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------ PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE AGGREGATE AMOUNT OF BEING REGISTERED REGISTERED PER UNIT* OFFERING PRICE* REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------ Pass Through Certificates..... $95,000,000 100% $95,000,000 $28,787.88 - ------------------------------------------------------------------------------------------------------------------------
* Estimated solely for purposes of calculating the registration fee. ------------------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ================================================================================ 2 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. PROSPECTUS (Subject to Completion) Issued June 4, 1997 $95,000,000 [AMERICA WEST LOGO] America West Airlines 1997-1 Pass Through Trusts PASS THROUGH CERTIFICATES, SERIES 1997-1 ------------------------ Each Pass Through Certificate (collectively, the "Certificates") will represent a fractional undivided interest in one of the four America West Airlines 1997-1 Pass Through Trusts (the "Class A Trust", the "Class B Trust", the "Class C Trust" and the "Class D Trust" and, collectively, the "Trusts") to be formed pursuant to a pass through trust agreement (the "Basic Agreement") and four separate supplements thereto (each, a "Trust Supplement" and together with the Basic Agreement, collectively, the "Pass Through Trust Agreements") between America West Airlines, Inc. ("AWA") and Fleet National Bank, as trustee under each Trust (the "Trustee"). The Certificates to be issued by the Class A Trust, the Class B Trust, the Class C Trust and the Class D Trust are referred to herein as "Class A Certificates", "Class B Certificates", "Class C Certificates" and "Class D Certificates", respectively. No Certificate issued by a Trust will have any rights, benefits or interests in respect of any other Trust. Pursuant to the Intercreditor Agreement (as defined herein), (i) the Class B Certificates will be subordinated in right of payment to the Class A Certificates, (ii) the Class C Certificates will be subordinated in right of payment to the Class B Certificates and (iii) the Class D Certificates will be subordinated in right of payment to the Class C Certificates. Payments of interest on the Class A, Class B, and Class C Certificates (but not the Class D Certificates) will be supported by a separate liquidity facility for the benefit of the holders of such Certificates, each such facility to be provided by Kredietbank N.V., acting through its New York branch (the "Liquidity Provider"), in an amount sufficient to pay interest thereon at the applicable interest rate for such Certificates on three successive distribution dates. (continued on the following page) ------------------------ SEE "RISK FACTORS" COMMENCING ON PAGE 26 FOR INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------
PASS THROUGH FINAL EXPECTED PRICE TO CERTIFICATES PRINCIPAL AMOUNT(1) INTEREST RATE DISTRIBUTION DATE(1) PUBLIC(2)(3) ------------ ---------------------- ---------------------- ---------------------- ---------------------- Class A $45,753,110 % July 2, 2008 100% Class B 17,026,464 July 2, 2005 100 Class C 17,116,098 January 2, 2004 100 Class D 14,153,323 July 2, 2001 100
- --------------- (1) The principal amounts and the final expected distribution dates are indicative only and subject to change. (2) Plus accrued interest, if any, from June , 1997. (3) The aggregate commission payable to the Underwriter varies by Trust and aggregates to $ , which constitutes % of the principal amount of the Certificates offered hereby. The aggregate commission and certain other expenses, estimated at approximately $ , will be paid by a U.S.-domiciled subsidiary of GPA Group plc. All proceeds of the Certificates will be used by the Trusts to purchase the Equipment Notes from the Owner Trustees (as defined herein). ------------------------ The Certificates offered hereby are offered by the Underwriter, subject to prior sale, when, as and if accepted by the Underwriter and subject to approval of certain legal matters by Milbank, Tweed, Hadley & McCloy, counsel for the Underwriter. It is expected that delivery of the Certificates in book-entry form will be made on or about June , 1997 through the facilities of The Depository Trust Company, against payment therefor in immediately available funds. ------------------------ MORGAN STANLEY DEAN WITTER June , 1997 3 (continued from cover page) The property of the Trusts will include, among other things, equipment notes (the "Equipment Notes") to be issued on a nonrecourse basis by the trustees (each, an "Owner Trustee") of separate owner trusts (each, an "Owner Trust") in connection with four separate leveraged lease transactions to refinance the current indebtedness of such Owner Trustees previously incurred to finance the purchase of four Airbus Industrie model A320-231 aircraft (collectively, the "Aircraft") which will be leased to AWA. The Equipment Notes in respect of each Aircraft will be issued in four series (the "Series A Equipment Notes", the "Series B Equipment Notes", the "Series C Equipment Notes" and the "Series D Equipment Notes"). Each Trust will purchase one series of Equipment Notes issued with respect to the Aircraft such that all of the Equipment Notes held in each Trust will have an interest rate corresponding to the interest rate applicable to the Certificates to be issued by such Trust. The maturity dates of the Equipment Notes acquired by each Trust will occur on or before the final expected distribution date applicable to the Certificates to be issued by such Trust. The Equipment Notes issued with respect to each Aircraft will be secured by a security interest in such Aircraft and an assignment of certain of the related Owner Trustee's rights under the lease relating thereto (each, a "Lease"), including the right to receive rentals payable with respect to such Aircraft by AWA. Although neither the Certificates nor the Equipment Notes are obligations of, or guaranteed by, AWA, the aggregate amounts unconditionally payable by AWA for lease of the Aircraft will be at least sufficient to pay in full when due all scheduled amounts required to be paid on the Equipment Notes held in the Trusts. All of the Equipment Notes held by each Trust will accrue interest at the applicable rate per annum for such Trust, payable on January 2 and July 2 of each year, commencing January 2, 1998. Interest paid on the Equipment Notes held in each Trust will be passed through to Certificateholders (as defined herein) of such Trust on each such date, in each case subject to the Intercreditor Agreement. See "Description of the Certificates -- General" and "-- Payments and Distributions". Scheduled principal payments made on the Equipment Notes held in each Trust will be passed through to the Certificateholders of each such Trust on January 2 or July 2 or both in certain years, commencing January 2, 1998, 1997, in accordance with the principal repayment schedule set forth herein under "Description of the Certificates -- Pool Factors", in each case subject to the Intercreditor Agreement. Under each Pass Through Trust Agreement, a PTC Event of Default (as defined herein) will occur if the Trustee fails to pay within ten business days of the due date thereof: (i) the outstanding Pool Balance (as defined herein) of the applicable Class of Certificates on the Final Legal Distribution Date (as defined herein) for such Class or (ii) interest due on such Certificates on any Distribution Date (as defined herein) (unless, in the case of the Class A, B or C Certificates, the Subordination Agent (as defined herein) shall have made an Interest Drawing (as defined herein) in an amount sufficient to pay such interest and shall have distributed such amount to the Certificateholders entitled thereto). --------------------- Delivery of the Certificates is scheduled to be made against payment therefor on June , 1997 (the "Closing Date"), without regard to the date on which the Underwriter enters into a firm agreement to purchase the Certificates. Accordingly, the Certificates will be subject to a settlement cycle that exceeds three business days (such settlement cycle being referred to herein as "Long Settlement"). Purchasers of Certificates should note that initial trading of Certificates may be affected by the Long Settlement. See "Underwriting". Prior to their issuance there will have been no public market for the Certificates offered hereby nor can there be any assurance that one will develop. See "Risk Factors -- Factors Relating to the Certificates and the Offering -- Absence of a Public Market for the Certificates". 2 4 ------------------------ NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY AWA, THE UNDERWRITER OR THE LIQUIDITY PROVIDER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF AWA SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. ------------------------ CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CERTIFICATES. SPECIFICALLY, THE UNDERWRITER MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND PURCHASE, THE CERTIFICATES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING". ------------------------ AVAILABLE INFORMATION AND REPORTS TO CERTIFICATEHOLDERS AWA has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-3 (together with all amendments and exhibits, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Certificates offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission, and to which reference is hereby made. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Registration Statement, reference is made to the exhibit for a more complete description of the matter involved. AWA is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports and other information with the Commission. Reports and other information concerning AWA can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; The Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of such material can be obtained from the Public Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such material may also be accessed electronically by means of the Commission's home page on the Internet at http://www.sec.gov. Warrants to purchase Class B Common Stock of America West Holdings Corporation are listed on the New York Stock Exchange and AWA's registration statements, reports, proxy and information statements and other information may also be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. On behalf of each Trust, the applicable Trustee will prepare and send certain periodic reports concerning the Certificates and distributions made by such Trust to the Certificateholders of such Trust. See "Description of the Certificates -- Reports to Certificateholders". AWA is a Delaware corporation. Its executive offices are located at 4000 East Sky Harbor Boulevard, Phoenix, Arizona 85034, and its telephone number is (602) 693-0800. 3 5 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents of AWA, which have been filed with the Commission, are hereby incorporated by reference in this Prospectus: 1. The Annual Report on Form 10-K for the year ended December 31, 1996; 2. The portions of the definitive Proxy Statement for the Annual Meeting of Stockholders of America West Holdings Corporation held on May 2, 1997 that have been incorporated by reference into the Form 10-K; and 3. The Quarterly Report on Form 10-Q for the quarter ended March 31, 1997. All documents filed by AWA pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Certificates offered hereby shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the respective dates of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. AWA's file number is 1-10140. AWA will provide without charge to any person to whom a copy of this Prospectus has been delivered, upon written or oral request, a copy of any or all of the foregoing documents incorporated herein by reference (other than exhibits to such documents unless such exhibits are specifically incorporated by reference into such documents). Requests should be directed to Patricia Penwell, Corporate Secretary, America West Airlines, Inc., 51 W. Third Street, Tempe, Arizona 85281, telephone number (602) 693-0800. FORWARD LOOKING INFORMATION This Prospectus contains or incorporates by reference various forward-looking statements and information that are based on AWA's beliefs as well as assumptions made by and information currently available to AWA. This Prospectus contains various forward-looking statements and information that are based on management's beliefs as well as assumptions made by and information currently available to management. When used in this Prospectus, the words "anticipate," "estimates," "expects," "believes," "seeks," "goals," "intends" or "projects" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected or projected. Among the key factors that may have a direct bearing on AWA's results are competitive practices in the airline industry generally and particularly in AWA's principal markets, the ability of AWA to meet existing financial obligations in the event of adverse industry or economic conditions or to obtain additional capital to fund future significant commitments and expansion, AWA's relationship with employees and the terms of future collective bargaining agreements and the impact of current and future laws and governmental regulations affecting the airline industry and AWA's operations. For additional discussion of such risks, see "Risk Factors -- Company and Industry Related Risks". 4 6 TABLE OF CONTENTS
PAGE ---- Available Information and Reports to Certificateholders..... 3 Incorporation of Certain Documents by Reference............. 4 Forward Looking Information................................. 4 Prospectus Summary.......................................... 6 Risk Factors................................................ 26 Use of Proceeds............................................. 34 Ratio of Earnings to Fixed Charges.......................... 34 Capitalization.............................................. 35 Selected Financial and Operating Data....................... 36 Management's Discussion and Analysis of Financial Condition and Results of Operations................................. 37 Business.................................................... 46 Management.................................................. 56 Certain Transactions........................................ 60 Description of the Certificates............................. 63 Description of the Liquidity Facilities..................... 75 Description of the Intercreditor Agreement.................. 79 Description of the Aircraft and the Appraisals.............. 82 Description of the Equipment Notes.......................... 83 Certain U.S. Federal Income Tax Consequences................ 101 State Tax Considerations.................................... 103 ERISA Considerations........................................ 104 Underwriting................................................ 106 Legal Matters............................................... 107 Experts..................................................... 107 Index to Financial Statements............................... F-1 Index of Certain Defined Terms.............................. I-1 Aircraft Appraisals......................................... II-1 Equipment Notes Principal Payment Schedule.................. III-1
5 7 PROSPECTUS SUMMARY The following summary does not purport to be complete and is qualified in its entirety by reference to the detailed information appearing elsewhere in this Prospectus. America West Holdings Corporation ("Holdings") is a Delaware corporation that became the holding company for America West Airlines, Inc. effective midnight December 31, 1996. The only material asset of Holdings is the capital stock of AWA. Unless otherwise indicated, the term "AWA" refers to America West Airlines, Inc. and the terms "the Company" and "America West" both refer collectively to Holdings and AWA, its direct wholly owned subsidiary. Certain capitalized terms used herein are defined elsewhere in this Prospectus on the pages indicated in the "Index of Certain Defined Terms" appearing as Appendix I hereto, and all cross references herein refer to sections of this Prospectus. AMERICA WEST AIRLINES, INC. AWA is the ninth largest commercial airline carrier in the United States, operating through its principal hubs located in Phoenix, Arizona and Las Vegas, Nevada, and a mini-hub located in Columbus, Ohio. Management believes AWA is the lowest cost full service carrier in the United States. At March 31, 1997, AWA served 57 destinations, including six destinations in Mexico and one in Canada, with a fleet of 101 aircraft. AWA offers service to an additional 17 destinations through an alliance agreement with Continental Airlines, Inc. ("Continental") and 17 commuter service and regional destinations through an alliance agreement with Mesa Air Group, Inc. ("Mesa"). AWA is the leading airline serving Phoenix and Las Vegas, with approximately 36% and 23% of total revenue passenger miles, respectively, based on the twelve months ended December 31, 1996. The Phoenix and Las Vegas airports are the seventh and thirteenth largest airports and the fifth and eighth largest domestic hubs in the United States as measured by passenger enplanements. AWA believes that these hubs are well positioned for continued growth due to their geographically favorable locations with access to key southwestern and west coast markets, relatively low operating costs, year-round fair weather and modern, uncongested facilities. Substantially all of AWA's passenger traffic is channeled into or through its hubs, which serve as gateways for AWA's route network. Through its hub-and-spoke system, AWA serves more markets with greater frequency than would be possible with the same number of aircraft in a point-to-point route system. AWA operates with a low cost structure. AWA's operating cost per available seat mile ("ASM") for the first three months of 1997 was 7.40 cents, which was approximately 21.1% less than the average cost per ASM of the nine major domestic airlines. AWA believes that its low cost structure is a significant competitive advantage relative to other full service carriers and also enables AWA to compete effectively against low cost carriers in its short-haul local markets. As a full service airline, AWA believes that it distinguishes itself from other low cost carriers by offering passenger services that include assigned seating, meal service on selected flights, participation in computerized reservation systems, interline ticketing, first class cabins, baggage transfer and various other services. Through its America West Vacations division ("America West Vacations"), AWA arranges and sells vacation packages that include hotel accommodations, air fare, ground transportation and a variety of entertainment options. This business unit generated approximately $190 million in gross package sales in 1996. America West Vacations occupies a substantial position in the Las Vegas destination market and arranges packages for travel to the other traditional vacation destinations served by AWA, including Arizona, California, Florida, Canada and Mexico. To further develop this business, the Company intends to combine America West Vacations with AWA's charter business and reorganize such operations as a separate subsidiary of Holdings during 1997. 6 8 BUSINESS STRATEGY The Company's strategy seeks to achieve revenue growth and profitability by capitalizing on its key competitive strengths while maximizing financial flexibility. The principal elements of the Company's strategy are (i) strengthening AWA's position in its existing hubs through strategic expansion, (ii) maintaining AWA's position as a leading low cost full service carrier, (iii) focusing on airline reliability and customer service, (iv) operating a modern and efficient fleet, (v) continuing to develop AWA's passenger base through key alliances and (vi) pursuing opportunities to expand its leisure travel businesses. STRENGTHEN POSITION IN EXISTING HUBS THROUGH STRATEGIC EXPANSION. AWA's strategy is designed to capitalize on its strong position in its Phoenix and Las Vegas hubs. In February 1996, AWA began implementation of a two-year plan to expand its principal hub operations and increase connecting traffic and service to longer-haul nonstop markets. Pursuant to this plan, during 1996 AWA increased ASMs by 11.3% and added six new cities to AWA's route network. In addition, AWA has increased flight frequencies to enhance service to existing West Coast destinations and to expand connecting opportunities through Phoenix to long-haul flights to the East and Midwest. AWA has also sought to increase asset utilization through the expansion of its night flight service to Las Vegas, utilizing aircraft for this service that otherwise would be idle overnight. Pursuant to the growth plan, AWA added one new city to its route network in the first-quarter of 1997 and expects to introduce service to at least one additional city by December 31, 1997. MAINTAIN ITS POSITION AS A LEADING LOW COST AIRLINE. AWA is committed to maintaining its low cost structure, which it has achieved primarily through employee productivity, favorable labor costs per ASM and industry-leading asset utilization. AWA maintained low unit costs by focusing on productivity at all levels. In 1996, AWA increased its ASMs by 11.3% while increasing its full-time equivalent head count by 10.8%. FOCUS ON RELIABILITY AND CUSTOMER SERVICE. AWA is committed to maintaining its reliability and to improving its overall customer service. As a result of customer service and operational issues encountered in the third quarter of 1996, AWA initiated a program entitled Get the Product Right . . . Together, aimed at maximizing the airline's reliability and further improving customer service. Consistent with its strategy of being a low cost airline, this program is designed to be implemented without adversely affecting AWA's cost structure. In May 1997, AWA was ranked number one in customer satisfaction among the nine major domestic airlines, for flights of 500 miles or less, in the Airline Customer Satisfaction -- U.S. Flights Study conducted by Frequent Flyer Magazine and J.D. Power and Associates. OPERATE A MODERN AND EFFICIENT FLEET. AWA enjoys operational efficiencies due to its modern, fuel efficient fleet. At March 31, 1997, AWA's fleet consisted of 60 Boeing 737s, 27 Airbus A320s and 14 Boeing 757s, with an average age of approximately 10.2 years. Most of AWA's existing aircraft are held under leases with considerable fleet plan flexibility. As a result, in the event economic conditions change adversely, AWA can reduce its fleet size and reduce its aircraft related financial obligations by not renewing expiring aircraft leases. CONTINUE TO DEVELOP PASSENGER BASE THROUGH ALLIANCES. AWA plans to continue to employ alliance agreements to expand its passenger base and in some cases to achieve cost savings through the reduction of redundant labor and facilities. AWA's alliance agreements generally provide for code-sharing arrangements and linking of frequent flyer programs, and in some cases involve coordination of flight schedules, sharing of ticket counter space, coordination of ground handling 7 9 operations and joint purchasing and marketing efforts. AWA currently has alliance agreements with Continental, British Airways, Northwest Airlines and Mesa. Management believes that AWA's code-sharing activities result in increased travel and profitability for AWA and AWA intends to pursue additional alliances as opportunities warrant. EXPAND LEISURE TRAVEL BUSINESSES. The Company's strategic plan includes the expansion of its leisure tour packaging and charter businesses which, the Company believes, present opportunities for growth. The Company further believes that it will be competitive in these businesses because of its low cost structure and expertise gained in developing and managing America West Vacations and AWA's professional and college sports chartering business. During 1997, the Company expects to combine the America West Vacations and charter business under a separate subsidiary of Holdings, establish a private label tour packaging business, pursue the management of other airlines' vacation packaging businesses, expand the scope of its vacation and charter products and introduce new package tour destinations. 8 10 SUMMARY OF TERMS OF CERTIFICATES* Set forth below is certain information about each Class of Certificates:
CLASS A CLASS B CLASS C CLASS D CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES --------------- --------------- --------------- --------------- Aggregate face amount......... $45,753,110 $17,026,464 $17,116,098 $14,153,323 Rating: Moody's..................... A2 Baa2 Ba1 Ba3 Standard & Poor's........... AA- A- BBB- BB Initial LTV Ratio (cumulative)(1)............. 39.8% 54.7% 69.6% 81.9% Expected principal distribution window (in years)...................... 0.5 - 11.0 0.5 - 8.0 0.5 - 6.5 0.5 - 4.0 Initial average life (in years)...................... 8.7 6.7 5.0 2.0 January 2 and January 2 and January 2 and January 2 and Regular Distribution Dates.... July 2 July 2 July 2 July 2 Final Expected Distribution Date........................ July 2, 2008 July 2, 2005 January 2, 2004 July 2, 2001 Final Legal Distribution Date........................ January 2, 2010 January 2, 2007 July 2, 2005 July 2, 2001 sec. 1110 protection(2)....... Yes Yes Yes Yes 3 semi-annual 3 semi-annual 3 semi-annual interest interest interest Liquidity Facility coverage... payments payments payments None Initial Liquidity Facility amount(3)................... $ $ $ None
- --------------- * The aggregate face amount, the initial LTV Ratio (as defined herein), the expected principal distribution window, the initial average life, the Final Expected Distribution Date and the Final Legal Distribution Date for each Class of Certificates are indicative only and are subject to change. (1) Assumes an aggregate appraised Aircraft Value of $114,840,000. (2) The benefits of Section 1110 of the Bankruptcy Code (as defined herein) would be available by assignment to the Indenture Trustees (as and to the extent described in further detail herein). (3) For each Class of Certificates (other than the Class D Certificates), the initial amount of the related Liquidity Facility will cover the first three successive interest payments (without regard to any future payments of principal on such Certificates). 9 11 EQUIPMENT NOTES AND THE AIRCRAFT Set forth below is certain information about the Equipment Notes held in the Trusts and the Aircraft securing such Equipment Notes:
AIRCRAFT EQUIPMENT NOTES - ------------------------------------------------------------- -------------------------------------- MANUFACTURER'S AIRCRAFT DELIVERY APPRAISED PRINCIPAL MATURITY SERIAL NUMBER TYPE DATE(1) VALUE SERIES AMOUNT(*) DATE(*) - -------------- --------------- -------- ------------ ------- ----------- ------------ 66 Airbus A320-231 12/29/89 $ 28,600,000 A,B,C,D $23,512,249 July 2, 2008 67 Airbus A320-231 12/29/89 28,600,000 A,B,C,D 23,512,249 July 2, 2008 76 Airbus A320-231 12/29/89 28,820,000 A,B,C,D 23,512,249 July 2, 2008 81 Airbus A320-231 12/29/89 28,820,000 A,B,C,D 23,512,429 July 2, 2008 ------------ ----------- $114,840,000 $94,048,995 ============ ===========
- --------------- * The principal amounts and maturity dates are indicative only and are subject to change. (1) The delivery date indicated is for the purpose of the Leases. The original delivery dates of the Aircraft from the manufacturer were in November and December of 1989. See "Description of the Aircraft and the Appraisals". The appraised value of each Aircraft set forth above is based upon the lesser of the average and median value of such Aircraft as appraised by the following three independent appraisal and consulting firms as of the dates indicated: BK Associates, Inc. ("BK") as of March 26, 1997, Aircraft Information Services, Inc. ("AISI") as of March 19, 1997 and Morten Beyer and Associates ("MBA") as of March 31, 1997 (BK, AISI and MBA are collectively referred to herein as the "Appraisers"). See "Description of the Aircraft and the Appraisals". An appraisal is only an estimate of value and should not be relied upon as a measure of realizable value. The proceeds realized upon a sale of any Aircraft may be less than the appraised value thereof. In addition, the value of the Aircraft in the event of the exercise of remedies under the applicable Indenture will depend on market and economic conditions, the availability of buyers, the condition of the Aircraft, whether the Aircraft are sold separately or as a block and other factors. Accordingly, there can be no assurance that the proceeds realized upon any such exercise with respect to the Equipment Notes and the Aircraft pursuant to the applicable Indenture would be as appraised or sufficient to satisfy in full payments due on the Equipment Notes issued thereunder or the Certificates. For a discussion of the assumptions and methodologies used in preparing the appraisals, see "Risk Factors -- Factors Relating to the Certificates and the Offering -- Appraisals and Realizable Value of the Aircraft" and "Description of the Aircraft and the Appraisals". LOAN TO AIRCRAFT VALUE RATIOS The following table sets forth the loan to Aircraft value ratio ("LTV Ratio") for each Class of Certificates as of the date of the consummation of the offering of the Certificates and the Regular Distribution Dates specified therein. The LTV Ratios for each Class of Certificates were obtained for each such Regular Distribution Date by dividing (i) the expected Pool Balance of such Class of Certificates together in each case with the expected Pool Balance of all other Classes of Certificates senior in right of payment to such Class of Certificates under the Intercreditor Agreement determined immediately after giving effect to the distributions expected to be made on such Regular Distribution Date, by (ii) the assumed value of all of the Aircraft (the "Assumed Aggregate Aircraft Value") on such Regular Distribution Date based on the assumptions set forth below. The table contains forward-looking information that is based on the assumption that the value of each Aircraft included in the Assumed Aggregate Aircraft Value as of June 16, 1997 depreciates by 2% per year until the fifteenth year after the year of delivery of such Aircraft by the manufacturer, by 4% per year thereafter until the twentieth year after the year of such delivery and by 6% per year thereafter. Other rates or methods of depreciation would result in materially different LTV Ratios and no assurance can be given (i) that the depreciation rates and methods assumed for the purpose of the table are the ones most likely to 10 12 occur or are appropriate for evaluating the actual future value of any Aircraft or (ii) as to such actual future value. Many of the factors affecting the value of the Aircraft are discussed herein under "Risk Factors -- Factors Relating to the Certificates and the Offering -- Appraisals and Realizable Value of Aircraft". Although the table is compiled on an aggregate basis, it should be noted that, because the Equipment Notes are not cross-collateralized, the excess proceeds realized from the disposition of any particular Aircraft would not be available to offset shortfalls on the Equipment Notes relating to any other Aircraft. Therefore, upon the occurrence of an Indenture Event of Default, even if the Aircraft as a group could be sold for more than the total amounts payable in respect of all of the outstanding Equipment Notes, if certain Aircraft were sold for less than the total amount payable in respect of the related Equipment Notes, there would not be sufficient proceeds to pay all Classes of Certificates in full. See "Description of the Equipment Notes -- Loan to Value Ratios of Equipment Notes" for additional information regarding LTV Ratios for the Equipment Notes issued in respect of each Aircraft which may be more relevant in a default situation than the aggregate values shown in the following table. Thus, the table should not be considered a forecast or prediction of expected or likely LTV Ratios but simply a mathematical calculation based on one set of assumptions.
ASSUMED CLASS A CLASS B CLASS C AGGREGATE CERTIFICATES CLASS A CERTIFICATES CLASS B CERTIFICATES CLASS C EQUIPMENT POOL CERTIFICATES POOL CERTIFICATES POOL CERTIFICATES DATE VALUE(1) BALANCE LTV BALANCE LTV BALANCE LTV ---- ------------ ------------ ------------ ------------ ------------ ------------ ------------ June 16, 1997........ $114,840,000 $45,753,110 39.8% $17,026,464 54.7% $17,116,098 69.6% July 2, 1998......... 112,169,302 44,867,698 40.0 16,825,392 55.0 16,825,392 70.0 July 2, 1999......... 109,498,605 43,799,409 40.0 16,424,784 55.0 16,424,784 70.0 July 2, 2000......... 106,827,907 42,731,167 40.0 16,024,194 55.0 16,024,194 70.0 July 2, 2001......... 104,157,209 41,662,878 40.0 15,623,586 55.0 13,746,218 68.2 July 2, 2002......... 101,486,512 40,594,589 40.0 15,222,978 55.0 7,252,250 62.1 July 2, 2003......... 98,815,814 39,526,300 40.0 14,752,267 54.9 143,978 55.3 July 2, 2004......... 96,145,116 38,458,010 40.0 6,641,195 46.9 0 0.0 July 2, 2005......... 93,474,419 35,050,677 37.5 0 0.0 0 0.0 July 2, 2006......... 88,133,023 24,223,693 27.5 0 0.0 0 0.0 July 2, 2007......... 82,791,628 12,561,596 15.2 0 0.0 0 0.0 July 2, 2008......... 0 0 0.0 0 0.0 0 0.0 July 2, 2009......... 0 0 0.0 0 0.0 0 0.0 July 2, 2010......... 0 0 0.0 0 0.0 0 0.0 July 2, 2011......... 0 0 0.0 0 0.0 0 0.0 July 2, 2012......... 0 0 0.0 0 0.0 0 0.0 July 2, 2013......... 0 0 0.0 0 0.0 0 0.0 July 2, 2014......... 0 0 0.0 0 0.0 0 0.0 July 2, 2015......... 0 0 0.0 0 0.0 0 0.0 CLASS D CERTIFICATES CLASS D POOL CERTIFICATES DATE BALANCE LTV ---- ------------ ------------ June 16, 1997........ $14,153,323 81.9% July 2, 1998......... 9,783,305 78.7 July 2, 1999......... 5,073,025 74.6 July 2, 2000......... 1,051,953 71.0 July 2, 2001......... 0 0.0 July 2, 2002......... 0 0.0 July 2, 2003......... 0 0.0 July 2, 2004......... 0 0.0 July 2, 2005......... 0 0.0 July 2, 2006......... 0 0.0 July 2, 2007......... 0 0.0 July 2, 2008......... 0 0.0 July 2, 2009......... 0 0.0 July 2, 2010......... 0 0.0 July 2, 2011......... 0 0.0 July 2, 2012......... 0 0.0 July 2, 2013......... 0 0.0 July 2, 2014......... 0 0.0 July 2, 2015......... 0 0.0
- --------------- (1) The Assumed Aggregate Aircraft Value as of June 16, 1997 (but not the Assumed Aggregate Aircraft Values for subsequent dates) was determined based upon the lesser of the average and median value of all Aircraft as appraised by the Appraisers as of the respective dates of their appraisals (see "Description of the Aircraft and the Appraisals"). No assurance can be given that such value represents the realizable value of the Aircraft. See "Risk Factors -- Factors Relating to the Certificates and the Offering -- Appraisals and Realizable Value of the Aircraft" and "Description of the Aircraft and the Appraisals". 11 13 CASH FLOW STRUCTURE Set forth below is a diagram illustrating the structure for the offering of the Certificates and certain cash flows. [DIAGRAM] - --------------- * Each Aircraft is subject to a separate Lease and a related Indenture. ** Liquidity Facilities are only available with respect to the Class A, B and C Certificates. 12 14 THE OFFERING Trusts: ................... Each of the Class A Trust, the Class B Trust, the Class C Trust and the Class D Trust is to be formed pursuant to one of the four separate Pass Through Trust Agreements to be entered into between AWA and Fleet National Bank, as trustee under each Trust. Each Trust will be a separate entity. Certificates Offered:...... The Certificates are pass through certificates to be issued by each Trust, representing fractional undivided interests in such Trust. The Certificates to be issued by the Class A Trust, the Class B Trust, the Class C Trust and the Class D Trust are the Class A Certificates, Class B Certificates, Class C Certificates and Class D Certificates, respectively. Subordination Agent:....... Fleet National Bank, as subordination agent under the Intercreditor Agreement (in such capacity, the "Subordination Agent"). Initial Liquidity Provider:.................. Kredietbank N.V., acting through its New York branch, initially will provide three separate liquidity facilities for the benefit of the holders of the Class A Certificates, Class B Certificates and Class C Certificates, respectively. Trust Property:............ The property of the Trusts (the "Trust Property") will include (i) Equipment Notes to be issued on a nonrecourse basis by the Owner Trustees in connection with four separate leveraged lease transactions to refinance the current indebtedness of such Owner Trustees originally incurred to finance the Aircraft which will be leased by such Owner Trustees to AWA, together with all monies at any time paid thereon and all monies due and to become due thereunder, (ii) the rights of such Trust under the Intercreditor Agreement (including all monies receivable in respect of such rights), (iii) except for the Class D Trust, all monies receivable under the Liquidity Facility for such Trust and (iv) funds from time to time deposited with the Trustee in accounts relating to such Trust. The Equipment Notes with respect to each Aircraft will be issued in four series under separate Indentures (each, an "Indenture") between the related Owner Trustee and the indenture trustee thereunder (the "Indenture Trustee"). Each Trust will purchase, pursuant to certain Refunding Agreements (each, a "Refunding Agreement"), one series of Equipment Notes issued with respect to the Aircraft such that all of the Equipment Notes held in each Trust will have an interest rate corresponding to the interest rate applicable to the Certificates to be issued by such Trust. The maturity dates of the Equipment Notes acquired by each Trust will occur on or before the final expected distribution date (the "Final Expected Distribution Date") applicable to the Certificates to be issued by such Trust as set forth on the cover page of this Prospectus. The aggregate original principal amount of the Equipment Notes to be held in each Trust will be the same as the aggregate original face amount of the Certificates to be issued by such Trust. Certificates and Denominations:........... The Certificates of each Trust will be issued in denominations of $1,000 and integral multiples thereof, except one Certificate which may be issued in a different denomination. See "Description of the Certificates -- General". 13 15 Regular Distribution Dates:..................... January 2 and July 2, commencing January 2, 1998. Special Distribution Date:...................... Any business day on which a Special Payment is to be distributed. See "Description of the Certificates -- Payments and Distributions". Record Date:............... The fifteenth day preceding a Regular Distribution Date or a Special Distribution Date. Distributions:............. All payments of principal and interest received by the Trustee on the Equipment Notes held in each Trust will be distributed by the Trustee to the holders of the Certificates (the "Certificateholders ") of such Trust, on the Regular Distribution Dates, subject to the provisions of the Intercreditor Agreement. Assuming payments on the Equipment Notes are made when due, the Final Expected Distribution Date for each Class of Certificates will be as set forth on the cover page of this Prospectus. Payments on the Equipment Notes held in each Trust are scheduled to be received in specified amounts by the Trustee of such Trust on January 2 and July 2 of each year, commencing January 2, 1998. Payments of principal, Make-Whole Amount (if any) and interest resulting from the purchase (if any) of the Equipment Notes held in any Trust will be distributed on a Special Distribution Date after not less than ten days' notice from the Trustee to the Certificateholders of such Trust, subject to the provisions of the Intercreditor Agreement. For a discussion of distributions upon an Indenture Event of Default, see "Description of the Certificates -- Indenture Events of Default and Certain Rights Upon an Indenture Event of Default". Events of Default:......... Events of Default under each Pass Through Trust Agreement (each, a "PTC Event of Default ") are the failure to pay within ten business days of the due date thereof: (i) the outstanding Pool Balance of the applicable Class of Certificates on the Final Legal Distribution Date (as defined below) for such Class or (ii) interest due on such Class of Certificates on any Regular Distribution Date or Special Distribution Date (each, a "Distribution Date") (unless, in the case of the Class A, B or C Certificates, the Subordination Agent shall have made an Interest Drawing with respect thereto in an amount sufficient to pay such interest and shall have distributed such amount to the Certificateholders entitled thereto). The "Final Legal Distribution Date" for each of the Class A, B, C and D Certificates is January 2, 2010, January 2, 2007, July 2, 2005 and July 2, 2001, respectively. Any failure to make expected principal distributions on any Class of Certificates on any Regular Distribution Date (other than the Final Legal Distribution Date) will not constitute a PTC Event of Default with respect to such Certificates. Purchase Rights of Certificateholders:...... Upon the occurrence and during the continuation of a Triggering Event (as defined below), (i) the Class B Certificateholders shall have the right to purchase all, but not less than all, of the Class A Certificates, (ii) the Class C Certificateholders shall have the right to purchase all, but not less than all, of the Class A and B Certificates and (iii) the Class D Certificateholders shall have the right to purchase all, but not less than all, of the Class A, B and C Certificates in each case at a purchase price equal to the Pool Balance of the relevant Class or Classes of Certificates plus accrued and unpaid interest thereon to the date of purchase, without any Make-Whole Amount, but including 14 16 any other amounts due to the Certificateholders of such Class or Classes. "Triggering Event" means (x) the occurrence of an Indenture Event of Default under all Indentures resulting in a PTC Event of Default with respect to the most senior Class of Certificates then outstanding, (y) the acceleration of, or a failure to pay at final maturity, all of the outstanding Equipment Notes or (z) certain bankruptcy or insolvency events involving AWA. Equipment Notes (a) Interest:............ The Equipment Notes held in each Trust will accrue interest at the applicable rate per annum for the Certificates issued by such Trust as set forth on the cover page of this Prospectus, payable on January 2 and July 2 of each year, commencing January 2, 1998, and such interest will be passed through to Certificateholders of such Trust on each such date until the Final Expected Distribution Date for the Certificates issued by such Trust, in each case subject to the Intercreditor Agreement. Interest is calculated on the basis of a 360-day year consisting of twelve 30-day months. See "Description of the Certificates -- Payments and Distributions", "Description of the Equipment Notes -- General" and "-- Principal and Interest Payments". (b) Principal:........... Scheduled principal payments made on the Equipment Notes held in each Trust will be passed through to the Certificateholders of each such Trust on January 2 or July 2 or both in certain years commencing January 2, 1998, in accordance with the principal repayment schedule set forth herein under "Description of the Certificates -- Pool Factors", in each case subject to the Intercreditor Agreement. (c) Redemption and Purchase:........... (i) All of the Equipment Notes issued with respect to an Aircraft will be redeemed in whole upon the occurrence of an Event of Loss with respect to such Aircraft if such Aircraft is not replaced by AWA under the related Lease, in each case at a price equal to the aggregate unpaid principal amount thereof, together with accrued interest thereon to, but not including, the date of redemption, and all other amounts payable under the related Indenture or under the related Refunding Agreement to the holders of such Equipment Notes, but without any Make-Whole Amount. (ii) If, with respect to an Aircraft, (x) the Indenture Trustee with respect to the related Equipment Notes has taken action or notified the applicable Owner Trustee that it intends to take action to foreclose the lien of the related Indenture or otherwise commence the exercise of any significant remedy under such Indenture or the related Lease, (y) the Equipment Notes with respect to such Aircraft shall have been accelerated or (z) there shall have occurred and be continuing a Lease Event of Default, then in each case all of the Equipment Notes issued with respect to such Aircraft may be purchased by the related Owner Trustee or the beneficial owner of such Aircraft (the "Owner Participant"), at a price equal to the aggregate unpaid principal amount thereof, together with accrued and unpaid interest thereon to, but not including, the purchase date, and all other amounts then payable 15 17 under the related Indenture or under the related Refunding Agreement to the holders of such Equipment Notes, but without any Make-Whole Amount (provided that if such option is exercised at a time when a Lease Event of Default shall have occurred and be continuing for less than 120 days and the events described in clauses (x) and (y) of this sentence do not apply, such price shall include the Make-Whole Amount). (d) Security:............ The Equipment Notes issued with respect to each Aircraft will be secured by a perfected security interest in the related Owner Trustee's rights in and to such Aircraft and an assignment to the related Indenture Trustee of certain of the related Owner Trustee's rights under the related Lease, including the right to receive payments of rent thereunder. The Equipment Notes are not cross-collateralized and, consequently, the Equipment Notes issued in respect of any one Aircraft are not secured by any of the other Aircraft or the Leases related thereto. There are no cross-default provisions in the Indentures or Leases and, consequently, events resulting in an event of default under any particular Indenture or Lease may or may not result in an event of default occurring under any other Indenture or Lease. If the Equipment Notes issued in respect of one or more Aircraft are in default and the Equipment Notes issued in respect of the remaining Aircraft are not in default, no remedies will be exercisable under the Indentures with respect to such remaining Aircraft. See "Description of the Equipment Notes -- Security", "-- Indenture Events of Default; Notice and Waiver" and "-- Remedies". Although the Equipment Notes are not obligations of, or guaranteed by, AWA or Holdings, the aggregate amounts unconditionally payable by AWA for lease of the Aircraft will be at least sufficient to pay in full when due all scheduled amounts required to be paid on the Equipment Notes issued with respect to the Aircraft. See "Description of the Equipment Notes -- General". (e) Section 1110 Protection:......... Milbank, Tweed, Hadley & McCloy, counsel to the Underwriter, has advised the Indenture Trustees that if AWA were to become a debtor under Chapter 11 of the Bankruptcy Code, the applicable Owner Trustee, as a lessor under each Lease, and the related Indenture Trustee, as assignee of such Owner Trustee's rights under such Lease pursuant to such related Indenture, would be entitled to the benefits of Section 1110 of Title 11 of the United States Code (the "Bankruptcy Code") with respect to the airframe and engines comprising the related Aircraft. See "Description of the Equipment Notes -- Remedies" for a description of that opinion and certain assumptions and qualifications contained therein. (f) Ranking:............. Series B Equipment Notes issued in respect of each Aircraft will be subordinated in right of payment to Series A Equipment Notes issued in respect of such Aircraft; Series C Equipment Notes issued in respect of such Aircraft will be subordinated in right of payment to Series A and B Equipment Notes issued in respect of such Aircraft; and Series D Equipment Notes issued in respect of such Aircraft will be subordinated in right of payment to Series A, B and C Equipment Notes issued in respect of such Aircraft. On each Distribution Date, (i) payments of interest and principal due on Series A Equipment 16 18 Notes issued in respect of any Aircraft will be made prior to payments of interest and principal due on any Series B, C and D Equipment Notes issued in respect of such Aircraft, (ii) payments of interest and principal due on Series B Equipment Notes will be made prior to payments of interest and principal due on any Series C and D Equipment Notes issued in respect of such Aircraft and (iii) payments of interest and principal due on Series C Equipment Notes will be made prior to payments of interest and principal due on any Series D Equipment Notes issued in respect of such Aircraft. Liquidity Facilities:...... The Subordination Agent and the Liquidity Provider will enter into a revolving credit agreement (each, a "Liquidity Facility") with respect to each Trust (other than the Class D Trust). Under each of the Liquidity Facilities, the Liquidity Provider will, if necessary, make advances ("Interest Drawings") in an aggregate amount (the "Required Amount") sufficient to pay interest on the Class A, B or C Certificates, as the case may be, on up to three successive Regular Distribution Dates (without regard to any future payments of principal on such Certificates) at the respective interest rates (without any penalty or default margin) on such Certificates (the "Stated Interest Rates"). The initial amount available under the Liquidity Facilities for the Class A Certificates, the Class B Certificates and the Class C Certificates will be $ , $ and $ , respectively. An Interest Drawing under the relevant Liquidity Facility will be made promptly after any Regular Distribution Date if, after giving effect to the subordination provisions of the Intercreditor Agreement, there are insufficient funds available to the Subordination Agent to pay interest on any Class A, B or C Certificates; provided, however, that on any date the maximum amount available under such Liquidity Facility to fund any shortfall in interest due on such Certificates will not exceed the Required Amount. The Liquidity Facility for any Trust does not provide for drawings thereunder to pay for principal of, or Make-Whole Amount on, the Certificates of such Trust, any interest on the Certificates of such Trust in excess of the Stated Interest Rates, or principal of, or interest or Make-Whole Amount on, the Certificates of any other Trust. Upon each Interest Drawing under any Liquidity Facility, the Subordination Agent will be obligated to reimburse (to the extent that the Subordination Agent has available funds therefor) the Liquidity Provider for the amount of such drawing. Such reimbursement obligation and any other amounts, including interest thereon, owing to the Liquidity Provider under each Liquidity Facility or certain other agreements (the "Liquidity Obligations") will rank pari passu with the Liquidity Obligations relating to all other Liquidity Facilities and will rank senior to the Certificates in right of payment. Upon reimbursement in full of the Interest Drawings (but not other drawings), together with any accrued interest thereon, under any Liquidity Facility, the amount available under such Liquidity Facility will be reinstated to the then Required Amount of such Liquidity Facility; provided that the amount will not be reinstated at any time if (i) a Liquidity Event of Default (as defined herein) shall have occurred and be continuing or (ii) both(A) a Triggering Event shall 17 19 have occurred and be continuing and (B) a Performing Note Deficiency (as defined below) exist. "Non-Performing Equipment Notes" are Equipment Notes other than Performing Equipment Notes. "Performing Equipment Notes" are Equipment Notes with respect to which no payment default has occurred and is continuing (without giving effect to any acceleration thereof); provided that in the event of a bankruptcy proceeding involving AWA as a debtor under Chapter 11 of the Bankruptcy Code (i) any payment default existing during the 60-day period under Section 1110(a)(1)(A) of the Bankruptcy Code (or such longer period as may apply under Section 1110(b) of the Bankruptcy Code) (the "Section 1110 Period ") shall not be taken into consideration, unless during the Section 1110 Period the trustee in such proceeding or AWA refuses to assume or agree to perform its obligations under the Lease related to such Equipment Notes and (ii) any payment default occurring after the date of the order of relief in such proceeding shall not be taken into consideration if such payment default is cured under Section 1110(a)(1)(B) of the Bankruptcy Code before the later of (A) 30 days after the date of such default or (B) the expiration of the Section 1110 Period. "Performing Note Deficiency" means any time that less than 65% of the then aggregate outstanding principal amount of all Equipment Notes are Performing Equipment Notes. If at any time the short-term unsecured debt rating of the Liquidity Provider issued by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group ("Standard & Poor's" and, together with Moody's, the "Rating Agencies") is lower than the Threshold Rating (as defined herein) or, in the event the Liquidity Provider's short-term unsecured debt is not rated by Moody's or Standard & Poor's, the long-term unsecured debt rating of any Liquidity Provider issued by either Moody's or Standard & Poor's is lower than the Threshold Rating, then the Liquidity Provider for the related Trust or the Subordination Agent, in consultation with AWA (whose recommendations the Subordination Agent will accept), may arrange for another similar facility to be provided by a financial institution having unsecured short-term debt ratings or, in the event a selected financial institution's short-term unsecured debt is not rated by Moody's or Standard & Poor's, long-term unsecured debt ratings, issued by the applicable Rating Agencies which are equal to or higher than the Threshold Rating. If such Liquidity Facility is not replaced within the period specified in the Intercreditor Agreement after notice of the downgrading, such Liquidity Facility will be drawn in full (the "Downgrade Drawing") and the proceeds will be deposited into an account (a "Cash Collateral Account") for such Trust and used for the same purposes and under the same circumstances and subject to the same conditions as cash payments of Interest Drawings under such Liquidity Facility would be used. The Intercreditor Agreement provides that the Subordination Agent shall hold the proceeds of a Final Drawing made in accordance with the provisions set forth under "Description of Liquidity Facilities -- Liquidity Events of Default" in the Cash Collateral Account for the related Trust as cash collateral to be used for the same purposes and 18 20 under the same circumstances, and subject to the same conditions, as cash payments of Interest Drawings under such Liquidity Facility would be used. The Subordination Agent, in consultation with AWA (whose recommendations the Subordination Agent will accept), may, subject to certain limitations, arrange for a replacement facility at any time to replace the Liquidity Facility for any Trust. If such replacement facility is provided at any time after a Downgrade Drawing under such Liquidity Facility, the funds on deposit in the Cash Collateral Account for such Trust will be returned to the Liquidity Provider being replaced. Notwithstanding the subordination provisions of the Intercreditor Agreement, the Liquidity Facility for any Class of Certificates does not provide for drawings thereunder to pay principal of or interest or Make-Whole Amount on the Certificates of any other Class. Therefore, only the holders of the Certificates to be issued by a particular Trust will be entitled to receive and retain the proceeds of drawings under the Liquidity Facility for such Trust. There is no Liquidity Facility for the Class D Trust. See "Description of the Liquidity Facilities". Intercreditor Agreement: (a) Subordination:....... The Trusts, the Liquidity Provider and the Subordination Agent will enter into an agreement (the "Intercreditor Agreement") which will provide as follows: (i) All payments made in respect of the Equipment Notes and certain other payments will be made to the Subordination Agent which will distribute such payments as described in paragraphs (ii) and (iii) below. (ii) On each Distribution Date, so long as no Triggering Event shall have occurred (whether or not continuing), all payments received by the Subordination Agent in respect of the Equipment Notes and certain other payments will be distributed in the following order: (a) payment of the Liquidity Obligations to the Liquidity Provider and, if applicable, to replenish Cash Collateral Accounts up to their respective Required Amounts; (b) payment of Expected Distributions (as defined below) to the holders of Class A Certificates; (c) payment of Expected Distributions to the holders of Class B Certificates; (d) payment of Expected Distributions to the holders of Class C Certificates; (e) payment of Expected Distributions to the holders of Class D Certificates; and (f) payment of certain fees and expenses of the Subordination Agent and each Trustee. "Expected Distributions" means, with respect to the Certificates of any Trust on any Distribution Date (the "Current Distribution Date"), the sum of (x) accrued and unpaid interest on such Certificates and (y) the difference between (A) the Pool Balance of such Certificates as of the immediately preceding Distribution Date and (B) the Pool Balance of such Certificates as of the Current Distribution Date, calculated on the basis that the principal of the Equipment Notes held in such Trust has been paid when due (whether at stated maturity, upon redemption, prepayment, purchase or acceleration or otherwise) 19 21 and such payments have been distributed to the holders of such Certificates. (iii) Upon the occurrence of a Triggering Event and at all times thereafter, all payments received by the Subordination Agent in respect of the Equipment Notes and certain other payments will be distributed in the following order: (a) to reimburse the Subordination Agent, each Trustee, the Liquidity Provider and any Certificateholder, as the case may be, for the payment of Administration Expenses (as defined herein); (b) to the Liquidity Provider in payment of Liquidity Obligations and, so long as no Performing Note Deficiency exists and no Liquidity Event of Default has occurred and is continuing, to replenish Cash Collateral Accounts up to their respective Required Amounts; (c) to reimburse the Subordination Agent, each Trustee and each Certificateholder, as the case may be, for the payment of Certain Taxes and Fees (as defined herein); (d) to pay Adjusted Expected Distributions to the holders of Class A Certificates; (e) to pay Adjusted Expected Distributions to the holders of Class B Certificates; (f) to pay Adjusted Expected Distributions to the holders of Class C Certificates; and (g) to pay Adjusted Expected Distributions to the holders of Class D Certificates. "Adjusted Expected Distributions" means with respect to the Certificates of any Class on any Current Distribution Date the sum of (x) the amount of accrued and unpaid interest on such Certificates plus (y) the greater of: (A) the difference between (x) the Pool Balance of such Certificates as of the immediately preceding Distribution Date and (y) the Pool Balance of such Certificates as of the Current Distribution Date, calculated on the basis that (i) the principal of the Non-Performing Equipment Notes held in such Trust has been paid in full and such payments have been distributed to the holders of such Certificates and (ii) the principal of the Performing Equipment Notes has been paid when due (but without giving effect to any acceleration of Performing Equipment Notes) and has been distributed to the holders of such Certificates; and (B) the amount, if any, by which (i) the Pool Balance of such Class of Certificates as of the immediately preceding Distribution Date exceeds (ii) the Aggregate LTV Collateral Amount for such Class of Certificates for the Current Distribution Date; provided that, until the date of the initial LTV Appraisals (as defined below), clause (B) above shall not be applicable. "Aggregate LTV Collateral Amount" means, for any Class of Certificates for any Distribution Date, the sum of the applicable LTV Collateral Amounts (as defined below) for each Aircraft minus the Pool Balance for each Class of Certificates, if any, senior to such Class after giving effect to any distribution of principal on such Distribution Date on such senior Class or Classes, but in no event an amount less than zero. "Appraised Current Market Value" of any Aircraft means the lower of the average or the median of the most recent three LTV Appraisals (as defined below) of such Aircraft. After a Triggering Event occurs and any Equipment Note becomes a Non-Performing Equipment 20 22 Note, the Subordination Agent will be required to obtain LTV Appraisals to determine the Appraised Current Market Value and additional LTV Appraisals on or prior to each anniversary of the date of such initial LTV Appraisals; provided that, if the Controlling Party reasonably objects to the appraised value of the Aircraft shown in any such LTV Appraisals, the Controlling Party shall have the right to obtain or cause to be obtained substitute LTV Appraisals (including any LTV Appraisals based upon physical inspection of the Aircraft). "LTV Appraisal" means a current fair market value appraisal (which may be a "desktop" appraisal) performed by any Appraiser or any other nationally recognized appraiser on the basis of 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, both parties having knowledge of all relevant facts. "LTV Collateral Amount" of any Aircraft for any Class of Certificates for any Distribution Date means the lesser of (i) the initial LTV Ratio for such Class of Certificates multiplied by the Appraised Current Market Value of such Aircraft and (ii) the outstanding principal amount of the Equipment Notes secured by such Aircraft after giving effect to any principal payments of such Equipment Notes on or before such Distribution Date. "LTV Ratio" initially means for the Class A Certificates 39.8%, for the Class B Certificates 54.7%, for the Class C Certificates 69.6% and for the Class D Certificates 81.9%. (b) Intercreditor Rights:.................... Pursuant to the Intercreditor Agreement, the Trustees and the Liquidity Provider will agree that, with respect to any Indenture at any given time, the relevant Indenture Trustee will be directed (a) in taking, or refraining from taking, any action thereunder, so long as no Indenture Event of Default shall have occurred and be continuing thereunder, by the holders of at least a majority of the outstanding principal amount of the Equipment Notes issued thereunder (provided that, for so long as the Subordination Agent is the registered holder of the Equipment Notes, the Subordination Agent shall act with respect to this clause (a) in accordance with the directions of the Trustees representing holders of Certificates representing an undivided interest in such principal amount of Equipment Notes) and (b) after the occurrence and during the continuance of an Indenture Event of Default thereunder, subject to certain conditions in exercising remedies thereunder (including acceleration of such Equipment Notes or foreclosing the lien on the Aircraft securing such Equipment Notes), by the Controlling Party. "Controlling Party" with respect to any Indenture means: (w) the Class A Trustee; (x) upon payment of Final Distributions to the holders of Class A Certificates, the Class B Trustee; (y) upon payment of Final Distributions to the holders of Class B Certificates, the Class C Trustee; and (z) upon payment of Final Distributions to the holders of Class C Certificates, the Class D Trustee. See "Description of the Certificates -- Indenture Events of Default and Certain Rights Upon an Indenture Event of Default" for a description of the rights of the Certificateholders of each Trust to direct the respective Trustee. Notwithstanding the foregoing, subject to certain limitations, the Liquidity Provider shall have the right to elect to 21 23 become the Controlling Party with respect to an Indenture at any time from and including the date which is 18 months after the earlier of (i) the acceleration of the Equipment Notes issued thereunder and (ii) a Final Drawing (as defined herein) under the Liquidity Facilities, if at the time of such election the Liquidity Obligations have not been paid in full; provided that if there is more than one Liquidity Provider, the Liquidity Provider with the greatest amount of unreimbursed Liquidity Obligations shall have such right. "Final Distributions" means, with respect to the Certificates of any Trust on any Distribution Date, the sum of (x) the aggregate amount of all accrued and unpaid interest on such Certificates and (y) the Pool Balance of such Certificates as of the immediately preceding Distribution Date. (i) Upon the occurrence and during the continuation of any Indenture Event of Default under any Indenture, the Controlling Party may accelerate and sell all (but not less than all) of the Equipment Notes issued under such Indenture to any person, subject to the provisions of paragraph (ii) below. The proceeds of such sale will be distributed pursuant to the provisions of the Intercreditor Agreement. (ii) So long as any Certificates are outstanding, during nine months after the earlier of (x) the acceleration of the Equipment Notes under any Indenture or (y) the bankruptcy or insolvency of AWA, without the consent of each Trustee, (a) no Aircraft subject to the lien of such Indenture or such Equipment Notes may be sold, if the net proceeds from such sale would be less than the Minimum Sale Price for such Aircraft or such Equipment Notes, and (b) the amount and payment dates of rentals payable by AWA under the Lease for such Aircraft may not be adjusted, if, as a result of such adjustment, the discounted present value of all such rentals would be less than 75% of the discounted present value of the rentals payable by AWA under such Lease before giving effect to such adjustment, in each case, using the weighted average interest rate of the Equipment Notes then outstanding under such Indenture as the discount rate. "Minimum Sale Price" means, with respect to the Aircraft or the Equipment Notes issued in respect of such Aircraft, at any time, the lesser of (a) 75% of the Appraised Current Market Value of such Aircraft based on the most recent LTV Appraisal and (b) the aggregate outstanding principal amount of such Equipment Notes, plus accrued and unpaid interest thereon. Use of Proceeds:........... The proceeds from the sale of the Certificates offered hereby will be used to purchase the Equipment Notes issued by the related Owner Trustees in connection with the refinancing of the indebtedness previously incurred by the Owner Trustees to finance the purchase of the Aircraft. The proceeds from the sale of Equipment Notes will be used to repay all of the current indebtedness of the Owner Trustees with respect to the Aircraft, and any proceeds remaining after such repayment may be used to pay certain costs and expenses, such as break-funding costs and redemption premiums, incurred in the refinancing. Such Equipment Notes will represent in the aggregate the entire debt portion of the leveraged lease transactions relating to all of 22 24 the Aircraft. Neither AWA nor Holdings will receive any of the proceeds from the sale of the Certificates. See "Use of Proceeds". Trustee: .................. Fleet National Bank will act as Trustee and as paying agent and registrar for the Certificates of each Trust. Fleet National Bank will also act as Subordination Agent under the Intercreditor Agreement. Indenture Trustee: ........ The Chase Manhattan Bank will act as Indenture Trustee with respect to the issue of Equipment Notes relating to each of the Aircraft. Federal Income Tax Consequences:............ Each Trust will be classified as a grantor trust for federal income tax purposes, and therefore each Certificate Owner will be treated as the owner of a pro rata undivided interest in each of the Equipment Notes and any other property held by such Trust. Each Certificate Owner should report on its federal income tax return its pro rata share of income from such Equipment Notes and other property held by such Trust in accordance with such Certificate Owner's method of accounting. The Equipment Notes will not be issued with original issue discount for U.S. federal income tax purposes. See "Certain U.S. Federal Income Tax Consequences". ERISA Considerations:...... In general, employee benefit plans subject to Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), or entities which may be deemed to hold the assets of any such plan (collectively, "Plans"), will be eligible to purchase the Class A Certificates. Plans will not be eligible to purchase the Class B, C or D Certificates; provided, however, that such Certificates may be acquired with the assets of an insurance company general account that may be deemed to contain Plan assets if the conditions of Prohibited Transaction Class Exemption ("PTCE") 95-60, 60 Fed. Reg. 35,925, are satisfied. By the acceptance of a Class B, C or D Certificate, each Certificateholder will be deemed to have represented that either (i) no Plan assets have been used to purchase such Certificate or (ii) the purchase and holding of such Certificate is exempt from the prohibited transaction restrictions of ERISA and the Code pursuant to PTCE 95-60. Each Plan fiduciary (and each fiduciary for a governmental or church plan subject to rules similar to those imposed on Plans under ERISA) should consult with its legal advisor concerning an investment in any of the Certificates. See "ERISA Considerations". Rating of the Certificates:.............. It is a condition to the issuance of the Certificates that the Certificates be rated by Moody's and Standard & Poor's as set forth below:
STANDARD & CERTIFICATES MOODY'S POOR'S ------------ ------- ---------- Class A A2 AA- Class B Baa2 A- Class C Ba1 BBB- Class D Ba3 BB
A rating is not a recommendation to purchase, hold or sell Certificates, inasmuch as such rating does not address market price or suitability for a particular investor. There can be no assurance that such ratings will not be lowered or withdrawn by a Rating Agency if, in the opinion 23 25 of such Rating Agency, circumstances (including the downgrading of AWA or the Liquidity Provider) so warrant. See "Risk Factors -- Factors Relating to the Certificates and the Offering -- Ratings of the Certificates". Rating of the Initial Liquidity Provider:........ Kredietbank N.V., acting through its New York branch, as the Initial Liquidity Provider, has a short-term unsecured debt rating of P-1 and A1+ from Moody's and Standard & Poor's, respectively, and a long-term unsecured debt rating of Aa2 and AA- from Moody's and Standard & Poor's, respectively. Threshold Rating:.......... "Threshold Rating" means the short-term unsecured debt rating of P-1 by Moody's and A-1 by Standard & Poor's or, in the event a person's short-term unsecured debt is not rated by either Moody's or Standard & Poor's, the long-term unsecured debt rating of A2 by Moody's and AA- by Standard & Poor's. 24 26 SUMMARY FINANCIAL AND OPERATING DATA The following table summarizes certain financial and operating data with respect to AWA contained elsewhere in this Prospectus and should be read in conjunction therewith. Statements of operations data subsequent to August 25, 1994 and balance sheet data as of December 31, 1994, 1995 and 1996 and March 31, 1996 and 1997 reflect the adoption by AWA of fresh start reporting upon consummation of AWA's reorganization and are not prepared on a basis of accounting consistent with prior data. References to "Predecessor Company" refer to AWA's operations prior to its emergence from bankruptcy and references to "Reorganized Company" refer to AWA's operations after its emergence from bankruptcy. See the financial statements and related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations".
REORGANIZED COMPANY ---------------------------------------------------------------- PREDECESSOR COMPANY(1) THREE MONTHS ENDED YEAR ENDED --------------------------- MARCH 31, DECEMBER 31, AUGUST 26 TO JANUARY 1 TO YEAR ENDED ----------------------- ----------------------- DECEMBER 31, AUGUST 25, DECEMBER 31, 1997 1996 1996 1995 1994 1994 1993 ---------- ---------- ---------- ---------- ------------ ------------ ------------ (DOLLARS IN THOUSANDS EXCEPT OPERATING DATA) STATEMENTS OF OPERATIONS DATA: Operating revenues........ $ 462,187 $ 413,150 $1,739,526 $1,550,642 $ 469,766 $ 939,028 $1,325,364 Operating income.......... 33,463 34,318 68,666(2) 154,732(3) 38,871 107,506 121,054 Income (loss) before income taxes and extraordinary items..... 25,918 25,420 34,493 108,378 19,736 (201,209) 37,924 Income (loss) before extraordinary items..... 13,944 13,727 9,610 54,770 7,846 (203,268) 37,165 Extraordinary gain (loss)(4)............... -- -- (1,105) (984) -- 257,660 -- Net income................ 13,944 13,727 8,505 53,786 7,846 54,392 37,165 BALANCE SHEET DATA (AT END OF PERIOD): Working capital deficiency.............. $ (188,483) $ (75,785) $ (170,907) $ (70,416) $ (47,927) $ (163,572) $ (124,375) Total assets.............. 1,602,082 1,651,928 1,597,677 1,588,709 1,545,092 -- 1,016,743 Long-term debt, less current maturities(5)... 333,685 371,588 330,148 373,964 465,598 -- 620,992 Total stockholder's equity (deficiency)............ 623,382 667,155 622,780 649,472 595,446 -- (254,262) OPERATING DATA: Available seat miles (in millions)............... 5,791 4,955 21,625 19,421 6,424 11,636 17,190 Revenue passenger miles (in millions)........... 3,982 3,504 15,321 13,313 3,972 8,261 11,221 Passenger load factor (%)..................... 68.8 70.7 70.9 68.5 61.8 71.0 65.3 Yield per revenue passenger mile (cents)................. 10.94 11.07 10.69 10.91 11.02 10.68 11.11 Passenger revenue per available seat mile (cents)................. 7.52 7.83 7.57 7.48 6.81 7.58 7.25 Operating cost per available seat mile (cents)................. 7.40 7.65 7.73(2) 7.19(3) 6.71 7.15 7.01 Full time equivalent employees (at end of period)................. 10,015 8,933 9,652 8,712 10,715 10,849 10,544
- --------------- (1) Includes net expenses incurred by the Predecessor Company in connection with its reorganization of $273.7 million for the period January 1 to August 25, 1994 and $25.0 million for the year ended December 31, 1993. (2) Reflects a $65.1 million nonrecurring special charge related to AWA's renegotiation of its AVSA aircraft purchase agreement and writedown of certain aircraft related inventory and equipment and underutilized facilities as well as certain other adjustments. The special charge increased cost per available seat mile by .30 cents for the year ended December 31, 1996. (3) Costs associated with AWA's outsourcing of its heavy aircraft maintenance resulted in a pretax restructuring charge of approximately $10.5 million and an increase in cost per available seat mile of .05 cents for the year ended December 31, 1995. (4) Includes (i) an extraordinary loss of $1.1 million in 1996 relating to prepayment of the 10 3/4% Notes, (ii) an extraordinary loss of $984,000 in 1995 resulting from the exchange of debt by AWA and (iii) an extraordinary gain of $257.7 million in the period from January 1 to August 25, 1994 resulting from the discharge of indebtedness pursuant to the consummation of AWA's plan of reorganization. (5) Includes certain balances reported as "Estimated Liabilities Subject to Chapter 11 Proceedings" for the Predecessor Company. 25 27 RISK FACTORS PROSPECTIVE PURCHASERS OF THE CERTIFICATES SHOULD CAREFULLY REVIEW THE INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS AND SHOULD PARTICULARLY CONSIDER THE FOLLOWING MATTERS: AWA AND INDUSTRY RELATED RISKS COMPETITIVE INDUSTRY CONDITIONS The airline industry is highly competitive and industry earnings are volatile. From 1990 to 1992, the airline industry experienced unprecedented losses due to high fuel costs, general economic conditions, intense price competition and other factors. Airlines compete on the basis of pricing, scheduling (frequency and flight times), on-time performance, frequent flyer programs and other services. The airline industry is susceptible to price discounting, which involves the offering of discount or promotional fares to passengers. Any such fares offered by one airline are normally matched by competing airlines, which may result in lower industry yields without a corresponding increase in traffic levels. Most of AWA's markets are highly competitive and are served by larger carriers with substantially greater financial resources than AWA. A number of AWA's larger competitors have proprietary reservation systems providing them with certain competitive advantages. Also, in recent years several new carriers have entered the industry, typically with low cost structures. In some cases, new entrants have initiated or triggered further price discounting. The entry of additional new carriers on many of AWA's routes, as well as increased competition from or the introduction of new services by established carriers, could negatively impact AWA's results of operations. See "Business -- Competition and Marketing". In addition, the introduction of broadly available, deeply discounted fares by a U.S. airline would result in lower yields for the entire industry and could have a material adverse effect on AWA's operating results. LEVERAGE; FUTURE CAPITAL REQUIREMENTS At March 31, 1997, AWA had $377.9 million of long-term indebtedness (including current maturities). AWA does not have available lines of credit or significant unencumbered assets and thus may be less able than certain of its competitors to withstand adverse industry conditions or a prolonged economic recession. In addition, at March 31, 1997, AWA had firm commitments for a total of 17 Airbus A320-200 aircraft for delivery beginning in 1999. The aggregate net cost of such aircraft is based on formulae that include certain price indices (including indices for various aircraft components such as metal products) for periods preceding the various delivery dates. Based on an assumed 5% annual price escalation, AWA estimates such aggregate net cost to be approximately $850 million. AWA has arranged for financing for up to one-half of the commitment relating to such aircraft and will require substantial capital from external sources to meet its remaining financial commitment. There can be no assurance that AWA will be able to obtain such capital in sufficient amounts or on acceptable terms. AWA is presently negotiating to expand such arrangement from 17 to 22 firm orders for new aircraft, obtain financing support for 16 of the 22 firm orders and improve financing terms and conditions under which aircraft would be purchased. LABOR RELATIONS There have been numerous attempts by unions to organize the employees of AWA, and AWA expects such organization efforts to continue in the future. Several groups of AWA's employees have selected their respective collective bargaining representatives and negotiations are in progress. AWA cannot predict which, if any, other employee groups may seek union representation or the outcome or the terms of any future collective bargaining agreement and therefore the effect, if any, on AWA's operations or financial condition. See "Business -- Labor Relations". 26 28 CONCENTRATION OF VOTING POWER, INFLUENCE OF CERTAIN PRINCIPAL STOCKHOLDERS TPG Partners, L.P. ("TPG Partners ") TPG Parallel I, L.P. ("TPG Parallel "), Air Partners II, L.P. ("Air Partners " and together with TPG Partners and TPG Parallel, "TPG "), Continental and Mesa collectively control approximately 60.5% of the total voting power of Holdings and are subject to the terms of a stockholders' agreement, which provides for certain voting restrictions until the first annual meeting of stockholders of Holdings held after August 25, 1997. As a result, these stockholders are able to elect a majority of their designees to the Board of Directors and otherwise control the Company. Mesa and Continental are engaged in the airline industry and are parties to alliance agreements with AWA. Each of TPG Partners, TPG Parallel and Air Partners is controlled by TPG Advisors, Inc., a Delaware corporation whose executive officers and directors, through their positions in Air Partners, L.P., a significant shareholder of Continental, may be deemed to own beneficially a significant percentage of Continental's common stock. Larry L. Risley, a director of each of Holdings and AWA, is the chairman and chief executive officer of Mesa. There can be no assurance that the controlling stockholders identified above will not seek to influence the Company in a manner that would favor their own personal interests over the interests of the Company. AIRCRAFT FUEL Aircraft fuel costs constituted approximately 14% of AWA's total operating expenses during 1996. At current consumption levels, a one cent per gallon change in the price of jet fuel would affect AWA's annual operating results by approximately $3.5 million. Accordingly, a substantial increase in the price of jet fuel or the lack of adequate fuel supplies in the future would have a material adverse effect on AWA's operating results. AWA's performance during 1996 was adversely affected by the price of jet fuel. The average price of jet fuel purchased by AWA during 1996 was 66.49 cents per gallon or 19.1% higher than the average price paid by AWA in 1995. Those price increases were largely responsible for AWA's 1996 jet fuel expense exceeding that incurred in 1995 by $59.3 million or 34.1%. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". AWA purchases its fuel from petroleum refiners and suppliers on standard trade terms under master agreements. Although AWA is currently able to obtain adequate supplies of jet fuel, future supplies and price trends may change as a result of geopolitical developments, regional production patterns, environmental concerns and other unpredictable events. In 1996, AWA implemented a fuel hedging program to manage the risk from fluctuating jet fuel prices. The program's objectives are to provide some protection against extreme, upward movements in the price of jet fuel and to protect AWA's ability to meet its annual fuel expense budget. Under the program, AWA may enter into certain cap and swap transactions with approved counterparties for a period not to exceed twelve months. This program will primarily address AWA's exposure associated with its United States East Coast fuel requirements, which correlate well with risk management vehicles having reasonable market liquidity. Due to the scope and nature of AWA's route system, AWA purchases a substantially greater share of jet fuel on the United States West Coast than its larger competitors. West Coast jet fuel prices tend to be more volatile than jet fuel prices in other domestic markets. Further, the propensity of West Coast jet fuel prices to move independently from the other United States jet fuel markets renders many conventional hedging techniques ineffective in managing this portion of AWA's jet fuel price risk. FAA FUNDING The federal air transportation excise taxes, which expired December 31, 1996, have been reenacted effective March 7, 1997 through September 30, 1997. Such taxes (a 10% ticket tax, a 6.25% air cargo tax and a $6.00 international departure tax) generate a substantial portion of funding for the Federal Aviation Administration ("FAA"). A coalition of the seven largest U.S. airlines is proposing a user fee as a replacement for the excise taxes. A fuel tax is also being considered. The National Aviation Civilian Review Commission (the "Review Commission") has announced its intention to conduct an independent review of possible funding mechanisms to replace the excise taxes and is scheduled to release a report in September 1997. Implementation by Congress of a user fee as proposed by the seven airlines, which would favor AWA's larger 27 29 competitors, or other proposals recommended by the Review Commission, could significantly increase the cost of AWA's airline operations and could have a material adverse impact on AWA's operating results. See "Business -- Government Regulations -- FAA Funding". SECURITY AND SAFETY MEASURES Congress recently adopted increased safety and security measures designed to increase airline passenger security and protect against terrorist acts. Such measures have resulted in additional operating costs to the airline industry. A report of the President's Commission on Aviation Safety and Security (the "Aviation Safety Commission") recommends the adoption of further measures aimed at improving the safety and security of air travel. AWA cannot forecast what additional security and safety requirements may be imposed in the future or the costs or revenue impact that would be associated with complying with such requirements. See "Business -- Government Regulations -- Additional Security and Safety Measures". OTHER REGULATORY MATTERS The FAA has issued a number of maintenance directives and other regulations relating to, among other things, retirement of older aircraft, collision avoidance systems, airborne windshear avoidance systems, noise abatement and increased inspections and maintenance procedures to be conducted on older aircraft. At March 31, 1997, 20 of AWA's 101 aircraft did not meet the FAA's Stage III noise reduction requirements and must be retired or significantly modified prior to the year 2000. These modifications may require substantial capital expenditures. There can be no assurance that AWA will be able to obtain financing for such capital expenditures or, if such financing is obtained that it will be on terms that are favorable or acceptable to AWA. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources". The FAA is currently revising procedures for airline surveillance of outsourced maintenance and training. Additional laws and regulations have been proposed from time to time that could significantly increase the cost of airline operations by imposing additional requirements or restrictions on operations. AWA cannot predict what laws and regulations will be adopted or what changes to international air transportation agreements will be effected, if any, or how they will affect AWA. See "Business -- Government Regulations". SUBSTANTIAL RESTRICTIONS AND COVENANTS Certain loan agreements and debt instruments of AWA contain significant operating and financial restrictions on AWA. The terms of such agreements and instruments affect, and in many cases significantly limit or prohibit, among other things, the ability of AWA to repay indebtedness prior to its stated maturity, sell assets or engage in mergers or acquisitions. In addition, under certain of such agreements and instruments, AWA is required to maintain specified levels of stockholder's equity and adjusted cash and maintain certain specified financial ratios. While AWA is currently in compliance with these restrictions and requirements, such restrictions and requirements could also limit the ability of AWA to effect future financings, make needed capital expenditures, withstand a future downturn in AWA's business or the economy in general or otherwise conduct necessary corporate activities. A failure by AWA to comply with these restrictions and requirements could lead to a default under the terms of such indebtedness. In the event of default, the holders of such indebtedness could elect to declare all of the funds borrowed pursuant thereto due and payable together with accrued and unpaid interest. In such event, there can be no assurance that AWA would be able to make such payments or borrow sufficient funds from alternative sources to make such payments. Even if additional financing could be obtained, there can be no assurance that it would be on terms that are favorable or acceptable to AWA. In the event of certain changes of control, with respect to Holdings or AWA, AWA will be required to offer to purchase certain amounts of the indebtedness referred to above, in each case subject to certain conditions. There can be no assurance that AWA will be able to raise sufficient funds to meet its obligations in connection with such a change of control. In addition, in the event of certain asset dispositions, AWA will be 28 30 required under certain circumstances to use the excess proceeds to offer to purchase certain amounts of such indebtedness. FACTORS RELATING TO THE CERTIFICATES AND THE OFFERING APPRAISALS AND REALIZABLE VALUE OF THE AIRCRAFT The appraised value of each Aircraft is based upon the lesser of the average and median value of such Aircraft as appraised by the Appraisers (the "Appraisals"). The Appraisals are based on differing assumptions and methodologies, which vary among the Appraisers. For a discussion of the assumptions and methodologies used in preparing each of the Appraisals, reference is hereby made to the Appraiser's reports with respect to the Appraisals, copies of which are annexed to this Prospectus as Appendix II. Appraisals that are prepared based on different assumptions or methodologies may result in valuations that are significantly different from those contained in the Appraisals. An appraisal is only an estimate of value and should not be relied upon as a measure of realizable value. The proceeds realized upon the sale of any Aircraft may be less than the appraised value thereof. In addition, the value of the Aircraft in the event of the exercise of remedies under the applicable Indenture will depend on market and economic conditions at the time, the availability of buyers, the condition of the Aircraft, whether the Aircraft is sold separately or as a block and other factors. Accordingly, there can be no assurance that the proceeds realized upon any such exercise with respect to the Equipment Notes and the Aircraft pursuant to the applicable Indenture would be as appraised or sufficient to satisfy in full remaining payments due on the Equipment Notes issued thereunder or the Certificates. See "Description of the Aircraft and the Appraisals -- Appraised Value". The Equipment Notes are not cross-collateralized and, consequently, liquidation proceeds from the sale of the Aircraft in excess of the amounts due on Equipment Notes related to such Aircraft will not be available to offset shortfalls, if any, on any other Equipment Notes. PRIORITY OF DISTRIBUTIONS; SUBORDINATION Pursuant to the Intercreditor Agreement to which the Trusts, the Subordination Agent and the Liquidity Provider will be parties, on each Distribution Date, so long as no Triggering Event shall have occurred (whether or not continuing), all payments received by the Subordination Agent will be distributed in the following order: (a) payment of the Liquidity Obligations to the Liquidity Provider and, if applicable, to replenish the Cash Collateral Accounts up to their respective Required Amounts; (b) payment of Expected Distributions to the holders of Class A Certificates; (c) payment of Expected Distributions to the holders of Class B Certificates; (d) payment of Expected Distributions to the holders of Class C Certificates; (e) payment of Expected Distributions to the holders of Class D Certificates; and (f) payment of certain fees and expenses of the Subordination Agent and each Trustee. In addition, upon the occurrence of a Triggering Event and at all times thereafter, all payments received by the Subordination Agent in respect of the Equipment Notes and certain other payments will be distributed under the Intercreditor Agreement in the following order: (a) to reimburse the Subordination Agent, each Trustee, the Liquidity Provider and any Certificateholder, as the case may be, for the payment of Administration Expenses; (b) to the Liquidity Provider in payment of Liquidity Obligations and, so long as no Performing Note Deficiency Exists and no Liquidity Event of Default has occurred and is continuing to replenish Cash Collateral Accounts up to their respective Required Amounts; (c) to reimburse the Subordination Agent, each Trustee and each Certificateholder, as the case may be, for payment of Certain Taxes and Fees; (d) to pay Adjusted Expected Distributions to the holders of Class A Certificates; (e) to pay Adjusted Expected Distributions to the holders of Class B Certificates; (f) to pay Adjusted Expected Distributions to the holders of Class C Certificates; and (g) to pay Adjusted Expected Distributions to the holders of Class D Certificates. The priority of distributions after a Triggering Event will have the effect in certain circumstances of distributing payments received in respect of one or more junior series of Equipment Notes to more senior 29 31 Classes of Certificates. If this should occur, the interest accruing on the remaining Equipment Notes would be less than the interest accruing on the remaining Certificates because the Certificates would have a greater proportion of high interest rate junior classes. As a result of this possible interest shortfall, the holders of one or more junior Classes of Certificates may not receive the full amount due them after a Triggering Event even if all the Equipment Notes are eventually paid in full. See "Description of the Intercreditor Agreement". CONTROL OVER COLLATERAL; SALE OF COLLATERAL Pursuant to the Intercreditor Agreement, the Trustee and the Liquidity Provider will agree that, with respect to any Indenture at any given time, the Indenture Trustee will be directed (a) in taking, or refraining from taking, any action with respect to such Indenture or the Equipment Notes issued thereunder, so long as no Indenture Event of Default has occurred and is continuing thereunder, by the holders of at least a majority of the outstanding principal amount of the Equipment Notes issued thereunder (provided that, for so long as the Subordination Agent is the registered holder of the Equipment Notes, the Subordination Agent shall act with respect to this clause (a) in accordance with the directions of the Trustees representing holders of Certificates representing an undivided interest in such principal amount of Equipment Notes) and (b) subject to certain conditions in exercising remedies thereunder (including acceleration of such Equipment Notes or foreclosing the lien on the Aircraft securing such Equipment Notes) after the occurrence and during the continuance of an Indenture Event of Default thereunder, by the Controlling Party. See "Description of the Certificates -- Indenture Events of Default and Certain Rights Upon an Indenture Event of Default" for a description of the rights of the Certificateholders of each Trust to direct the respective Trustee. Notwithstanding the foregoing, subject to certain limitations, the Liquidity Provider shall have the right to elect to become the Controlling Party at any time after 18 months from the earlier of (i) the acceleration of the Equipment Notes and (ii) a Final Drawing under the Liquidity Facilities, if at the time of such election the Liquidity Obligations have not been paid in full. For purposes of giving effect to the foregoing, the Trustee (other than the Controlling Party) shall irrevocably agree (and the Certificateholders (other than the Certificateholders represented by the Controlling Party) shall be deemed to agree by virtue of their purchase of Certificates) to exercise their voting rights as directed by the Controlling Party. Upon the occurrence and during the continuation of any Indenture Event of Default under any Indenture, the Controlling Party may accelerate and, subject to the provisions of the following paragraph, sell all (but not less than all) of the Equipment Notes issued under such Indenture to any person. The market for Equipment Notes at the time of the existence of any Indenture Event of Default may be very limited, and there can be no assurance as to the price at which they could be sold. If the Controlling Party sells any such Equipment Notes for less than their outstanding principal amount, certain Certificateholders will receive a smaller amount of principal distributions than anticipated and will not have any claim for the shortfall against AWA, any Owner Trustee, any Owner Participant or any Trustee. Subject to the right of the Owner Trustee or Owner Participant to purchase the Equipment Notes as described under "Description of Equipment Notes -- Redemption", so long as any Certificates are outstanding, during nine months after the earlier of (x) the acceleration of the Equipment Notes under any Indenture or (y) the bankruptcy or insolvency of AWA, without the consent of each Trustee, (a) no Aircraft subject to the lien of such Indenture or such Equipment Notes may be sold, if the net proceeds from such sale would be less than the Minimum Sale Price for such Aircraft or such Equipment Notes, and (b) the amount and payment dates of rentals payable by AWA under the Lease for such Aircraft may not be adjusted, if, as a result of such adjustment, the discounted present value of all such rentals would be less than 75% of the discounted present value of the rentals payable by AWA under such Lease before giving effect to such adjustment, in each case, using the weighted average interest rate of the Equipment Notes outstanding under such Indenture as the discount rate. RATINGS OF THE CERTIFICATES It is a condition to the issuance of the Certificates that the Class A Certificates be rated A2 by Moody's and AA- by Standard & Poor's, the Class B Certificates be rated Baa2 by Moody's and A- by Standard & Poor's, the Class C Certificates be rated Ba1 by Moody's and BBB- by Standard & Poor's and the Class D 30 32 Certificates be rated Ba3 by Moody's and BB by Standard & Poor's. A rating is not a recommendation to purchase, hold or sell Certificates, inasmuch as such rating does not address market price or suitability for a particular investor. There is no assurance that a rating will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by a Rating Agency if, in its judgment, circumstances in the future (including the downgrading of AWA or the Liquidity Provider) so warrant. The rating of the Certificates is based primarily on the default risk of the Equipment Notes, the availability of the Liquidity Facility for the holders of the Certificates (other than the Class D Certificates), the collateral value provided by the Aircraft and the subordination in right of payment under the Intercreditor Agreement of the Class B Certificates to the Class A Certificates, of the Class C Certificates to the Class B Certificates and of the Class D Certificates to the Class C Certificates. The foregoing ratings address the likelihood of timely payment of interest (at the non-default rate) when due on the Certificates and the ultimate payment of principal of the Certificates by the Final Legal Distribution Date. Such ratings do not address the possibility of a PTC Event of Default, an Indenture Event of Default, including a Lease Event of Default, or other circumstances (such as an Event of Loss (as defined herein)) which could result in the payment of the outstanding principal amount of the Certificates prior to the Final Expected Distribution Date. The reduction, suspension or withdrawal of the ratings of the Certificates will not, in and of itself, constitute a PTC Event of Default or an Indenture Event of Default, including a Lease Event of Default. REPOSSESSION Except for the Aircraft subject to the Hong Kong Cross-Border Lease financings, in which case AWA may not permit such Aircraft to be used, operated or maintained in Hong Kong or the People's Republic of China, the Leases do not contain general geographic restrictions on AWA's (or any Permitted Sublessee's) ability to operate the Aircraft. Although AWA has no current intention to do so, AWA is permitted, upon compliance with the Leases and the Refunding Agreements, to sublease the Aircraft and to register the Aircraft in foreign jurisdictions. While the Indenture Trustee's rights and remedies in the event of a default under the related Lease include the right to terminate such Lease (and any sublease) and repossess the related Aircraft, it may be difficult, expensive and time-consuming to obtain possession of such Aircraft, particularly when such Aircraft has been registered in a foreign jurisdiction or is located outside the United States or is subleased to a foreign operator. Any such exercise of the right to repossess Aircraft will be subject to the limitations and requirements of applicable law, including the need to obtain consents or approvals for deregistration or re-export of the Aircraft, which may be subject to delays and to political risk. When a defaulting Permitted Sublessee or other permitted transferee is the subject of a bankruptcy, insolvency or similar event, such as protective administration, additional limitations on the exercise of remedies may apply. Furthermore, certain jurisdictions may accord higher priority to certain other liens or other third-party rights over the Aircraft than the lien of the related Indenture. These factors could limit the benefits of the security interest in the Aircraft. As permitted under the Leases, an Airframe subject to a Lease may be equipped with engines which are not subject to the same Lease, and Engines subject to a Lease may not be on an Airframe subject to that or another Lease. As a result, notwithstanding AWA's agreement in the Leases to return the related Engines owned by the applicable Owner Trustee on the return of the related repossessed Airframe, at the time of obtaining repossession of an Airframe it could be difficult, expensive and time-consuming to assemble an Aircraft consisting of an Airframe and related Engines subject to such Lease. CROSS-BORDER LEASES Three Aircraft securing the obligations under the related Indentures are subject to Hong Kong Cross-Border Lease financings with terms expiring in 2006. Under the terms of each of the Cross-Border Lease financings, title to the relevant Aircraft is held by the relevant Owner Trustee as assignee of the title holder of the Aircraft, which, under a hire purchase agreement, has been hired by the original title holder to a Hong Kong entity acting as the Cross-Border Lessor of such Aircraft. In summary, the Hong Kong lease financing documentation provides that, subject to various terms 31 33 and conditions, the Cross-Border Lessor has the right to acquire title to the Aircraft from the relevant Owner Trustee upon the termination of the hire purchase agreement. The relevant documents further provide that the relevant Owner Trustee, as assignee of the Cross-Border Lessee, in each of the Hong Kong transactions can concurrently re-acquire title to the relevant Aircraft from the Cross-Border Lessor, if such lessor exercises its option to acquire title to the Aircraft upon the termination of the hire purchase agreement, or the Owner Trustee, as assignee of the title holder of the Aircraft, can retain title if the Cross-Border Lessor does not or cannot exercise its option to acquire the Aircraft upon termination of the hire purchase agreement. The rights of the Cross-Border Lessee (as defined herein) under each of these financings have been assigned to the relevant Owner Trustees. Under the terms of the financing, the Owner Trustee, as assignee of the Cross-Border Lessee, has the right to cause the termination of such cross-border financing upon the occurrence and continuance of a Lease Event of Default under the related U.S. Lease and the exercise of remedies under the U.S. Lease (to the extent not stayed). By virtue of an agreed defeasance arrangement, the monetary obligations of the Cross-Border Lessees under the Hong Kong Cross-Border Leases have been assumed by certain financial institutions or other parties. The relevant Owner Trustee's right to take title to the Aircraft free of the Cross-Border Lease financing is not conditioned upon the payment of any sum by any such parties. In addition, the relevant Cross-Border Lessor and the partners therein have expressly agreed that, after giving effect to the provisions of the Cross-Border Lease financing documentation, they shall not have any right to retain or assert any interest in the relevant Aircraft upon the termination of the relevant Cross-Border Lease financing. The ability of an Indenture Trustee to realize upon its security interest in an Aircraft that is subject to a Cross-Border Lease financing could be adversely affected if the relevant Cross-Border Lessor or any partner therein were to become a debtor in a bankruptcy or similar proceeding in its home jurisdiction and a creditor, trustee in bankruptcy, liquidator, receiver or similar official were to take the position that the related Aircraft should be treated as part of the estate of such lessor or partner therein, as the case may be (particularly, if at the same time the Indenture Trustee is seeking to exercise remedies under the related Indenture). If such a position were to be taken in such a proceeding, a delay in the clearing of title to such Aircraft free of the Cross-Border Lease financing could occur. Such a delay might impede the ability of an Indenture Trustee to realize upon the Aircraft collateral securing the related Equipment Notes. Legal opinions from Hong Kong and English counsel (based on certain assumptions and qualifications) will be given to the effect that upon the occurrence of an insolvency, bankruptcy, liquidation or any other similar event with respect to the Cross-Border Lessor or any partner therein, neither the Cross-Border Lessor nor any partner therein nor any trustee in bankruptcy, liquidator, receiver or any other similar official in relation to the Cross-Border Lessor or any partner therein would be entitled to acquire and retain title to the relevant Aircraft. There can be no assurance, however, that the circumstances or the law upon which such counsel based their opinions will not change, that a court of competent jurisdiction in Hong Kong or England would not find differently, that such opinions would prove to be correct or that the law of another jurisdiction would not apply. In this regard, Hong Kong counsel advises that the Sino-British Joint Declaration on the future of Hong Kong provides that the laws of Hong Kong in force on June 30, 1997 will be maintained except for laws that contravene the Basic Law of the Special Administrative Region of the People's Republic of China which comes into effect in Hong Kong on July 1, 1997 (the "Basic Law"). Hong Kong counsel will be giving an opinion that, in their view, the Basic Law does not contain any provisions which would be contravened by any provision of Hong Kong law relevant to their opinion referred to above, but that this is a matter for interpretation by the Standing Committee of the National People's Congress of the People's Republic of China, in which the power of interpretation of the Basic Law is vested. In connection with the realization by the Indenture Trustee of its security interest in an Aircraft subject to a Cross-Border Lease Financing, it may be desirable to have the related Cross-Border Leases terminated. The information set forth above regarding Cross-Border Lease financings was provided by GPA Group plc ("GPA") and AWA takes no responsibility for the accuracy thereof. 32 34 MAINTENANCE AWA is responsible for the maintenance, service, repair and overhaul of the Aircraft to the extent described in the Leases. The failure of AWA (or any Permitted Sublessee (as defined herein)) to maintain, service, repair or overhaul adequately an Aircraft may adversely affect the value of such Aircraft and thus, upon a disposition of the Aircraft, may affect the proceeds available to repay the holders of the related Equipment Notes. Under the Leases, the applicable maintenance standards may vary depending upon the jurisdiction in which an Aircraft is registered and whether an Aircraft is subleased, but AWA is obligated to cause such Aircraft to be maintained in accordance with maintenance standards required by, or substantially equivalent to those required by, the central civil aviation authority of the country of registry and, to the extent not inconsistent therewith, the FAA. Notwithstanding compliance by AWA (or any Permitted Sublessee) with its obligations under the Lease to maintain, service, repair or overhaul adequately the Aircraft, the value of the Aircraft may deteriorate. Such a deterioration in the value of the Aircraft would not, in and of itself, constitute a breach by AWA of its obligations under the Leases. See "Description of the Equipment Notes -- The Leases". INSURANCE AWA is responsible for the maintenance of public liability, property damage and all-risk aircraft hull insurance on the Aircraft to the extent described in the Leases. The failure of AWA to adequately insure the Aircraft will affect the proceeds which could be obtained upon an Event of Loss and, thus, may affect the proceeds available to repay the holders of the related Equipment Notes. With respect to any hull insurance required, AWA may maintain deductibles of up to $1.0 million per Aircraft. See "Description of the Equipment Notes -- The Leases -- Insurance". ABSENCE OF A PUBLIC MARKET FOR THE CERTIFICATES There has been no market for the Certificates prior to the sale of the Certificates. The Underwriter has advised AWA that the Underwriter currently intends to make a market in the Certificates as permitted by applicable law. The Underwriter, however, is not obligated to make a market in the Certificates and any such market-making may be discontinued at any time at the sole discretion of the Underwriter. Accordingly, no assurance can be given as to the development or liquidity of any market for the Certificates. 33 35 USE OF PROCEEDS The Certificates are being issued in connection with four separate leveraged lease transactions with respect to the refinancing of the current indebtedness of the Owner Trustees previously incurred to finance the purchase of the Aircraft. Such indebtedness bore interest at a weighted average rate per annum of approximately % as of , and matures at various dates between and . Neither AWA nor Holdings will receive any of the proceeds from the sale of the Certificates. The proceeds from the sale of the Certificates are to be used by the Trustee on behalf of the Trusts to purchase $ aggregate principal amount of Equipment Notes to be issued by the related Owner Trustees. Such Equipment Notes will be issued under the Indentures on a non-recourse basis by the Owner Trustees and will represent in the aggregate the entire debt portion of the leveraged lease transactions relating to all of the Aircraft. The proceeds from the sale of the Equipment Notes will be used to repay all of the current indebtedness of the Owner Trustees with respect to the Aircraft, and any proceeds remaining after such repayment may be used to pay certain costs and expenses of the Original Lessee, such as break-funding costs and redemption premiums, incurred in the refinancing and which would otherwise be borne directly by the Original Lessee (as defined below). When originally acquired, the Aircraft were delivered directly to a U.S.-domiciled subsidiary of GPA. The Aircraft were leased from the Owner Trustees to such subsidiary as original lessee (the "Original Lessee") and sublessor. After a period of storage the Aircraft were, in September 1990, subleased by the Original Lessee to AWA. See "Certain Transactions". In addition, three of these Aircraft at the time of lease to the Original Lessee were, and continue to be, subject to certain cross-border transactions with foreign lessors. See "Description of the Equipment Notes -- Cross-Border Leases". In connection with the refinancing of the Aircraft, the Original Lessee's interests under leases between the Owner Trustees and the Original Lessee, as lessee, are being assigned to AWA and the leases will be amended and restated as leases between the Owner Trustees and AWA, with the Original Lessee being released from future obligations thereunder. RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the ratio of earnings to fixed charges for AWA for the periods indicated. The ratio of earnings to fixed charges represents the number of times that fixed charges were covered by earnings. In computing the ratio, earnings consist of income (loss) before income taxes and extraordinary items plus fixed charges, less capitalized interest. Fixed charges consist of interest expense including amortization of debt expense, one-third of rental expense, which is considered representative of an interest factor, and capitalized interest.
REORGANIZED COMPANY PREDECESSOR COMPANY -------------------------------------------- ---------------------------- THREE MONTHS ENDED YEAR ENDED PERIOD FROM PERIOD FROM YEAR ENDED MARCH 31, DECEMBER 31, AUGUST 26 TO JANUARY 1 TO DECEMBER 31, ------------- ------------- DECEMBER 31, AUGUST 25, ------------- 1997 1996 1996 1995 1994 1994 1993 1992 ----- ----- ----- ----- ------------ ------------ ----- ----- 1.69 1.71 1.22 1.73 1.38 * 1.28 *
- --------------- * For the purpose of computing the ratio of earnings to fixed charges, "earnings" consist of income (loss) before income taxes and extraordinary item plus fixed charges less capitalized interest. "Fixed charges" consist of interest expense including amortization of debt expense, one-third of rent expense, which is deemed to be representative of an interest factor, and capitalized interest. For the period ended August 25, 1994, earnings were insufficient to cover fixed charges by $201.2 million. For the year ended December 31, 1992, earnings were insufficient to cover fixed charges by $131.8 million. 34 36 CAPITALIZATION The following table sets forth the capitalization of AWA at March 31, 1997. The table should be read in conjunction with AWA's financial statements and the related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus.
MARCH 31, 1997 -------------- (IN THOUSANDS) Long-term debt, including current maturities................ $ 377,896 Stockholder's equity: Common Stock (1,000 shares authorized and 1,000 shares issued and outstanding)................................ -- Additional paid-in capital.................................. 539,301 Retained earnings........................................... 84,081 ---------- Total stockholder's equity................................ 623,382 ---------- Total capitalization........................................ $1,001,278 ==========
35 37 SELECTED FINANCIAL AND OPERATING DATA The selected data presented below under the captions "Statements of Operations Data" and "Balance Sheet Data" for, and as of, (i) the years ended December 31, 1996 and 1995, the period August 26, 1994 through December 31, 1994, the period January 1, 1994 to August 25, 1994, and each of the years in the two-year period ended December 31, 1993, are derived from the financial statements of AWA, which financial statements have been audited by KPMG Peat Marwick LLP, independent certified public accountants and (ii) the periods ended March 31, 1997 and 1996 are derived from the unaudited condensed financial statements of AWA. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation. The balance sheets as of December 31, 1996 and 1995, and the related statements of income, cash flows and stockholder's equity for the years ended December 31, 1996 and 1995, the period August 26, 1994 through December 31, 1994, and the period January 1, 1994 through August 25, 1994, and the report thereon, are included elsewhere in this prospectus. The independent auditors' report as of and for the years ended December 31, 1996 and 1995, the period August 26, 1994 through December 31, 1994, and the period January 1, 1994 through August 25, 1994 contains an explanatory paragraph that states the financial statements of the Reorganized Company reflect the impact of adjustments to reflect the fair value of assets and liabilities under fresh start reporting. As a result, the financial statements of the Reorganized Company are presented on a different basis than those of the Predecessor Company and, therefore, are not comparable in all respects.
REORGANIZED COMPANY ---------------------------------------------------------------- THREE MONTHS ENDED YEAR ENDED MARCH 31, DECEMBER 31, AUGUST 26 TO ----------------------- ----------------------- DECEMBER 31, 1997 1996 1996 1995 1994 ---------- ---------- ---------- ---------- ------------ (DOLLARS IN THOUSANDS EXCEPT OPERATING DATA) STATEMENTS OF OPERATIONS DATA: Operating revenues............ $ 462,187 $ 413,150 $1,739,526 $1,550,642 $ 469,766 Operating income.............. 33,463 34,318 68,666(2) 154,732(3) 38,871 Income (loss) before income taxes and extraordinary items....................... 25,918 25,420 34,493 108,378 19,736 Income (loss) before extraordinary items......... 13,944 13,727 9,610 54,770 7,846 Extraordinary gain (loss)(4)................... -- -- (1,105) (984) -- Net income.................... 13,944 13,727 8,505 53,786 7,846 BALANCE SHEET DATA (AT END OF PERIOD): Working capital deficiency.... $ (188,483) $ (75,785) $ (170,907) $ (70,416) $ (47,927) Total assets.................. 1,602,082 1,651,928 1,597,677 1,588,709 1,545,092 Long-term debt, less current maturities(5)............... 333,685 371,588 330,148 373,964 465,598 Total stockholder's equity (deficiency)................ 623,382 667,155 622,780 649,472 595,446 OPERATING DATA: Available seat miles (in millions)................... 5,791 4,955 21,625 19,421 6,424 Revenue passenger miles (in millions)................... 3,982 3,504 15,321 13,313 3,972 Passenger load factor (%)..... 68.8 70.7 70.9 68.5 61.8 Yield per revenue passenger mile (cents)................ 10.94 11.07 10.69 10.91 11.02 Passenger revenue per available seat mile (cents)..................... 7.52 7.83 7.57 7.48 6.81 Operating cost per available seat mile (cents)........... 7.40 7.65 7.73(2) 7.19(3) 6.71 Full time equivalent employees (at end of period).......... 10,015 8,933 9,652 8,712 10,715 PREDECESSOR COMPANY(1) ---------------------------------------- YEAR ENDED JANUARY 1 TO DECEMBER 31, AUGUST 25, ------------------------- 1994 1993 1992 ------------ ------------ ---------- (DOLLARS IN THOUSANDS EXCEPT OPERATING DATA) STATEMENTS OF OPERATIONS DATA: Operating revenues............ $ 939,028 $1,325,364 $1,294,140 Operating income.............. 107,506 121,054 (74,812) Income (loss) before income taxes and extraordinary items....................... (201,209) 37,924 (131,761) Income (loss) before extraordinary items......... (203,268) 37,165 (131,761) Extraordinary gain (loss)(4)................... 257,660 -- -- Net income.................... 54,392 37,165 (131,761) BALANCE SHEET DATA (AT END OF PERIOD): Working capital deficiency.... $(163,572) $ (124,375) $ (201,567) Total assets.................. -- 1,016,743 1,036,441 Long-term debt, less current maturities(5)............... -- 620,992 647,015 Total stockholder's equity (deficiency)................ -- (254,262) (294,613) OPERATING DATA: Available seat miles (in millions)................... 11,636 17,190 19,271 Revenue passenger miles (in millions)................... 8,261 11,221 11,781 Passenger load factor (%)..... 71.0 65.3 61.1 Yield per revenue passenger mile (cents)................ 10.68 11.11 10.31 Passenger revenue per available seat mile (cents)..................... 7.58 7.25 6.30 Operating cost per available seat mile (cents)........... 7.15 7.01 7.10 Full time equivalent employees (at end of period).......... 10,849 10,544 10,233
- --------------- (1) Includes net expenses incurred by the Predecessor Company in connection with its reorganization of $273.7 million for the period January 1 to August 25, 1994 and $25.0 million and $16.2 million for the years ended December 31, 1993 and 1992, respectively. (2) Reflects a $65.1 million nonrecurring special charge related to AWA's renegotiation of its AVSA aircraft purchase agreement and writedown of certain aircraft related inventory and equipment and underutilized facilities as well as certain other adjustments. The special charge increased cost per available seat mile by .30 cents for the year ended December 31, 1996. (3) Costs associated with AWA's outsourcing of its heavy aircraft maintenance resulted in a pretax restructuring charge of approximately $10.5 million and an increase in cost per available seat mile of .05 cents for the year ended December 31, 1995. (4) Includes (i) an extraordinary loss of $1.1 million in 1996 relating to prepayment of the 10 3/4% Notes, (ii) an extraordinary loss of $984,000 in 1995 resulting from the exchange of debt by AWA and (iii) an extraordinary gain of $257.7 million in the period from January 1 to August 25, 1994 resulting from the discharge of indebtedness pursuant to the consummation of the plan of reorganization. (5) Includes certain balances reported as "Estimated Liabilities Subject to Chapter 11 Proceedings" for the Predecessor Company. 36 38 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company adopted a holding company structure effective midnight December 31, 1996 when Holdings became the parent company of AWA. Management believes the holding company structure improves the Company's ability to manage separate business segments effectively and that the holding company provides a platform for further expansion of the Company's businesses, including its leisure travel businesses. The Company intends to continue to evaluate investment and expansion opportunities which allow the Company to capitalize on its key strengths and market position. 1996 IN REVIEW In 1996, AWA had net income of $8.5 million. The 1996 earnings included a $65.1 million pretax nonrecurring special charge resulting from AWA's decisions to order certain new aircraft and cancel a prior order, and to make certain other related adjustments (See Note 12, "Restructuring and Other Nonrecurring Special Charges" in Notes to Financial Statements). Excluding this charge, net income for the year was $48.7 million. Excluding the special charge, these results reflected one of the best years in the airline's history. Another measure AWA uses to evaluate its financial performance is EBITDAR (operating income before depreciation, amortization, rent and nonrecurring charges). AWA's EBITDAR margin for 1996 was 28.3% which AWA believes was the highest EBITDAR margin among the major U.S. airlines. For the first six months of 1996, AWA posted record results. Net income before extraordinary item for that period was $43.2 million, an increase of 65.8% over the first half of 1995. Revenues rose to $877.1 million, due in part to the growth plan announced in September 1995, which increased capacity by 8.6%, a 13.8% increase in passenger traffic and solid passenger revenue yields. Higher year-over-year operating costs, primarily from higher fuel and passenger traffic related expenses, were more than offset by the favorable revenue performance. In the third quarter, AWA experienced a setback in the 1996 trend of record results with a net loss of $45.7 million, which included the $65.1 million nonrecurring special charge discussed above. The decline in earnings resulted from a number of factors, including the $65.1 million charge, lower yields caused by untimely revenue decisions made in June and July 1996, high jet fuel prices and operating dependability difficulties encountered during the summer of 1996. AWA took action to address these problems as follows: REVENUE MANAGEMENT - Established a full time revenue recovery team led by senior management, to review and address the problems that led to poor revenue management decisions. - Increased staffing of and upgraded the revenue management team. - Conducted a market-by-market review and addressed pricing/yield issues. - Implemented policies and procedures to enhance controls over the revenue management process. - Committed to $7.3 million in spending for new revenue management systems. FUEL COST - Established a hedging program to manage AWA's exposure to fluctuating fuel prices. OPERATIONS - Initiated Get The Product Right . . . Together, a comprehensive program designed to improve operational and customer service performance, including increasing the airline's maintenance workforce, adding two additional overnight maintenance stations and increasing reservations staffing and technology. 37 39 - Implemented a structured "work out process" whereby teams of front-line employees develop solutions to operational problems. - Authorized the acquisition of an additional spare aircraft. The fourth quarter of 1996 saw a return to record profitability with pretax earnings of $16.8 million. Net income for the quarter was $12.1 million. Bolstered by a record 69.1% load factor, revenues for the fourth quarter were a record $439.9 million, an 11% improvement over 1995. Operating cost per available seat mile ("CASM") (excluding special charges) decreased 2.6% from 7.38 cents per ASM in the fourth quarter of 1995 to 7.19 cents per ASM in the 1996 fourth quarter, despite a 23.1% increase in the average price of fuel consumed. Operational reliability also showed marked improvement as the percentage of scheduled aircraft miles completed averaged more than 98% in the 1996 fourth quarter as compared to a low of 96% in the third quarter of 1996. SELECTED OPERATING DATA The table below sets forth selected operating data for AWA. The data for the year ended December 31, 1994 is on a combined basis for the Reorganized and Predecessor Company.
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, ------------------------- -------------------------------------------------- PERCENT COMBINED PERCENT PERCENT CHANGE BASIS CHANGE CHANGE 1997 1996 1997-1996 1996 1995 1994 1996-1995 1995-1994 ----- ----- --------- ------ ------ -------- --------- --------- Available seat miles (in millions)..... 5,791 4,955 16.9 21,625 19,421 18,060 11.3 7.5 Revenue passenger miles (in millions)............................ 3,982 3,504 13.6 15,321 13,313 12,233 15.1 8.8 Load factor (percent).................. 68.8 70.7 (2.7) 70.9 68.5 67.7 3.5 1.2 Yield per revenue passenger mile (cents).............................. 10.94 11.07 (1.2) 10.69 10.91 10.79 (2.0) 1.1 Revenue per available seat mile Passenger (cents).................... 7.52 7.83 (4.0) 7.57 7.48 7.31 1.2 2.3 Total (cents)........................ 7.98 8.34 (4.3) 8.04 7.98 7.80 0.8 2.3 Passenger enplanements (in thousands)........................... 4,590 4,305 6.6 18,178 16,848 15,669 7.9 7.5 Average stage length (miles)........... 768 700 9.7 732 686 676 6.7 1.5 Average passenger journey (miles)...... 1,088 968 12.4 1,042 986 979 5.7 0.7 Average daily aircraft utilization (hours).............................. 12.4 11.5 7.8 11.8 11.4 11.2 3.5 1.8 Aircraft (end of period)............... 101 95 6.3 101 93 87 8.6 6.9 Full time equivalent employees (end of period).............................. 10,015 8,933 12.1 9,652 8,712 10,715 10.8 (18.7)
38 40 The table below sets forth the major components of operating expense per ASM for AWA for the applicable periods. The data for the year ended December 31, 1994 is shown on a combined basis for the Reorganized and Predecessor Company. (See Note 1, "Summary of Significant Accounting Policies -- (a) Basis of Presentation" in Notes to Financial Statements).
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, ----------------------- ---------------------------------------------------------- PERCENT COMBINED PERCENT PERCENT CHANGE BASIS CHANGE CHANGE 1997 1996 1997-1996 1996 1995 1994 1996-1995 1995-1994 ---- ---- --------- ---------- ---------- -------- --------- --------- (IN CENTS) (IN CENTS) Salaries and related costs............ 1.74 1.91 (8.9) 1.78 1.97 1.83 (9.6) 7.7 Aircraft rents........................ .95 .95 -- .94 .89 .89 5.6 -- Other rents and landing fees.......... .53 .54 (1.9) .52 .56 .58 (7.1) (3.4) Aircraft fuel......................... 1.19 .99 20.2 1.08 .90 .88 20.0 2.3 Agency commissions.................... .66 .66 -- .62 .64 .64 (3.1) -- Aircraft maintenance materials and repairs............................. .54 .55 (1.8) .58 .34 .25 70.6 36.0 Depreciation and amortization......... .21 .27 (22.2) .24 .25 .40 (4.0) (37.5) Amortization of reorganization value in excess of amounts allocable to identifiable assets................. .11 .13 (15.4) .12 .17 .07 (29.4) nm Restructuring charges and other nonrecurring special charges........ -- -- -- .30 .05 -- nm nm Other................................. 1.47 1.65 (10.9) 1.55 1.42 1.45 9.2 (2.1) ---- ---- --- --- --- 7.40 7.65 (3.3) 7.73 7.19 6.99 7.5 2.9 ==== ==== === === ===
- --------------- nm -- not meaningful. RESULTS OF OPERATIONS AWA's operating results are significantly affected by general economic conditions as well as competitive factors, jet fuel price levels, government regulations, taxes on jet fuel and taxes specific to the air transport industry and other conditions affecting the airline industry. In recent periods, airlines have achieved generally improved operating results as a result of more favorable economic conditions and as a result of focusing on their areas of relative strength, eliminating service to under-performing markets and rationalizing operations, route systems and pricing strategies. Due to the greater demand for air travel during the summer months, revenues in the airline industry in the second and third quarters of the year tend to be greater than revenues in the first and fourth quarters of the year. Other factors that are not necessarily seasonal also significantly affect results, including the extent and nature of price and other competition from other airlines, changing levels of operations, international events, fuel prices and general economic conditions. The following discussion provides an analysis of AWA's results of operations and reasons for material changes therein for the (i) three month periods ended March 31, 1997 and 1996 and (ii) years ended December 31, 1996 and 1995, and the combined periods from January 1 through August 25, 1994, when AWA completed its reorganization and emerged from bankruptcy protection, and August 26 through December 31, 1994. AWA's results of operations for the periods subsequent to August 25, 1994 have not been prepared on a basis of accounting consistent with its results of operations for periods prior to August 26, 1994 due to the implementation of fresh start reporting upon AWA's emergence from bankruptcy. IMPACT OF FRESH START REPORTING In connection with its emergence from bankruptcy in August 1994, AWA adopted fresh start reporting in accordance with Statement of Position 90-7 "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7") of the American Institute of Certified Public Accountants. Fresh start reporting significantly affects AWA's statements of income including the financial statement accounting for 39 41 income taxes. However, actual cash flows, including cash taxes payable, do not materially change as a result of fresh start reporting. Under fresh start reporting, the reorganization value of AWA has been allocated to its assets and liabilities on a basis substantially consistent with purchase accounting. The portion of reorganization value not attributable to specific tangible assets has been recorded as "Reorganization Value in Excess of Amounts Allocable to Identifiable Assets". Certain fresh start reporting adjustments, primarily related to the adjustment of AWA's assets and liabilities to fair market values, have had and will have a significant effect on AWA's statements of income. The more significant adjustments relate to (i) reduced rent expense due to the revaluation of aircraft leases to market rates, (ii) reduced maintenance expense due to the write off of previously capitalized overhauls, (iii) reduced depreciation expense on property and equipment due to the revaluation of such assets to fair value, (iv) the addition of amortization expense relating to reorganization value in excess of amounts allocable to identifiable assets, (v) increased interest expense due to the revaluation of aircraft leases to market rates, and (vi) increased income tax expense principally because the amortization of excess reorganization value is not deductible for income tax purposes, giving rise to an effective tax rate for financial reporting purposes that is significantly greater than the current U.S. corporate statutory rate of 35%. THREE MONTHS ENDED MARCH 31, 1997 AND 1996 For the three months ended March 31, 1997 and 1996, AWA realized net income of $13.9 million and $13.7 million, respectively. Net income for the three month period in 1997 included income tax expense for financial reporting purposes of $12.0 million compared to $11.7 million in 1996. AWA's results of operations for interim periods are not necessarily indicative of such results for an entire year due to seasonal factors as well as competitive and general economic conditions. Passenger revenues increased $47.7 million or 12.3% to $435.5 million during the three months ended March 31, 1997 due primarily to a 13.6% increase in revenue passenger miles. Yield decreased 1.2% to 10.94 cents from 11.07 cents due primarily to a 9.7% increase in stage length. Capacity, as measured in ASMs, increased 16.9% in the 1997 first quarter as compared to 1996 due to the effect of AWA's strategic growth plan which was initiated in February 1996. Load factor decreased by 1.9 points to 68.8%. Passenger revenue per available seat mile ("RASM") decreased to 7.52 cents from 7.83 cents. Cargo and other revenues increased 5.1% to $26.6 million for the first quarter of 1997 as a result of higher available capacity. CASM decreased 3.3% to 7.40 cents in the first quarter of 1997 from 7.65 cents for the 1996 period, despite a 24.7% increase in the average price per gallon of fuel. Excluding fuel and related taxes, CASM declined 6.7% when compared with the first quarter of 1996. The changes in the components of operating expense per ASM are explained as follows: - Salaries and related costs per ASM decreased 8.9% due to continued improvement in productivity as full-time equivalent headcount increased 12.1% versus a 16.9% increase in ASMs. - Aircraft fuel expense per ASM increased 20.2% due to a 24.7% increase in the average price per gallon of fuel from 60.15 cents in the 1996 quarter to 75.03 cents in 1997. - Depreciation and amortization expense per ASM decreased 22.2% due in part to lower 1997 depreciation expense as certain ramp equipment was depreciated to net realizable value in 1996. - Amortization of excess reorganization value per ASM decreased 15.4% primarily due to the 16.9% increase in ASMs. - Other operating expenses per ASM decreased 10.9% to 1.47 cents from 1.65 cents as increases in passenger traffic-related costs such as CRS booking fees, catering costs, and credit card discount fees, and fuel taxes were more than offset by the 16.9% increase in ASMs. 40 42 Net nonoperating expenses decreased $1.4 million to $7.5 million in the first quarter of 1997 from $8.9 million in 1996. Excluding interest income and expense associated with intercompany notes, the year-over-year change was primarily due to a net decrease in interest expense as AWA reduced outstanding debt by $42.3 million. Income tax expense for financial reporting purposes for the three months ended March 31, 1997 was relatively unchanged when compared to the 1996 quarter. 1996 COMPARED WITH 1995 In 1996, AWA realized net income of $8.5 million which included a pretax, nonrecurring special charge of $65.1 million (See Note 12, "Restructuring and Other Nonrecurring Special Charges" in Notes to Financial Statements). Excluding the nonrecurring special charge, AWA recorded net income of $48.7 million. Comparative amounts for 1995 were net income of $60.3 million (excluding a $10.5 million restructuring charge), and income tax expense for financial reporting purposes of $53.6 million. The decline in pretax income (excluding the nonrecurring special charge and before extraordinary item) for the 1996 period resulted from untimely revenue decisions made in June and July of 1996, high jet fuel prices and operating dependability difficulties encountered during the summer of 1996. Industry capacity increases into Las Vegas and aggressive fare sale activity also adversely impacted 1996. Total operating revenues were $1.7 billion in 1996 compared to $1.6 billion in 1995. Passenger revenues for 1996 were $1.6 billion, an increase of 12.8% over the prior year. Cargo and other revenues increased 3.4% to $101.8 million in 1996. Other revenues consist primarily of alcoholic beverage sales, contract service sales and service charges. Capacity, as measured by ASMs, increased 11.3% in 1996 compared to 1995 as AWA completed the first year of a two-year strategic growth plan. Revenue passenger miles increased 15.1% in 1996. Load factor for the 1996 period increased by 3.5% (2.4 points) to a company record of 70.9%, despite the 11.3% capacity increase. Revenue per passenger mile (yield) decreased 2.0%, and RASM increased by 1.2% in 1996 from 1995. CASM increased to 7.73 cents in 1996 from 7.19 cents in 1995 primarily due to a nonrecurring special charge of $65.1 million and increases in jet fuel prices. Excluding the nonrecurring special charge, and jet fuel and related taxes, CASM increased year-over-year only 1.0% to 6.24 cents in 1996. The changes in the components of operating expense per available seat mile (excluding the nonrecurring special charge) are explained as follows: - The 9.6% decrease in salaries and related costs per ASM was primarily related to the $12.1 million reduction in salaries related to AWA's outsourcing of its heavy aircraft maintenance in December 1995 and a reduction in AWArd Pay and incentive pay due to AWA's decline in income. In addition, AWA continued to improve productivity as full-time equivalent head count increased 10.8% versus an 11.3% increase in ASMs. - Aircraft rents per ASM increased 5.6% primarily due to a net addition of eight leased aircraft to the fleet during 1996. - Rentals and landing fees per ASM decreased primarily due to the 11.3% increase in ASMs. - The average price per gallon of aircraft fuel increased 19.1% to 66.49 cents in 1996 from 55.82 cents in 1995. This increase in fuel price increased 1996 operating expense by approximately $37.5 million. - Aircraft maintenance materials and repairs expense per ASM increased 70.6% due primarily to an increase in capitalized maintenance which increased capitalized maintenance amortization expense by $27.7 million in 1996 when compared with 1995. The unamortized balance of capitalized maintenance grew to $102.5 million at December 31, 1996, an increase of $47.5 million from December 31, 1995. In addition, maintenance expense per ASM increased further in the 1996 period due to the classification for accounting purposes of fees paid to outside vendors to complete aircraft maintenance following the 41 43 outsourcing of that work in late 1995. This increase in maintenance expense was substantially offset by a reduction in maintenance payroll expense as discussed above. - Amortization of reorganization value in excess of identifiable assets expense per ASM decreased 29.4% primarily due to the reduction in the unamortized balance of excess reorganization value as the result of (i) utilization of tax attributes of the pre-reorganization company, including net operating loss carryforwards, such reduction amounting to $16.7 million in 1996 and $50 million in 1995, and (ii) recognition of a deferred tax asset of $74.7 million in 1995. - Other operating expenses per ASM increased 9.2% primarily due to the 4.3 cents per gallon federal fuel tax for which AWA became liable commencing October 1, 1995, an increase in interrupted trip expense due to the operating dependability difficulties discussed above, and an increase in passenger traffic related costs. - Contributing to the increase in operating cost per ASM was the effect of the first class installation program that was completed in late 1995 and reduced 1996 ASMs by 2.6% but had no significant effect on operating costs. Net nonoperating expenses decreased $12.2 million to $34.2 million in 1996 from $46.4 million in 1995 due primarily to a net decrease in interest expense resulting from reduced levels of debt and lower interest rates. Income tax expense for financial reporting purposes in 1996 decreased to $24.9 million from $53.6 million in 1995 due principally to lower pretax income. AWA incurred extraordinary charges in 1996 and 1995 of $1.1 million and $984,000, respectively, for the partial prepayment of its 10 3/4% Notes. These amounts were net of income tax benefit of $918,000 and $984,000, respectively. YEAR ENDED DECEMBER 31, 1995 AND THE COMBINED PERIOD FROM AUGUST 26, 1994 THROUGH DECEMBER 31, 1994, AND JANUARY 1, 1994 THROUGH AUGUST 25, 1994 For the periods ended December 31, 1995 and 1994, AWA realized net income of $53.8 million and a combined $62.2 million, respectively. Net income for 1995 included income tax expense for financial reporting purposes of $53.6 million compared to a combined $13.9 million in 1994. The increase in income tax expense for financial reporting purposes resulted principally from the adoption of fresh start reporting. Net income for the combined periods of 1994 included reorganization expense of $273.7 million and an extraordinary gain of $257.7 million. Total operating revenues were $1.6 billion in 1995 compared to a combined $1.4 billion for 1994. Passenger revenues increased 10% to $1.5 billion during 1995. Cargo and other revenues increased 10.7% to $98.4 million for 1995. The balance of other revenues includes revenues generated primarily from alcoholic beverage sales, contract service sales and service charges. Capacity, as measured by ASM's, increased 7.5% in 1995 compared to the combined 1994 period, primarily due to an increase in the average stage length of 1.5% and the addition of six aircraft to the fleet. Revenue passenger miles increased 8.8% in 1995 compared to the combined 1994 period while load factor increased by 0.8 points and yield increased 1.1%. CASM increased to 7.19 cents in 1995 from 6.99 cents for the combined 1994 period. The changes in the components of operating expense per available seat mile are explained as follows: - The increase in salaries and related costs per ASM is primarily the result of accruals totaling $17.7 million in 1995 to provide for performance awards related to AWA's profitability. In addition, such costs were affected in May 1995 by a significant initial increase in pilot salaries under their collective bargaining agreement and the adoption of AWA's Total Pay program in January 1995. These pay increases were effected in order to make employees' compensation levels more competitive 42 44 with that of other low cost carriers and local employers. These pay increases were largely offset by improvements in productivity and through a reduction in the size of the work force. - Aircraft rent per ASM was flat primarily due to the decrease related to the amortization of deferred credits recorded in AWA's adjustment of operating leases to fair market value under fresh start reporting. Such decrease was offset by a net addition of six aircraft to the fleet. - Rentals and landing fees per ASM decreased primarily due to the 7.5% increase in ASM's. - The average price per gallon of aircraft fuel increased slightly to 55.8 cents in 1995 from 54.9 cents for the combined 1994 period. - Aircraft maintenance materials and repairs expense per ASM increased largely as the result of the change in classification of the amortization expense associated with heavy engine and airframe overhauls from depreciation and amortization expense to aircraft maintenance materials and repairs expense in August 1994. For 1995 and the period August 26 through December 31, 1994, amortization of capitalized maintenance totaling $11.9 million and $356,000, respectively, is included in aircraft maintenance materials and repairs expense. Amortization of capitalized maintenance totaling $24 million for the period January 1 through August 25, 1994 is included in depreciation and amortization. In addition, costs associated with a new auxiliary power unit repair agreement which commenced in April 1994 increased in 1995 as compared to 1994. - Depreciation and amortization expense per ASM decreased due to the $24 million change in the classification of the amortization expense associated with capitalized aircraft maintenance materials and repairs expense. In addition, the revaluation of property and equipment under fresh start reporting reduced expense by $835,000 in 1995. - Amortization of reorganization value in excess of identifiable assets expense increased $20.8 million compared to 1994. - A restructuring charge incurred in 1995 associated with AWA's outsourcing of its heavy aircraft maintenance consisted of a provision for employee severance and related cost of $10.5 million. - Other operating expenses per ASM decreased primarily due to the reduction in property taxes and the fixed nature of certain other costs. Net nonoperating expenses decreased $281.5 million to $46.4 million in 1995 from a combined $327.9 million for 1994. This net decrease resulted from: a decrease in reorganization expense of $273.7 million since AWA emerged from bankruptcy; an increase in interest income of $10.7 million due to higher cash and cash equivalent balances in 1995; partially offset by a net increase in interest expense of $2.0 million because AWA did not accrue and pay interest on unsecured prepetition long-term debt during its bankruptcy proceedings in conformity with SOP 90-7, and an increase in interest expense due to the re- valuation of aircraft leases to market rates as part of fresh start reporting. Income tax expense for financial reporting purposes in 1995 increased to $53.6 million from a combined $13.9 million in 1994 due principally to the increase in the amortization of the excess reorganization value which is not deductible for income tax purposes. LIQUIDITY AND CAPITAL RESOURCES Unrestricted cash and cash equivalents and short-term investments decreased to $165.7 million at March 31, 1997 from $176.6 million at December 31, 1996 primarily due to the repurchase of 1.91 million warrants to purchase Class B Common Stock of Holdings for approximately $13.3 million by AWA. (See Note 4, "Warrants" in Notes to Condensed Financial Statements.) Net cash provided from operating activities decreased to $53.7 million for the quarter ended March 31, 1997 from $58.7 million in 1996 due principally to the payment in 1997 of approximately $43 million in federal air transportation excise taxes. Net cash used in investing activities decreased to $31.2 million for the first quarter period of 1997 from 43 45 $32.9 million for the 1996 period. Net cash used in financing activities was $23.6 million for the first quarter compared to $13.6 million in the 1996 period primarily due to the warrant repurchase. AWA has a working capital deficiency which increased to $188.5 million at March 31, 1997 from $170.9 million at December 31, 1996. Operating with a working capital deficiency is typical in the airline industry as tickets sold for transportation which has not yet been provided are classified as a current liability while the related income producing assets, the aircraft, are classified as non-current. Despite the working capital deficiency, AWA expects to meet all of its obligations as they become due. AWA's long-term debt maturities through 1999 consist primarily of principal amortization of notes payable secured by certain of AWA's aircraft. As of March 31, 1997, such maturities were $36 million, $43.2 million and $70.4 million, respectively, for the remainder of 1997, 1998 and 1999. Management expects to fund these requirements with cash from operations. At March 31, 1997, Holdings had net operating loss carryforwards ("NOL") and general business tax credit carryforwards of approximately $471.8 million and $12.7 million, respectively. Under Section 382 of the Code, if a loss corporation has an "ownership change" within a designated testing period, its ability to use its NOL and credit carryforwards is subject to certain limitations. AWA is a loss corporation within the meaning of Section 382. The issuance of certain common stock by AWA pursuant to the plan of reorganization and emergence from bankruptcy in 1994 resulted in an ownership change within the meaning of Section 382. This ownership change has resulted in an annual limitation (the "Section 382 Limitation") upon AWA's ability to offset any post-change taxable income with pre-change NOL. Should AWA generate insufficient taxable income in any post-change taxable year to fully utilize the Section 382 Limitation of that year, any excess limitation will be carried forward to use in subsequent tax years, provided the pre-change NOL has not been exhausted nor has the carryforward period expired. AWA's reorganization and the associated implementation of fresh start reporting gave rise to significant items of expense for financial reporting purposes that are not deductible for income tax purposes. In large measure, it is these nondeductible expenses that result in an effective tax rate (for financial reporting purposes) significantly greater than the current U.S. corporate statutory rate of 35%. Nevertheless, AWA's actual cash income tax liability (i.e., income taxes payable) is considerably lower than income tax expense shown for financial reporting purposes. This difference in financial expense compared to actual income tax liability is in part attributable to tax attributes (including NOLs, subject to certain limitations) of the Predecessor Company that serve to reduce AWA's actual income tax liability. To the extent the tax attributes of the Predecessor Company reduce AWA's actual income tax liability below the amount of expense reflected in the financial statements, that difference is applied to reduce the carrying balance of AWA's Reorganization Value in Excess of Amounts Allocable to Identifiable Assets. In December 1994, AWA entered into a support contract with International Aero Engines ("IAE") which provides for the purchase by AWA of six new V2500-A5 spare engines scheduled for delivery beginning in 1998 through 2000 for use on AWA's A320 fleet. Such engines have an estimated aggregate cost of $42 million. At March 31, 1997, AWA had firm commitments to AVSA S.A.R.L., an affiliate of Airbus Industrie ("AVSA"), for a total of 17 Airbus A320-200 aircraft with delivery beginning in 1999. The aggregate net cost of such aircraft is based on formulae that include certain price indices (including indices for various aircraft components such as metal products) for periods preceding the various delivery dates. Based on an assumed 5% annual price escalation, AWA estimates such aggregate net cost to be approximately $850 million. AWA has arranged for financing for up to one-half of the commitment relating to such aircraft and will require substantial capital from external sources to meet its remaining financial commitment. There can be no assurance that AWA will be able to obtain such capital in sufficient amounts or on acceptable terms, and a default by AWA under the AVSA agreement or any such commitment could have a material adverse effect on AWA. In November 1996, America West Airlines 1996-1 Pass Through Trusts issued $218.6 million of Pass Through Certificates in connection with the refinancing of eight Airbus A320 aircraft and three IAE V2500 spare jet engines. The combined effective interest rate on the financing is 7.05%. The proceeds of the transaction were used to refinance the indebtedness incurred by the owners of the aircraft and engines leased 44 46 to AWA. Under the arrangements, the financial benefits of the transactions are shared among AWA, the equity investors in leverage leases covering the aircraft and U.S. subsidiaries of GPA, the original lessees under the restructured leases. Benefits to AWA include the agreed termination of arrangements with GPA pursuant to which GPA could cause AWA to lease up to four aircraft over the balance of the decade and a reduction in rental expense approximating $500,000 per year. The Pass Through Certificates were issued by separate pass through trusts. The equipment notes are secured by a security interest in the aircraft and engines and an assignment of AWA's leases of such equipment. Neither the equipment notes nor the pass through certificates are direct obligations of, or guaranteed by, AWA, and the corresponding debt and interest expense are not included in AWA's financial statements. As of March 31, 1997, AWA's fleet consisted of 101 aircraft of which 20 aircraft meet the FAA's Stage II (but not Stage III) noise reduction requirements and must be retired or significantly modified prior to the year 2000. Management is currently considering its options regarding such aircraft. If AWA determines to modify such aircraft to comply with Stage III, the required capital expenditures for such modifications are currently estimated to be approximately $2 million per aircraft. There can be no assurance that AWA will be able to obtain such capital in sufficient amounts or on favorable terms. Capital expenditures for the quarters ended March 31, 1997 and 1996 were approximately $41 million and $32.8 million, respectively. Included in these amounts are capital expenditures for capitalized maintenance of approximately $22.4 million for the first quarter of 1997 and $11.6 million for the first quarter of 1996. Capital expenditures for the year ended December 31, 1996 were approximately $155.7 million, including capitalized maintenance expenditures of approximately $87.2 million. Certain of AWA's long-term debt agreements contain minimum cash balance requirements, leverage ratios, coverage ratios and other financial covenants with which AWA was in compliance at March 31, 1997. GOVERNMENT REGULATIONS On August 20, 1996, the Small Business Job Protection Act of 1996 reinstated the federal air transportation excise taxes (the 10% ticket tax, the 6.25% air cargo tax and the $6.00 international departure tax) effective August 27, 1996. Management believes that AWA benefited from the expiration of the federal air transportation excise taxes on December 31, 1995 and that the reimposition of such excise taxes on August 27, 1996 had a negative impact on AWA, although the amount of such benefit or negative impact directly resulting from the excise taxes cannot be precisely determined. The reinstated federal air transportation excise taxes expired on December 31, 1996 and on March 7, 1997, the taxes were reimposed to September 30, 1997. It is unclear at this time whether the taxes will expire on September 30, 1997, or will once again be extended. In addition, AWA's operating costs have been and will continue to be affected by various safety, security and other regulations and requirements applicable to its operations. The National Aviation Civilian Review Commission, with the assistance of the Department of Transportation (the "DOT"), will conduct an independent study of funding requirements for the FAA and develop a cost allocation model for distribution of the cost of using the United States aviation system to each segment of the system. The Review Commission will also analyze and propose funding alternatives to the existing air transportation excise taxes (primarily the 10% ticket tax) which currently fund the FAA, which expired on December 31, 1996 but were reinstated effective March 7, 1997 through September 30, 1997. The report of the Review Commission is scheduled to be released in September 1997. AWA cannot forecast the results of the Review Commission's activities or what proposals the Review Commission will make. Implementation of these proposals could increase the cost of the airline operations and could have a material adverse effect on AWA's operating results. The President's Commission on Aviation Safety and Security and the U.S. Congress recently adopted increased safety and security measures designed to increase airline passenger security and protect against terrorist acts. These measures place additional security and safety requirements on the airline industry and result in additional operating costs. AWA cannot forecast what additional costs or the impact on revenue that would be associated with complying with such increased safety and security requirements. 45 47 BUSINESS OVERVIEW AWA is the ninth largest commercial airline carrier in the United States, operating through its principal hubs located in Phoenix, Arizona and Las Vegas, Nevada, and a mini-hub located in Columbus, Ohio. Management believes AWA is the lowest cost full service carrier in the United States. At March 31, 1997 AWA served 57 destinations, including six destinations in Mexico and one in Canada, with a fleet of 101 aircraft. AWA offers service to an additional 17 destinations through an alliance agreement with Continental and 17 commuter service and regional destinations through an alliance agreement with Mesa. AWA is the leading airline serving Phoenix and Las Vegas, with approximately 36% and 23% of total revenue passenger miles, respectively, based on the twelve months ended December 31, 1996. The Phoenix and Las Vegas airports are the seventh and thirteenth largest airports and the fifth and eighth largest domestic hubs in the United States as measured by passenger enplanements. AWA believes that these hubs are well positioned for continued growth due to their geographically favorable locations with access to key southwestern and west coast markets, relatively low operating costs, year-round fair weather and modern, uncongested facilities. Substantially all of AWA's passenger traffic is channeled into or through its hubs, which serve as gateways for AWA's route network. Through its hub-and-spoke system, AWA serves more markets with greater frequency than would be possible with the same number of aircraft in a point-to-point route system. AWA operates with a low cost structure. AWA's operating cost per ASM for the first three months of 1997 was 7.40 cents, which was approximately 21.1% less than the average cost per ASM of the nine major domestic airlines. AWA believes that its low cost structure is a significant competitive advantage relative to other full service carriers and also enables AWA to compete effectively against low cost carriers in its short-haul local markets. As a full service airline, AWA believes that it distinguishes itself from other low cost carriers by offering passenger services that include assigned seating, meal service, participation in computerized reservation systems, interline ticketing, first class cabins, baggage transfer and various other services. Through America West Vacations, AWA arranges and sells vacation packages that include hotel accommodations, air fare, ground transportation and a variety of entertainment options. This business unit generated approximately $190 million in gross package sales in 1996. America West Vacations occupies a substantial position in the Las Vegas destination market and arranges packages for travel to the other traditional vacation destinations served by AWA, including Arizona, California, Florida, Canada and Mexico. To further develop this business, the Company intends to combine America West Vacations with AWA's charter business and reorganize such operations as a separate subsidiary of Holdings during 1997. STRATEGY The Company's strategy seeks to achieve additional revenue growth and profitability by capitalizing on its key competitive strengths while maximizing financial flexibility. The principal elements of the Company's strategy are (i) strengthening AWA's position in its existing hubs through strategic expansion, (ii) maintaining AWA's position as a leading low cost full service carrier, (iii) focusing on airline reliability and customer service, (iv) operating a modern and efficient fleet, (v) continuing to develop AWA's passenger base through key alliances and (vi) pursuing opportunities to expand its leisure travel businesses. STRENGTHEN POSITION IN EXISTING HUBS THROUGH STRATEGIC EXPANSION AWA's strategy is designed to capitalize on its strong position in its Phoenix and Las Vegas hubs. In February 1996, AWA began implementation of a two-year plan to expand its principal hub operations and increase connecting traffic and service to longer-haul nonstop markets. Pursuant to this plan, during 1996 AWA increased ASMs by 11.3% and added six new cities to AWA's route network. In addition, AWA has increased flight frequencies to enhance service to existing West Coast destinations and to expand connecting opportunities through Phoenix to long-haul flights to the East and Midwest. AWA has also sought to increase 46 48 asset utilization through the expansion of its night flight service to Las Vegas, utilizing aircraft for this service that otherwise would be idle overnight. Pursuant to the growth plan, AWA added one new city to its route network in the first quarter of 1997 and expects to introduce service to at least one additional city by December 31, 1997. MAINTAIN ITS POSITION AS A LEADING LOW COST AIRLINE AWA is committed to maintaining its low cost structure, which it has achieved primarily through employee productivity, favorable labor costs per ASM and industry-leading asset utilization. AWA maintained low unit costs by focusing on productivity at all levels. Additionally, the contract between AWA and the Airline Pilots Association, which provides for fixed wage scale increases of approximately 2.8% per year until the contract expires in April 2000, is, and will continue to be, a factor in maintaining AWA's low cost structure. In 1996, AWA increased its ASMs by 11.3% while increasing its full-time equivalent head count by 10.8%. FOCUS ON RELIABILITY AND CUSTOMER SERVICE AWA is committed to maintaining its reliability and to improving its overall customer service. As a result of customer service and operational issues encountered in the third quarter of 1996, AWA initiated a program entitled Get the Product Right . . . Together, aimed at maximizing the airline's reliability and further improving customer service. Following the implementation of this program, AWA's completion rate increased from a low of 96% in the third quarter of 1996 to an average of 98.4% and 99% in the fourth quarter of 1996 and the first quarter of 1997, respectively. Consistent with its strategy of being a low cost airline, this program is designed to be implemented without adversely affecting AWA's cost structure. In May 1997, AWA was ranked number one in customer satisfaction among the nine major domestic airlines, for flights of 500 miles or less, in the Airline Customer Satisfaction -- U.S. Flights Study conducted by Frequent Flyer Magazine and J.D. Power and Associates. OPERATE A MODERN AND EFFICIENT FLEET AWA enjoys operational efficiencies due to its modern, fuel efficient fleet. At March 31, 1997, AWA's fleet consisted of 60 Boeing 737s, 27 Airbus A320s and 14 Boeing 757s, with an average age of approximately 10.2 years. Most of AWA's existing aircraft are held under leases with considerable fleet plan flexibility. As a result, in the event economic conditions change adversely, AWA can reduce its fleet size and reduce its aircraft related financial obligations by not renewing expiring aircraft leases. CONTINUE TO DEVELOP PASSENGER BASE THROUGH ALLIANCES AWA plans to continue to employ alliance agreements to expand its passenger base and in some cases to achieve cost savings through the reduction of redundant labor and facilities. AWA's alliance agreements generally provide for code-sharing arrangements and linking of frequent flyer programs, and in some cases involve coordination of flight schedules, sharing of ticket counter space, coordination of ground handling operations and joint purchasing and marketing efforts. AWA currently has alliance agreements with Continental, British Airways, Northwest Airlines and Mesa. Management believes that AWA's code-sharing activities result in increased travel and profitability for AWA and AWA intends to pursue additional alliances as opportunities warrant. EXPAND LEISURE TRAVEL BUSINESSES The Company's strategic plan includes the expansion of its leisure tour packaging and charter businesses which, the Company believes, present opportunities for growth. The Company further believes that it will be competitive in these businesses because of its low cost structure and expertise gained in developing and managing America West Vacations and AWA's professional and college sports chartering business. During 1997, the Company expects to combine the America West Vacations and charter business under a separate subsidiary of Holdings, establish a private label tour packaging business, pursue the management of other airlines' vacation packaging businesses, expand the scope of its vacation and charter products and introduce new package tour destinations. 47 49 OPERATIONS AIRLINE OPERATIONS AWA is the ninth largest commercial airline carrier in the United States, operating through its principal hubs located in Phoenix, Arizona and Las Vegas, Nevada, and a mini-hub located in Columbus, Ohio. AWA believes it is the lowest cost full service carrier in the United States. At March 31, 1997, AWA served 57 destinations, including six destinations in Mexico and one in Canada, with a fleet of 101 aircraft. AWA also offers service to additional destinations through alliance agreements with Continental and Mesa. AWA seeks to maximize its market share by operating primarily through hub airports in Phoenix and Las Vegas and, to a lesser extent, through its mini-hub in Columbus. The success of AWA's hub system depends on its ability to attract passengers traveling to and from its hubs, as well as passengers traveling through the hubs to AWA's other destinations. AWA believes the success of its operations in Phoenix and Las Vegas is in part due to such airports being among the world's largest 25 in passenger traffic and such cities being among the fastest growing in the nation. In addition, AWA believes these hubs are well positioned for continued growth due to their geographically favorable locations with strategic access to key southwestern and west coast markets, relatively low operating costs, year-round fair weather, and modern, uncongested facilities. AWA is the leading airline serving Phoenix Sky Harbor International Airport and McCarran International Airport in Las Vegas, based upon revenue passenger miles, with approximately 36% and 23% of total revenue passenger miles, respectively, for the twelve months ended December 31, 1996. In both markets AWA's principal competitor is Southwest Airlines, with approximately 22% and 17% of total revenue passenger miles in Phoenix and Las Vegas, respectively, for the twelve months ended December 31, 1996. At March 31, 1997, AWA served 49 destinations from its Phoenix hub, 45 destinations from its Las Vegas hub and 12 destinations from Columbus. During 1996, AWA had approximately 49% of Columbus revenue passenger miles compared to approximately 9% for US Airways, AWA's principal competitor in Columbus. At March 31, 1997, AWA offered service to an additional 17 destinations through its alliance with Continental and 17 commuter service and regional destinations through its alliance with Mesa. As a result of certain customer service and operational issues in the third quarter of 1996, AWA initiated a program entitled Get the Product Right . . . Together, aimed at maximizing the airline's on-time performance and further improving customer service. If successfully implemented, management believes this program will achieve significant advances in reliability through refinements to hub connection schedules, the addition of an operational spare aircraft and approximately 60 line mechanics, the establishment of two additional overnight maintenance bases, and improved coordination with providers of the airline's heavy aircraft maintenance. Management anticipates that those initiatives, together with expanded training of front line staff, increased staffing in critical areas (such as reservations), advanced technologies installed during 1996, enhanced aircraft appearance as the result of first class and new interior installations completed in 1996 and improved catering and onboard entertainment, will all operate together to improve customer satisfaction during 1997. Alliances. AWA has alliance agreements with Continental, British Airways, Northwest Airlines and Mesa. AWA's alliance agreement with Continental provides for code-sharing arrangements, coordinating flight schedules, sharing ticket counter space, linking frequent flyer programs and membership clubs, and coordinating ground handling operations. Through code-sharing, each airline is able to offer additional destinations to its customers without materially increasing operating and capital expenses. AWA has achieved cost savings from the Continental alliance primarily through the consolidation of airport facilities and resources and the elimination of duplicative costs for labor and equipment at key locations. In addition, through joint purchasing, both carriers may receive greater volume discounts on certain cost items. AWA's alliance agreement with British Airways includes code-sharing arrangements, reciprocal frequent flyer privileges and ground handling operations, and, using AWA's existing service, allows British Airways to offer connecting service to and from British Airways' Phoenix gateway to eight destinations served by AWA in the western United States. Through AWA's code-share agreement with Northwest Airlines, AWA provides connecting service from Northwest Airlines' Pacific routes to Las Vegas and Phoenix. AWA's code-sharing agreement with Mesa, which adds 17 destinations to AWA's route network, establishes Mesa as a feeder carrier for AWA at its Phoenix hub. The code-sharing agreement with Mesa provides for coordinated flight schedules, passenger handling and computer reservations under the AWA flight designator code, thereby 48 50 allowing passengers to purchase one air fare for their entire trip. On code-sharing flights, Mesa operates under the name "America West Express" and has incorporated AWA's color scheme and commercial logo on certain aircraft utilized on these routes. Leisure Travel Businesses. Through its America West Vacations division, AWA arranges and sells vacation packages that include hotel accommodations, air fare, ground transportation and a variety of entertainment options. This business unit generated approximately $190 million in gross package sales in 1996, sold approximately 823,000 room nights and approximately 137,000 rental car days, and handled approximately 557,000 passengers. America West Vacations occupies a substantial position in the Las Vegas destination market and arranges packages for travel to the other traditional vacation destinations served by AWA including Arizona, California, Florida, Canada and Mexico. To further develop this business, AWA expects to combine the America West Vacations with AWA's charter business and reorganize these businesses as a separate subsidiary of Holdings during 1997. AIRCRAFT At March 31, 1997, AWA operated a fleet of 60 Boeing 737s, 27 Airbus A320s and 14 Boeing 757s as follows:
AVERAGE REMAINING NUMBER AVERAGE LEASE AIRCRAFT TYPE STATUS(1) AIRCRAFT AGE (YRS.) TERM (YRS.) ------------- --------- -------- ---------- ----------- B737-100......................................... Owned 1 27.5 -- B737-200......................................... Leased 14 15.3 4.3 B737-200......................................... Owned 5 18.1 -- B737-300......................................... Leased 29 10.0 3.6 B737-300......................................... Owned 11 8.4 -- B757-200......................................... Leased 12 10.7 8.1 B757-200......................................... Owned 2 7.5 -- A320-200......................................... Leased 27 6.9 10.6 --- 101 10.2 6.7 ===
- --------------- (1) Each of the aircraft that is designated as owned serves as collateral for a loan pursuant to which the aircraft was acquired by AWA or serves as collateral for a non-purchase money loan. As of March 31, 1997 and through December 1998, leases for 20 of AWA's aircraft are scheduled to terminate (such aircraft are 12 Boeing B737-300s, two Boeing B737-200s, four Airbus A320-231s, and two Boeing B757-200s). At the option of the lessor, the lease for one of the B737-300 aircraft may be extended for up to 48 months, and the leases for six of the B737-300 aircraft may each be extended for up to 60 months, at set rates, which are currently less than market rates. At the option of either the lessor or AWA, the leases for two Airbus A320 aircraft may be extended for a period of two years, and the lease for one Airbus A320 aircraft may be extended for a period of one year. There are no contractual options to extend any other of such leases. See "Management's Discussion and Analysis of Financial Condition and Results of Operations". EMPLOYEES At March 31, 1997, AWA employed 8,942 full-time and 2,500 part-time employees, for an equivalent of 10,015 full-time employees. LABOR RELATIONS The airline business is labor intensive. Wages, salaries and benefits represented approximately 23.1% of AWA's operating expenses for the year ended December 31, 1996. To encourage increased productivity by its workforce, AWA awards performance bonuses ("AWArd Pay") from 5% to 25% of base pay to eligible non-executive non-union employees provided certain annually established operating income targets are attained. Eligibility is determined at the time of distribution. In February 1996, AWA paid performance awards amounting to 10.25% of each eligible employee's base pay for 1995 performance. The operating income targets 49 51 established for 1996 were not achieved, largely as the result of AWA's performance during the third quarter of that year. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." However, AWA's Board of Directors concluded that the failure to achieve the 1996 operating income target was due largely to circumstances beyond the control of the eligible employees and that it was important to reward the eligible employees for their substantial efforts in achieving AWA's first and second quarter record performance and in AWA's return to record earnings in the fourth quarter. Accordingly, in an exception to policy, in February 1997, the Board of Directors elected to pay AWArd Pay performance bonuses equal to the minimum of 5% of eligible employees' base pay in respect of 1996 performance. There have been numerous attempts by unions to organize AWA's employees, and AWA expects such organization efforts to continue in the future. Several groups of AWA's employees have selected their collective bargaining representatives and negotiations are in progress. AWA cannot predict at this time the outcome or the terms of any future collective bargaining agreement and therefore the effect, if any, on AWA's operations or financial performance. AWA's pilots are represented by the Airline Pilots Association. In May 1995, a five-year collective bargaining agreement with AWA's pilots became effective. The terms of this contract are consistent with AWA's productivity objectives. Under this contract, pilot wage scales will increase 9.41% from December 31, 1996 until April 29, 2000, or approximately 2.8% per year during that period. Terms of the agreement include a single pay scale for all aircraft types, flexible work rules, management's right to staff the airline and to enter into strategic alliances and the preclusion of sympathy work stoppages. In September 1994, the National Mediation Board ("NMB") certified the Association of Flight Attendants as the collective bargaining representative of AWA's flight attendants and contract negotiations are ongoing. In January 1996, the International Brotherhood of Teamsters ("IBT") filed an application with the NMB seeking to be certified as the bargaining representative for AWA's mechanics, including related personnel. Following a representation election in April 1996, the NMB certified the IBT as the collective bargaining representative for that work group. AWA is currently litigating the certification of the IBT and the matter is presently before the Ninth Circuit Court of Appeals. To comply with the ruling of the lower court, AWA has commenced negotiations with the IBT on a provisional basis. In April 1996, the IBT filed an application with the NMB seeking to become the collective bargaining representative of AWA's 40 stock clerks. The IBT lost the representation election in July 1996. Following the announcement of those election results, the IBT filed a claim of election interference against AWA. Both AWA and the IBT filed submissions with the NMB in connection with the election interference charge, and the matter will be decided by the NMB in due course. If the NMB rules in favor of IBT, a rerun election will be ordered. In September 1996, the Transportation Workers Union ("TWU") was certified to represent AWA's approximately 40 dispatchers and contract negotiations have commenced. COMPETITION AND MARKETING The airline industry is highly competitive and is susceptible to price discounting, which involves the offering of discount or promotional fares to passengers. Any such fares offered by one airline are normally matched by competing airlines, resulting in lower industry yields with little or no increase in traffic levels. AWA competes with other major full service airlines based on price and, due to its low cost structure, is able to compete with other low cost carriers in its short haul local markets. The entry of additional carriers on many of AWA's routes (as well as increased competition from or the introduction of new services by established carriers) could negatively impact AWA's results of operations. AWA competes with a number of major airlines on medium- and long-haul routes through its hubs and with Southwest Airlines for short-haul flights at its Phoenix and Las Vegas hubs and with USAir at its Columbus mini-hub. Most tickets for travel on AWA are sold by travel agents through computer reservation systems that have been developed and are controlled by other airlines. Travel agents generally receive commissions based on the 50 52 price of tickets sold. Accordingly, airlines compete not only with respect to the price of tickets sold but also with respect to the amount of commissions paid. Airlines often pay additional commissions in connection with special revenue programs. Federal regulations have been promulgated that are intended to diminish preferential schedule displays and other practices with respect to the reservation systems that place AWA and other similarly situated users at a competitive disadvantage to the airlines controlling the systems. Effective January 8, 1996, AWA implemented electronic or paperless ticketing to respond to customer needs and to reduce distribution costs for tickets booked directly through AWA, and by year end 1996, approximately 21% of its tickets were processed electronically. FREQUENT FLYER PROGRAM All major U.S. airlines have established frequent flyer programs to encourage travel on that particular carrier. AWA offers the FlightFund program that allows members to earn mileage credits by flying AWA, by using the services of other program participants such as hotels, car rental firms and other specialty services and by flying certain partner carriers. Through AWA's alliance agreement with both Continental and British Airways, AWA has formed frequent flyer program partnerships. FlightFund and Continental One Pass program members may earn and redeem mileage credit in connection with flights to all AWA and Continental destinations. FlightFund and British Airways Executive Club members may also earn and redeem mileage credit for flights to all AWA and British Airways destinations. In addition, AWA periodically offers special short-term promotions that allow members to earn additional free travel awards or mileage credits. When a FlightFund member accumulates mileage credits of 20,000 miles, AWA issues mileage award certificates that can be redeemed for various travel awards, including first class upgrades and tickets on AWA or other airlines participating in AWA's frequent flyer program. Most travel awards are subject to blackout dates and capacity controlled seating. Mileage award certificates automatically expire after two years if issued prior to April 1, 1993 and after three years for certificates issued after that date. Travel is valid up to one year from the date of ticketing. FlightFund awards may also be redeemed for flights to certain international destinations and Hawaii. AWA is required to purchase space on other airlines to accommodate such award redemption. AWA accounts for the FlightFund program under the incremental cost method whereby travel awards are valued at the incremental cost of carrying one additional passenger. Costs including passenger food, beverages, supplies, fuel, liability insurance, purchased space on other airlines and denied boarding compensation are accrued as frequent flyer program participants accumulate mileage to their accounts. Such unit costs are based upon expenses expected to be incurred on a per passenger basis. No profit or overhead margin is included in the accrual for these incremental costs. FlightFund's membership at December 31, 1996 was approximately 2.7 million participants. At December 31, 1996, 1995 and 1994, AWA estimated that approximately 358,000, 342,000 and 369,000, respectively, travel awards were expected to be redeemed. Correspondingly, AWA had an accrued liability of $11.3 million, $10.7 million and $9.8 million for 1996, 1995 and 1994, respectively. The accrual is based upon AWA's estimates of mileage earned that will eventually be redeemed for a travel award. The number of FlightFund travel awards redeemed for round-trip travel for the years ended December 31, 1996, 1995 and 1994, was approximately 130,000, 111,000 and 109,000, respectively, representing 2.3%, 2.3% and 2.6% of total revenue passenger miles for each respective period. AWA does not believe that the usage of free travel awards results in any significant displacement of revenue passengers due to AWA's ability to manage frequent flyer travel. FACILITIES AWA's principal facilities are associated with its hub operations in Phoenix, Las Vegas and Columbus. AWA operates from Terminal 4 of Phoenix Sky Harbor International Airport pursuant to a lease agreement that includes 28 gates and approximately 255,000 square feet of space at March 31, 1997. AWA also leases approximately 39,000 square feet of additional space at the airport for administrative offices and pilot training and owns a 375,000 squire foot maintenance and technical support facility that includes four hangar bays, hangar shops, two flight simulator bays, and warehouse and commissary facilities. 51 53 In Las Vegas, AWA leases approximately 79,000 square feet of space a McCarran International Airport, which includes seven gates and adjoining holding room areas. At its Columbus mini-hub, AWA leases 30,000 square feet and seven gates. Pursuant to AWA's alliance agreement with Continental, certain of the station operations for both carriers have been consolidated in an effort to reduce operating expenses. Space for ticket counters, gates and back offices has also been obtained at each of the other airports served by AWA, either by lease from the airport operator or by sublease from another airline. AWA owns 68,000 square foot America West Corporate Center at 222 S. Mill Avenue in Tempe, Arizona. AWA currently leases approximately 389,000 square feet of general office and other space in Phoenix and Tempe, Arizona. GOVERNMENT REGULATIONS NOISE ABATEMENT AND OTHER RESTRICTIONS The Airport Noise and Capacity Act of 1990 provides, with certain exceptions, that after December 31, 1999, no person may operate certain large civilian turbo-jet aircraft in the United States that do not comply with Stage III noise levels, which is the FAA designation for the quietest commercial jets. These regulations require carriers to gradually phase out their noisier jets, either replacing them with quieter Stage III jets or equipping them with hush kits to comply with noise abatement regulations, over a five-year period commencing December 31, 1994. At December 31, 1996, AWA's fleet consisted of 101 aircraft, all of which meet Stage III noise reduction requirements except for 21 aircraft that meet the FAA's Stage II (but not Stage III) noise reduction requirements. The aircraft that do not meet the Stage III standards must be retired or significantly modified prior to the year 2000. Management is currently considering its options regarding these aircraft and expects to decide whether to install hush kits on those aircraft or replace them with Stage III aircraft. Numerous airports served by AWA, including those at Boston, Denver, Los Angeles, Minneapolis-St. Paul, New York City, San Diego, San Francisco, San Jose, Orange County, Washington, D.C., Burbank and Long Beach have imposed restrictions such as curfews, limits on aircraft noise levels, mandatory flight paths, runway restrictions and limits on number of average daily departures, which limit the ability of air carriers to provide service to or increase service at such airports. AWA's Boeing 757-200s, Boeing 737-300s and Airbus A320s all comply with the current noise abatement requirements of the airports listed above. FUEL TAX INCREASES In August 1993, the federal government increased taxes on fuel, including aircraft fuel, by 4.3 cents per gallon. Initially, commercial aviation fuel was exempt from this tax; however, the exemption expired on September 30, 1995 and AWA began paying such tax on October 1, 1995. The expiration of such exemption increased AWA's annual operating expenses by approximately $15.1 million for 1996. EXCISE TAXES Effective March 7, 1997, the federal air transportation excise taxes (the 10% ticket tax based on the price of the ticket, the 6.25% air cargo tax based on freight charges and the $6.00 per passenger international departure tax), which had been effective from August 27, 1996 but had expired on December 31, 1996, were reinstated for the period ending September 30, 1997. As a result of competitive pressure, AWA and other airlines have been limited in their abilities to pass on the cost of the excise taxes to passengers through fare increases. PASSENGER FACILITY CHARGES During 1990, Congress enacted legislation to permit airport authorities, with prior approval from the DOT, to impose passenger facility charges ("PFCs") as a means of funding local airport projects. These charges, which are intended to be collected by the airlines from their passengers, are limited to $3.00 per enplanement, and to no more than $12.00 per round trip. As a result of competitive pressure, AWA and other airlines have been limited in their abilities to pass on the cost of the PFCs to passengers through fare increases. 52 54 AGING AIRCRAFT MAINTENANCE The FAA issued several Airworthiness Directives ("ADs") in 1990 mandating changes to the older aircraft maintenance programs. These ADs were issued to ensure that the oldest portion of the nation's aircraft fleet remains airworthy. The FAA requires that these aircraft undergo extensive structural modifications. These modifications are required upon the accumulation of 20 years time in service, prior to the accumulation of a designated number of flight cycles or prior to 1994 deadlines established by the various ADs, whichever occurs later. Four of AWA's aircraft are currently affected by these aging aircraft ADs and are in compliance with such ADs. AWA constantly monitors its fleet of aircraft to ensure safety levels which meet or exceed those mandated by the FAA or the DOT. FAA FUNDING Congress recently enacted the FAA Reauthorization Act of 1996, which established the Review Commission. The Review Commission, with the assistance of the DOT, will conduct an independent study of FAA funding requirements through the year 2002, and develop a cost allocation model for distribution of the cost of using the United States aviation system to each segment of the system. The Review Commission will also analyze funding and propose alternatives to the excise taxes (primarily the 10% ticket tax) which currently fund the FAA. The excise taxes had expired December 31, 1996 but were reinstated March 7, 1997 for the period through September 30, 1997. The report of the Review Commission is scheduled to be released on September 30, 1997. AWA cannot forecast the results of the Review Commission's activities or what proposals the Review Commission will make, but no change in the funding mechanism is expected to be enacted prior to the completion of the Review Commission's activities. Implementation of these proposals could significantly increase the cost of airline operations and could have a material adverse impact on AWA's operating results. AIRCRAFT MAINTENANCE AND OPERATIONS AWA is subject to the jurisdiction of the FAA with respect to aircraft maintenance and operations, including equipment, dispatch, communications, training, flight personnel and other matters affecting air safety. The FAA has the authority to issue new or additional regulations. To ensure compliance with its regulations, the FAA conducts regular safety audits and requires AWA to obtain operating, airworthiness and other certificates which are subject to suspension or revocation for cause. In addition, a combination of FAA and Occupational Safety and Health Administration regulations on both federal and state levels apply to all of AWA's ground-based operations. AWA is also subject to the jurisdiction of the Department of Defense with respect to its voluntary participation in their Commercial Passenger Airlift program administered by the Air Force's Air Mobility Command. The carrier recently successfully underwent its biannual capability survey and has been approved for continued use by the military. ADDITIONAL SECURITY AND SAFETY MEASURES The Aviation Safety Commission and the U.S. Congress have recently adopted increased safety and security measures designed to increase airline passenger security and protect against terrorist acts. Such measures have resulted in additional operating costs to the airline industry. Examples of increased security measures include increased passenger profiling, enhanced pre-board screening of passengers and carry-on baggage, positive bag match for profile selections, continuous physical bag search at checkpoints, additional airport security personnel, expanded criminal background and FBI fingerprint checks for selected airport employees, significantly expanded use of bomb-sniffing dogs, certification of screening companies and aggressive testing of existing security systems. The Aviation Safety Commission issued a final report on February 12, 1997 which reaffirms its earlier recommendations, including feasibility analyses of the deployment and use of positive bag match systems, enhanced passenger profiling procedures and advanced cockpit voice and flight data recorders. The final report makes additional recommendations for certain safety and security measures to be implemented by December 31, 1997, including the installation of new ground proximity warning systems on all commercial 53 55 aircraft, expansion of aging aircraft inspections to include non-structural components, development of objective methods for carriers to monitor and improve their own level of safety, and implementation of positive bag match based on passenger profiling. Future decisions which place increased security and safety requirements on the airline industry could be significant. AWA cannot forecast, based upon the final report of the Aviation Safety Commission, what additional security and safety requirements may be imposed in the future or the costs or revenue impact that would be associated with complying with such requirements, although such costs and revenue impact could be significant. SLOT RESTRICTIONS At New York City's John F. Kennedy Airport and LaGuardia Airport, Chicago's O'Hare International Airport and Washington's National Airport, which have been designated "High Density Airports" by the FAA, there are restrictions on the number of aircraft that may land and take-off during peak hours. In the future, these take-off and landing time slot restrictions and other restrictions on the use of various airports and their facilities may result in further curtailment of services by, and increased operating costs for, individual airlines, including AWA, particularly in light of the increase in the number of airlines operating at such airports. In general, the FAA rules relating to allocated slots at the High Density Airports contain provisions requiring the relinquishment of slots for nonuse and permit carriers, under certain circumstances, to sell, lease or trade their slots to other carriers. All slots must be used on 80% of the dates during each two-month reporting period. Failure to satisfy the 80% use rate will result in loss of the slot which would revert to the FAA and be reassigned through a lottery arrangement. AWA currently utilizes two slots at New York City's Kennedy Airport, four slots at New York City's LaGuardia Airport, four slots at Chicago's O'Hare International Airport and six slots at Washington's National Airport. Four of the slots at Washington's National Airport are subject to expiration in December 1997, and AWA intends to file a timely application for renewal. Approval of such application is discretionary with the FAA. The utilization rates by AWA of all the foregoing slots ranged from 94% to 99% in 1996. ENVIRONMENTAL MATTERS AWA is subject to regulation under major environmental laws administered by federal, state and local agencies, including laws governing air, water and waste discharge activities. While AWA strives to comply with environmental laws and regulations, AWA has incurred and may incur costs to comply with applicable environmental laws, including soil and groundwater cleanup and other related response costs. AWA believes, however, that under current environmental laws and regulations these costs would not have a material adverse effect on AWA's financial condition. The Comprehensive Environmental Response Compensation and Liability Act of 1980, also known as Superfund, and comparable state laws impose liability without regard to fault on certain classes of persons that may have contributed to the release or threatened release of a "hazardous substance" into the environment. These persons include the owner or operator of a facility and persons that disposed or arranged for the disposal of hazardous substances. Many airports in the United States, including Phoenix Sky Harbor International Airport, are the subject of Superfund investigations or state implemented groundwater investigations. Although AWA occupies facilities at some of these affected airports, AWA does not believe that its operations have been included within the ambit of any of these investigations. The trend in environmental regulation is to place more restrictions and limitations on activities that may affect the environment, and AWA expects that the costs of compliance will continue to increase. LEGAL PROCEEDINGS AWA emerged from bankruptcy on August 25, 1994 after operating as a debtor-in-possession since June 27, 1991, when AWA filed a voluntary petition to reorganize under Chapter 11 of the Bankruptcy Code. The Bankruptcy Court confirmed AWA's plan of reorganization (the "Reorganization Plan") on August 10, 54 56 1994. As contemplated by the Reorganization Plan, certain administrative and priority tax claims remain pending against AWA, which, if ultimately allowed by the Bankruptcy Court, would represent general obligations of AWA. Such claims include claims of various state and local tax authorities, most of which represent pre-bankruptcy tax obligations not paid during the pendency of the bankruptcy proceedings and various other matters. In connection with the state and local tax claims, AWA has reserved certain amounts believed by management to be adequate. At March 31, 1997, approximately 399,000 shares of Holdings' Class B Common Stock was with an escrow agent pending final resolution of claims in connection with the bankruptcy. All other securities issued pursuant to the bankruptcy have been distributed. The Company believes that it will reach final settlement of all remaining unresolved claims such that the remaining approximately 399,000 shares will be distributed during 1997. Following the commencement of AWA's bankruptcy proceedings in June 1991, the Commission requested information from AWA concerning disclosures made in AWA's annual and quarterly reports filed with the Commission in 1991. This inquiry ultimately led to a settlement with the Commission, pursuant to which the Commission issued an "Order Instituting Proceedings Pursuant to Section 21C of the Exchange Act and Opinion and Order of the Commission" (the "Order") finding AWA's Form 10-K for the year ending December 31, 1990, violated Section 13(a) of the Exchange Act and Rule 13a-1 thereunder, and that AWA's Form 10-Q for the first quarter of 1991 violated Section 13(a) of the Exchange Act and Rule 13a-13 thereunder, and ordered that AWA cease and desist from violating Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13 promulgated under the Exchange Act. The Order provided that AWA neither admits nor denies any violation of the securities laws. AWA leases six aircraft which may be subject to a claim in an unspecified amount as a result of the Internal Revenue Service potentially disallowing investment tax credits and accelerated depreciation claimed by the lessor of such aircraft. Under the terms of indemnity agreements, if such tax benefits were fully or partially disallowed, AWA's monthly obligation under the agreements could be increased by up to approximately $15,000 per aircraft (approximately $1,080,000 per year for all six aircraft) for the period from 1991 to 2013. The payment increase applicable to periods prior to the determination of an indemnity obligation would be payable monthly over a 24-month period, with interest calculated at a specified prime rate. AWA is unable to predict whether the Internal Revenue Service will prevail in matters asserted against the lessor and, consequently, whether AWA will incur any liability in connection with such claims or the amount of any such liability, if incurred. Based on information and relevant documents available to AWA, however, management currently believes that it is unlikely that the disposition of these matters will have a material adverse effect on AWA's financial condition. Following AWA's outsourcing of its heavy maintenance, on December 27, 1995 the IBT and five individuals commenced a lawsuit against AWA in the Federal District Court for the Northern District of Arizona alleging that the individual plaintiffs had been terminated because they were IBT committee members or open supporters of the union and that AWA wrongfully terminated approximately 378 members of the mechanics and related craft or class in connection with the outsourcing in violation of federal labor laws. In September 1996, the court dismissed the claims of the four discharged mechanics who had signed release agreements and found that the IBT did not have standing in its own behalf to pursue a claim under the Railway Labor Act (the "RLA"). Later that month, the IBT filed a second supplemental amended complaint seeking to assert claims under the RLA on behalf of the current mechanics and the discharged mechanics who did not sign releases. The main relief requested by the IBT is an injunction requiring AWA to discontinue the subcontracting of heavy maintenance, and an order of reinstatement for the discharged mechanics who did not release their claims. The remaining plaintiff asserted an Arizona wrongful discharge claim and sought punitive damages. The court's decision on AWA's motion to dismiss the plaintiffs' second supplemental amended complaint is pending. AWA is a named defendant in a number of additional lawsuits and proceedings arising in the ordinary course of business. While the outcome of the contingencies, lawsuits or other proceedings against AWA cannot be predicted with certainty, management currently expects that any liability arising from such matters, to the extent not provided for through insurance or otherwise, will not have a material adverse effect on the financial results and operations of AWA. 55 57 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS Information with respect to the executive officers and directors of AWA is set forth below.
NAME AGE POSITION WITH AWA ---- --- ----------------- William A. Franke...... 60 Chairman of the Board Richard R. Goodmanson.. 49 Director, President and Chief Executive Officer Julia Chang Bloch...... 55 Director Stephen F. Bollenbach........... 54 Director Frederick W. Bradley, Jr. ................. 70 Director James G. Coulter....... 37 Director John F. Fraser......... 66 Director John L. Goolsby........ 55 Director Richard C. Kraemer..... 53 Director John R. Power, Jr...... 41 Director Larry L. Risley........ 52 Director Frank B. Ryan.......... 60 Director Richard P. Schifter.... 44 Director John F. Tierney........ 52 Director Raymond S. Troubh...... 71 Director Ronald A. Aramini...... 51 Senior Vice President -- Operations John R. Garel.......... 38 Senior Vice President -- Marketing and Sales Stephen L. Johnson..... 40 Senior Vice President -- Legal Affairs W. Douglas Parker...... 35 Senior Vice President and Chief Financial Officer Michael R. Carreon..... 43 Vice President and Controller C. A. Howlett.......... 53 Vice President -- Public Affairs
DIRECTORS Set forth below is information regarding AWA's directors: WILLIAM A. FRANKE. Chairman of the Board (Executive Committee). Mr. Franke was named Chairman of the Board of Directors of AWA in September 1992. From January 1, 1994 to February 4, 1997, Mr. Franke served as AWA's Chief Executive Officer and from May 23, 1996 to February 4, 1997 he served as AWA's President. Mr. Franke also serves as Chairman of the Board and Chief Executive Officer of Holdings. In addition to his responsibilities at AWA, Mr. Franke serves as president of Franke & Company, Inc., a financial services company he has owned since May 1987. Mr. Franke serves as a director of Phelps Dodge Corp., Central Newspapers Inc., the Air Transport Association of America, Beringer Wine Estates, Inc. and Mtel Latin America, Inc. Mr. Franke serves as a Director and Chairman of the Board of Airplanes Limited and a controlling trustee and chairman of Airplanes U.S. Trust, entities involved in aircraft financing and leasing. Mr. Franke also serves as a managing partner of Newbridge Latin America L.P. ("Newbridge"), an investment fund controlled by TPG Partners. RICHARD R. GOODMANSON. Director, President and Chief Executive Officer. Mr. Goodmanson joined AWA in June 1996 and became a member of AWA's Board of Directors effective on October 15, 1996. Mr. Goodmanson also serves as President and Director of Holdings. On February 4, 1997, Mr. Goodmanson was elected President and Director of Holdings and President and Chief Executive Officer of AWA. From 1992 until 1996, Mr. Goodmanson served as Senior Vice President of Operations at Frito-Lay, Inc. From 1980 until 1992, Mr. Goodmanson served as a principal at the consulting firm of McKinsey and Company, Inc. 56 58 JULIA CHANG BLOCH. (Compensation Committee.) Ms. Bloch has been a member of AWA's Board of Directors since August 26, 1994. Ms. Bloch also serves as a director of Holdings. Ms. Bloch is currently the president of the United States -- Japan Foundation. From June 1993 to June 1996, Ms. Bloch served as the group executive vice president, corporate relations of Bank of America Corporation. Ms. Bloch served as the U.S. Ambassador to Nepal from September 1989 through May 1993. Ms. Bloch is a board member of the American Refugee Committee and the Himalaya Foundation and serves as a trustee of the Asian Art Museum Foundation and the Asia Society. STEPHEN F. BOLLENBACH. (Compensation Committee, Special Committee.) Mr. Bollenbach has been a member of AWA's Board of Directors since August 26, 1994. Mr. Bollenbach also serves as a director of Holdings. He has been president, chief executive officer and a director of Hilton Hotels Corporation since February 1996. He served as senior executive vice president and chief financial officer of The Walt Disney Company from May 1995 to February 1996. Prior to May 1995, he was president and chief executive officer of Host Marriott Corp. He served as executive vice president and chief financial officer of The Marriott Corporation from 1992 until 1993. Mr. Bollenbach served as chief financial officer of the Promus Companies from 1986 to 1990 and served as chief financial officer for the Trump Organization from 1990 to 1992. Mr. Bollenbach is a nominee for the Board of Directors of Time Warner, Inc. and serves as a director of Ladbroke Group plc, Hilton Hotels Corporation and its subsidiaries, American Gaming Association and Kmart Corporation. FREDERICK W. BRADLEY, JR. (Compensation Committee, Executive Committee, Special Committee.) Mr. Bradley has been a member of AWA's Board of Directors since September 1992. Mr. Bradley also serves as a director of Holdings. Until his retirement, Mr. Bradley was a senior vice president of Citibank/Citicorp's Global Airline and Aerospace business. Mr. Bradley joined Citibank/Citicorp in 1958. In addition, Mr. Bradley is a member of the board of directors of Banner Aerospace, First Citicorp Life Insurance Co., Shuttle, Inc. (USAir Shuttle) and the Institute of Air Transport, Paris, France. Mr. Bradley also is chairman of the board of directors of Aircraft Lease Portfolio Securitization 92-1 Ltd. and Aircraft Lease Portfolio Securitization 94-1 Ltd. as well as President of IATA's International Airline Training Fund of the United States. JAMES G. COULTER. (Executive Committee.) Mr. Coulter has been a member of AWA's Board of Directors since August 26, 1994. Mr. Coulter also serves as a director of Holdings. Since 1992, Mr. Coulter has been a managing director of Texas Pacific Group, an investment firm. From 1986 to August 1992, Mr. Coulter was vice president of Keystone, Inc. (formerly Robert M. Bass Group, Inc.), a private investment firm based in Fort Worth, Texas. From April 1993 until he became a member of AWA's Board, Mr. Coulter was a member of the board of directors of Continental. Mr. Coulter also serves as Co-Chairman of the Board of Beringer Wine Estates, Inc. and is a director of Allied Waste Industries, Inc., Del Monte Holdings, Co. and Virgin Cinemas, Ltd. JOHN F. FRASER. Mr. Fraser has been a member of AWA's Board of Directors since August 26, 1994. Mr. Fraser also serves as a director of Holdings. Mr. Fraser currently serves as vice chairman and director of Russel Metals, Inc. (formerly Federal Industries Ltd.), and has served in such position since May 1995. Mr. Fraser joined Federal Industries Ltd. as president and chief executive officer in 1978 and was elected chairman of the board in 1992. Mr. Fraser is a director and chairman of the board of Air Canada, and a director of Bank of Montreal, Centra Gas Manitoba Inc., Coca-Cola Beverages Ltd., Inter-City Products Corporation, Shell Canada Limited, The Thomson Corporation and Manitoba Telecom Services, Inc. JOHN L. GOOLSBY. (Audit Committee, Special Committee.) Mr. Goolsby has been a member of AWA's Board of Directors since August 26, 1994. Mr. Goolsby also serves as a director of Holdings. He is the president and chief executive officer of The Howard Hughes Corporation (formerly named Summa Corporation), a subsidiary of the Rouse Company engaged in the development and management of office and industrial buildings and large scale land development in Nevada and Southern California. In addition, Mr. Goolsby serves as a director of Nevada Power Company and Bank of America Nevada. RICHARD C. KRAEMER. (Compensation Committee, Special Committee.) Mr. Kraemer has been a member of AWA's Board of Directors since September 1992. Mr. Kraemer also serves as a director of 57 59 Holdings. Mr. Kraemer is currently president of Chartwell Capital, Inc., private investment company. He served as Chief Executive Officer and President of UDC Homes, Inc. ("UDC "), a Phoenix-based homebuilding company, from October 1994 until March 1996. Mr. Kraemer was President and Chief Operating Officer of UDC from 1985 until October 1994. He was also a director of UDC from 1980 until March 1996. UDC filed for protection under Chapter 11 of the Bankruptcy Code in May 1995. The plan for the reorganization of UDC was confirmed by the bankruptcy court on October 3, 1995 and consummated on November 16, 1995. JOHN R. POWER, JR. (Executive Committee.) Mr. Power has been a member of AWA's Board of Directors since August 26, 1994. Mr. Power also serves as a director of Holdings. He is president of The Patrician Corporation, an investment company. Prior to joining The Patrician Corporation, Mr. Power served as senior manager at Continental Bank. Mr. Power also serves as a director of NRS Services and a subsidiary of J.I. Case Corporation. LARRY L. RISLEY. (Audit Committee.) Mr. Risley has been a member of AWA's Board of Directors since August 26, 1994. Mr. Risley also serves as a director of Holdings. He has been the chief executive officer and chairman of the board of directors of Mesa since the founding of the company in 1983. From 1979 to 1982, Mr. Risley was president of Mesa Aviation Services, Inc. FRANK B. RYAN. (Audit Committee.) Dr. Ryan has been a member of AWA's Board of Directors since March 17, 1995. Dr. Ryan also serves as a director of Holdings. Since August 1990, Dr. Ryan has been a professor of mathematics and of computational and applied mathematics, and was formerly the vice president of external affairs, of Rice University. From 1988 to 1990, Dr. Ryan served as president and chief executive officer of Contex Electronics, Inc., an electronic component manufacturing company. Dr. Ryan serves as a director of Danielson Holding Corporation, Siena Holdings, Inc. and Sequoia Systems, Inc. and as a governor advisor to Rice University. RICHARD P. SCHIFTER. (Compensation Committee.) Mr. Schifter has been a member of AWA's Board of Directors since August 26, 1994. Mr. Schifter also serves as a director of Holdings. He has been a managing director of Texas Pacific Group, an investment firm, since July 1994. Mr. Schifter serves of counsel to the Washington, D.C. based law firm of Arnold & Porter, where he was an associate from 1979 to 1986 and a partner from 1986 to July 1994. Mr. Schifter serves on the board of directors of TPG Communications, Ryanair Holdings plc and Mtel Latin America, Inc. and also serves as a managing partner of Newbridge. JOHN F. TIERNEY. Mr. Tierney has served as a member of AWA's Board of Directors since December 1993. Mr. Tierney also serves as a director of Holdings. Mr. Tierney is the assistant chief executive and finance director of GPA and has served in such capacity since 1993. From 1981 to 1993, he served as chief financial officer of GPA. RAYMOND S. TROUBH. (Audit Committee.) Mr. Troubh has been a member of AWA's Board of Directors since August 26, 1994. Mr. Troubh also serves as a director of Holdings. He is a financial consultant and currently serves on the board of directors of ADT Limited, ARIAD Pharmaceuticals, Inc., Becton, Dickinson and Company, Diamond Offshore Drilling, Inc., Foundation Health Corporation, General American Investors Company, The MicroCap Fund, Inc., Olsten Corporation, Petrie Stores Corporation, Time Warner Inc., Triarc Companies, Inc. and WHX Corporation. EXECUTIVE OFFICERS Set forth below is information regarding the executive officers of AWA other than Mr. Franke and Mr. Goodmanson, who are described above. RONALD A. ARAMINI. Senior Vice President -- Operations. Mr. Aramini joined AWA in September 1996. From October 1993 until September 1996, Mr. Aramini served as President and Chief Executive Officer of Allegheny Airlines, a Pennsylvania-based regional airline subsidiary of US Air Group, Inc. Before that, he served for three years at Air Wisconsin, including in positions as Vice President -- Operations, Senior Vice President -- Operations, and President and Chief Executive Officer. Prior to his position at Air Wisconsin, Mr. Aramini served in various positions at Continental. 58 60 JOHN R. GAREL. Senior Vice President -- Marketing and Sales. Mr. Garel joined AWA in April 1995. From 1993 until early 1995, Mr. Garel was the Chief Executive Officer of Cadmus Journal Services, a division of Cadmus Communications. From 1990 until 1992, Mr. Garel served as Vice President, Financial Planning and Analysis of Northwest Airlines and, thereafter, as Vice President, Market Development and Area Marketing. Prior to that, Mr. Garel worked for American Airlines in several management capacities. STEPHEN L. JOHNSON. Senior Vice President -- Legal Affairs of both AWA and Holdings. Mr. Johnson joined AWA in February 1995. From 1993 to 1994, Mr. Johnson served as Senior Vice President and General Counsel to GE Capital Aviation Services Limited. From 1989 to 1993 Mr. Johnson was employed by GPA, from 1989 to 1991 as Vice President and Senior Counsel and from 1991 to 1993 as Senior Vice President and General Counsel to GPA's Leasing Division. Prior to joining GPA, Mr. Johnson was engaged in the private practice of law. W. DOUGLAS PARKER. Senior Vice President and Chief Financial Officer of both AWA and Holdings. Mr. Parker joined AWA in June 1995. From 1991 through June of 1995, Mr. Parker worked in various capacities at Northwest Airlines, including positions as Vice President -- Assistant Treasurer and Vice President - -- Financial Planning and Analysis. From 1986 through 1991, Mr. Parker served in various financial management positions at American Airlines. MICHAEL R. CARREON. Vice President and Controller. Mr. Carreon joined AWA in December 1994 as Senior Director -- Corporate Audit. On January 1, 1996, he was appointed Vice President and Controller. From 1986 to 1994, Mr. Carreon held accounting and audit-related management positions at United Airlines. Prior to that, he served for five years in the Audit Services Practice of Arthur Andersen & Co. in Chicago. C. A. HOWLETT. Vice President -- Public Affairs of both AWA and Holdings. Mr. Howlett joined AWA in January 1995. Prior to such time, Mr. Howlett maintained a government relations practice as a principal at the law firm of Lewis and Roca in Phoenix. Mr. Howlett's prior work experience has included senior positions with Salt River Project, the City of Phoenix and The White House where he served as special assistant to President Ronald Reagan for intergovernmental affairs. 59 61 CERTAIN TRANSACTIONS AWA has certain alliance agreements with Continental and Mesa (the "Alliance Agreements"). See "Business -- Operations". The Alliance Agreements are designed to enhance AWA's growth in revenue passenger miles and operating results. Continental and Mesa are principal stockholders of Holdings. AWA entered into several agreements with Continental in 1994 and 1995 to implement code-sharing arrangements and to coordinate ground handling operations. AWA paid Continental approximately $21.7 million and received approximately $13.0 million from Continental for such services in 1996. In September 1992, prior to Mesa becoming a significant stockholder, AWA entered into a code-sharing agreement with Mesa. Pursuant to this agreement, which establishes Mesa as a feeder carrier for AWA at its hub in Phoenix, AWA assesses a per passenger charge for facilities, reservations and other services from Mesa for enplanements on the Mesa system. Such payments by Mesa to AWA totalled approximately $3.5 million for 1996. On October 14, 1994, AWA issued $13 million of its 11 1/4% Senior Unsecured Notes due 2001 ("11 1/4% Notes") to Fidelity Management Trust Company and certain of its affiliates ("Fidelity") and $10 million of such notes to Lehman Brothers, Inc. ("Lehman") in satisfaction of certain claims and other prepetition obligations totalling approximately $25 million held by Fidelity and Lehman. Fidelity and Lehman are stockholders of Holdings. In connection with the issuance of such notes, Fidelity and Lehman also received cash payments of $2.1 million and $1.3 million, respectively, representing the portion of claims and other prepetition obligations not satisfied by the issuance of the notes and other payments made in connection with the settlement of such claims. In addition, Fidelity held an additional $100 million principal amount of the 11 1/4% Notes. In August 1995, AWA prepaid $48 million principal amount of the 11 1/4% Notes and exchanged the remaining $75 million principal amount of such notes, held solely by Fidelity, for $75 million of AWA's 10 3/4% Senior Unsecured Notes due 2005 (the "10 3/4% Notes"). In connection with such transaction, Fidelity was paid a fee equal to 3 5/8% of the principal amount of the new notes ($2,718,750). In the second quarter of 1996, AWA prepaid $25 million of the 10 3/4% Notes. In February 1996, AWA helped facilitate the sale by certain principal stockholders of 7,243,000 shares of its Class B Common Stock pursuant to AWA's shelf registration statement filed with the Securities and Exchange Commission (File No. 333-02129). The stockholders participating in such sale were TPG Partners, TPG Parallel, Air Partners, Continental, Mesa and Lehman. Pursuant to its obligations under a registration rights agreement entered into in August 1994, AWA entered into an underwriting agreement in connection with the transaction containing customary provisions for transactions of such nature and incurred expenses of approximately $250,000. John F. Tierney, a director of Holdings and AWA, is the assistant chief executive and finance director of GPA. AWA has entered into various aircraft acquisitions and leasing arrangements with GPA at terms comparable to those obtained from third parties for similar transactions. AWA currently leases eight aircraft from GPA; the rental payments for such leases amounted to $29.5 million for 1996. As of December 31, 1996, AWA was obligated to pay approximately $500 million under these leases which expire at various times throughout the year 2013. In November 1996, the America West Airlines 1996-1 Pass Through Trusts issued $218.6 million of pass through certificates representing fractional undivided interests in such trusts. These certificates were issued to refinance indebtedness incurred by the owner trustees of eight aircraft and three spare engines (the "Equipment") which were subleased to AWA. Prior to the issuance of the certificates, the Equipment was leased to certain United States subsidiaries of GPA (the "GPA Subs," one of which is the Original Lessee), which subleased the Equipment to AWA. As a result of the refinancing, the GPA Subs' interests under leases between the owners of the Equipment and the GPA Subs were assigned to AWA and the leases were amended and restated as leases between the owners and AWA, with each GPA Sub being released from certain of its future obligations thereunder. Also as a result of the refinancing, GPA, the GPA Subs and AWA entered into a Put Termination Agreement (the "Put Termination Agreement") which terminated arrangements with GPA pursuant to which GPA could cause AWA to lease up to four additional aircraft prior to June 30, 1999. Pursuant to the Put Termination Agreement, AWA is obligated to make certain payments to the GPA Subs. For the period from 60 62 November 26, 1996 to December 31, 1996, the GPA Subs received $44,000 from AWA. For the year 1997, the payments due to the GPA Subs under the Put Termination Agreement are estimated to be $500,000. As compared to the payments AWA was obligated to make under the prior subleases with respect to the Equipment, the combined payments by AWA (i) under the Put Termination Agreement to the GPA Subs and (ii) under the restated leases to the owners of the Equipment represent net savings to AWA of approximately $8 million over the remaining 15-year term of the leases. For the period from January 1, 1996, to November 26, 1996, payments from AWA to the GPA Subs under the subleases relating to the Equipment totaled approximately $30.4 million. In connection with the transactions described in this Prospectus relating to the issuance of the Certificates, the Put Termination Agreement will be amended to provide for the obligation of AWA to pay the Original Lessee, over the life of the Leases, certain amounts generally equal in the aggregate to (x) the amounts which AWA would have been required to pay as monthly lease payments under the subleases between AWA and the Original Lessee with respect to the Aircraft (the "Prior Subleases", which will be terminated in connection with AWA entering into the Leases) minus (y) the amount which AWA is required to pay as Basic Rent under the Leases minus (z) an amount which results in a rent savings to AWA, under the Leases as compared to the Prior Subleases, of approximately $3.75 million. With respect to a particular Aircraft, an amount, generally equal to the portion of the amount described in the preceding sentence to be paid with respect to such Aircraft discounted to present value, must be paid in connection with an Event of Loss (as defined herein) with respect thereto (as described under "Description of the Equipment Notes -- The Leases -- Events of Loss"). Pursuant to the amendment of the Put Termination Agreement described above and subject to a number of conditions specified therein, GPA will be obligated to indemnify and reimburse AWA for certain of its costs and expenses (including certain of those arising from indemnification obligations of AWA) incurred in connection with the transactions contemplated by this Prospectus. In addition, GPA has agreed to indemnify AWA against certain liabilities arising under applicable securities laws with respect to certain information in this Prospectus, and AWA has agreed to indemnify GPA against certain liabilities arising under applicable securities laws with respect to certain other information in this Prospectus. After the consummation of the transaction described in this Prospectus, AWA will continue to sublease four of its A320-200 aircraft from the Original Lessee. In May 1996, AWA purchased warrants to purchase 802,860 and 1,384,615 shares of AWA's Class B Common Stock from Continental and GPA, respectively, for $6,531,266 and $11,609,997, respectively. As part of the holding company formation transaction, the AWA warrants became rights to acquire shares of Holdings' Class B Common Stock. In March 1997, AWA purchased warrants to purchase 1,584,915, 159,580 and 167,028 shares of Holdings' Class B Common Stock from TPG, TPG Parallel and Air Partners, respectively, for $11,062,706, $1,113,868 and $1,165,855, respectively. William A. Franke, Chairman of the Board of AWA and Chairman of the Board and Chief Executive Officer of Holdings, serves as a Director and Chairman of the Board of Airplanes Limited and the Controlling Trustee and Chairman of Airplanes U.S. Trust. Such entities were formed to acquire indirectly certain aircraft from GPA, two of which are leased indirectly to AWA. In 1997, AWA expects to enter into leasing arrangements for two additional aircraft from Airplanes U.S. Trust. In 1994 and 1995, AWA loaned Mr. Franke $470,282 and $203,136, respectively, for the purpose of enabling him to pay income taxes attributable to certain grants of AWA's Class B Common Stock made to Mr. Franke in 1994. In January 1996, AWA loaned Mr. Franke an additional $40,000 in connection with such grants. The loans are each payable in two equal installments on September 26, 2000 and September 26, 2001. The 1994 loan bears interest (payable semi-annually) at the rate of 8% per annum (11% per annum after maturity) and the 1995 and 1996 loans bear interest at the rate of 6.02% per annum (10% per annum after maturity). The loans are secured by a portion of the shares granted to Mr. Franke, but are otherwise non-recourse to Mr. Franke. 61 63 In 1996, AWA loaned Mr. Franke $644,704 for the purpose of enabling him to pay income taxes attributable to a grant of AWA's Class B Common Stock made to him in 1996. The loan is payable in two equal installments on September 26, 2000 and September 26, 2001 and bears interest (payable semi-annually) at the rate of 5.65% per annum (10% per annum after maturity). The loan is secured by a portion of the shares granted to Mr. Franke, but is otherwise nonrecourse to him. 62 64 DESCRIPTION OF THE CERTIFICATES The Certificates offered hereby will be issued pursuant to four separate Trust Supplements to be entered into between AWA and the Trustee pursuant to the terms of the Basic Agreement. The following summary describes certain terms of the Certificates, the Basic Agreement and the Trust Supplements, forms of which have been filed as exhibits to the Registration Statement. The statements under this caption are a summary and do not purport to be complete. The summary makes use of terms defined in, and is qualified in its entirety by reference to, all of the provisions of the Basic Agreement and the Trust Supplements. Except as otherwise indicated, the following summary relates to each of the Trusts and the Certificates issued by each Trust. The terms and conditions governing each of the Trusts will be substantially the same, except as described under "-- Subordination" below and except that the principal amount, the interest rate, scheduled repayments of principal and maturity date applicable to the Equipment Notes held by each Trust and the Final Expected Distribution Date applicable to each Trust will differ. Section references in parentheses are to the relevant sections of the Basic Agreement, unless otherwise indicated. GENERAL The Certificates of each Trust will be issued in fully registered form only and will be subject to the provisions described below under "-- Delivery and Form; Book-Entry". (Section 3.01) Each Certificate will represent a fractional undivided interest in the Trust created by the Pass Through Trust Agreement pursuant to which such Certificate is issued. (Section 2.01) The Trust Property will consist of (i) the Equipment Notes held in such Trust, all monies at any time paid thereon and all monies due and to become due thereunder, (ii) the rights of such Trust under the Intercreditor Agreement (including all monies receivable in respect of such rights), (iii) except for the Class D Trust, all monies receivable under the Liquidity Facility for such Trust and (iv) funds from time to time deposited with the Trustee in accounts relating to such Trust. (Section 1.01) Certificates will represent pro rata shares of the Equipment Notes and other property held in the related Trust and will be issued in denominations of $1,000 and integral multiples thereof, except one Certificate which may be issued in a different denomination. (Sections 2.01 and 3.01) The Certificates represent interests in the respective Trusts and all payments and distributions thereon will be made only from the Trust Property of the related Trust. (Section 3.08) The Certificates do not represent an interest in or obligation of AWA or Holdings, any Trustee, Indenture Trustee, Owner Trustee, Owner Participant, or any affiliate of any thereof. Each Certificateholder by its acceptance of a Certificate agrees to look solely to the income and proceeds from the Trust Property of the related Trust as provided in the Pass Through Trust Agreements. The Equipment Notes issued under an Indenture may be held in more than one Trust and one Trust may hold Equipment Notes issued under more than one Indenture. SUBORDINATION Pursuant to the Intercreditor Agreement to which the Trustees, the Subordination Agent and the Liquidity Provider will be parties, on each Distribution Date, so long as no Triggering Event shall have occurred (whether or not continuing), all payments received by the Subordination Agent in respect of the Equipment Notes and certain other payments will be distributed in the following order: (a) payment of the Liquidity Obligations to the Liquidity Provider and, if applicable to replenish Cash Collateral Accounts up to their respective Required Amounts; (b) payment of Expected Distributions to the holders of Class A Certificates; (c) payment of Expected Distributions to the holders of Class B Certificates; (d) payment of Expected Distributions to the holders of Class C Certificates; (e) payment of Expected Distributions to the holders of Class D Certificates; and (f) payment of certain fees and expenses of the Subordination Agent and each Trustee. Upon the occurrence of a Triggering Event and at all times thereafter, all payments received by the Subordination Agent in respect of the Equipment Notes and certain other payments will be distributed in the following order: (a) to reimburse the Subordination Agent, each Trustee, the Liquidity Provider, and any Certificateholder, as the case may be, for the payment of Administration Expenses; (b) to the Liquidity 63 65 Provider in payment of Liquidity Obligations and, so long as no Performing Note Deficiency exists and no Liquidity Event of Default has occurred and is continuing, to replenish Cash Collateral Accounts up to their respective Required Amounts; (c) to reimburse the Subordination Agent, each Trustee and each Certificateholder, as the case may be, for the payment of Certain Taxes and Fees; (d) to pay Adjusted Expected Distributions to the holders of Class A Certificates; (e) to pay Adjusted Expected Distributions to the holders of Class B Certificates; (f) to pay Adjusted Expected Distributions to the holders of Class C Certificates and (g) to pay Adjusted Expected Distributions to the holders of Class D Certificates. The priority of distributions after a Triggering Event will have the effect in certain circumstances of distributing payments received in respect of one or more junior series of Equipment Notes to more senior Classes of Certificates. If this should occur, the interest accruing on the remaining Equipment Notes would be less than the interest accruing on the remaining Certificates because the Certificates would have a greater proportion of high interest rate junior Classes of Certificates. As a result of such possible interest shortfalls, the holders of one or more junior Classes of Certificates may not receive the full amount due them after a Triggering Event even if all the Equipment Notes are eventually paid in full. PAYMENTS AND DISTRIBUTIONS Payments of principal, Make-Whole Amount (if any) and interest with respect to the Equipment Notes or other Trust Property held in each Trust will be distributed by the Trustee to Certificateholders of such Trust on the date receipt of such payment is confirmed except in the case of certain types of Special Payments. The Equipment Notes held in each Trust will accrue interest at the applicable rate per annum for the Certificates issued by such Trust as set forth on the cover page of this Prospectus, payable on January 2 and July 2 of each year, commencing January 2, 1998, and such interest payments will be passed through to Certificateholders of such Trust on each such date until the final Distribution Date for such Trust, in each case subject to the Intercreditor Agreement. Interest is calculated on the basis of a 360-day year consisting of twelve 30-day months. Payments of interest on the Certificates to be issued by each Trust (other than the Class D Trust) will be supported by a separate Liquidity Facility to be provided by the Liquidity Provider for the benefit of the holders of such Certificates in an amount sufficient to pay interest thereon at the Stated Interest Rate for such Trust on three successive Regular Distribution Dates. Notwithstanding the subordination provisions of the Intercreditor Agreement, the Liquidity Facility for any Class of Certificates does not provide for drawings thereunder to pay principal of or interest or Make-Whole Amount on the Certificates of any other Class. Therefore, only the holders of the Certificates to be issued by a particular Trust will be entitled to receive and retain the proceeds of drawings under the Liquidity Facility for such Trust. There is no Liquidity Facility for the Class D Trust. See "Description of the Liquidity Facilities". Payments of principal on the Equipment Notes held in each Trust are scheduled to be received by the Trustee on January 2 or July 2 or both, in certain years depending upon the terms of the Equipment Notes held in such Trust, commencing January 2, 1998, in accordance with the principal repayment schedule set forth herein in each case subject to the Intercreditor Agreement. Scheduled payments of interest and principal on the Equipment Notes are herein referred to as "Scheduled Payments", and January 2 and July 2 of each year are herein referred to as "Regular Distribution Dates". See "Description of the Equipment Notes -- Principal and Interest Payments". The Final Expected Distribution Date for each Class of Certificates is set forth on the cover page of this Prospectus. The Trustee of each Trust will distribute, subject to the Intercreditor Agreement, on each Regular Distribution Date to the Certificateholders of such Trust all Scheduled Payments, the receipt of which is confirmed by the Trustee on such Regular Distribution Date. Each Certificateholder of each Trust will be entitled to receive a pro rata share of any distribution in respect of Scheduled Payments made on the Equipment Notes held in such Trust. Each such distribution of Scheduled Payments will be made by the Trustee of each Trust to the Certificateholders of record of such Trust on the Record Date applicable to such Scheduled Payment subject to certain exceptions. (Section 4.02) If a Scheduled Payment is not received by the Trustee on a Regular Distribution Date but is received within five days thereafter, it will be distributed to such holders of record on the date received. If it is received after such five-day period, it will be treated as a 64 66 Special Payment (as defined below) and distributed as described below, except that payments received by the Trustee following default in respect of the Equipment Notes on a Regular Distribution Date as a result of a drawing under the Liquidity Facility shall be distributed on such Regular Distribution Date. Any payment in respect of, or any proceeds of, any Equipment Note or the Trust Indenture Estate under (and as defined in) each Indenture (other than a Scheduled Payment) (each, a "Special Payment") will be scheduled to be distributed to the Certificateholders on the first business day which follows the later to occur of (x) the 22nd day after the date the Trustees receive written notice from the Subordination Agent of such Special Payment or (y) the date the Subordination Agent receives or expects to receive such Special Payment (the "Special Distribution Date"). (Intercreditor Agreement, Section 2.4(a)) Each Trustee will mail notice to the Certificateholders of the applicable Trust stating the scheduled Special Distribution Date, the related Record Date, the amount of such Special Payment, and the reason for the Special Payment. In the case of a redemption or purchase of the Equipment Notes held in the related Trust, such notice will be mailed not less than 20 days prior to the date such Special Payment is scheduled to be distributed, and in the case of any other Special Payment, such notice will be mailed as soon as practicable after the Trustee has confirmed that it has received funds for such Special Payment. (Section 4.02(c)) Each distribution of a Special Payment, other than a final distribution, on a Distribution Date for any Trust will be made by the Trustee to the Certificateholders of record of such Trust on the Record Date applicable to such Special Payment. (Section 4.02(b)) See "-- Indenture Events of Default and Certain Rights Upon an Indenture Event of Default" and "Description of the Equipment Notes -- Redemption". Each Pass Through Trust Agreement requires that the Trustee establish and maintain, for the related Trust and for the benefit of the Certificateholders of such Trust, one or more accounts (the "Certificate Account") for the deposit of payments representing Scheduled Payments on the Equipment Notes held in such Trust. Each Pass Through Trust Agreement also requires that the Trustee establish and maintain, for the related Trust and for the benefit of the Certificateholders of such Trust, one or more accounts (the "Special Payments Account") for the deposit of payments representing Special Payments, which account shall be non-interest bearing except in certain circumstances where the Trustee may invest amounts in such account in certain permitted investments. Pursuant to the terms of each Pass Through Trust Agreement, the Trustee is required to deposit any Scheduled Payments relating to the applicable Trust received by it in the Certificate Account of such Trust and to deposit any Special Payments so received by it in the Special Payments Account of such Trust. (Section 4.01) All amounts so deposited will be distributed by the Trustee on a Regular Distribution Date or a Special Distribution Date, as appropriate. (Section 4.02) Distributions by the Trustee from the Certificate Account or the Special Payments Account of each Trust on a Regular Distribution Date or a Special Distribution Date in respect of Certificates issued by such Trust in definitive form will be made to each Certificateholder of record of such Certificates on the applicable Record Date. (Section 4.02) The final distribution for each Trust, however, will be made only upon presentation and surrender of the Certificates for such Trust at the office or agency of the Trustee specified in the notice given by the Trustee of such final distribution. The Trustee will mail such notice of the final distribution to the Certificateholders of such Trust, specifying the date set for such final distribution and the amount of such distribution. (Section 11.01) See "-- Termination of the Trusts". Distributions in respect of Certificates issued in global form will be made as described in "-- Delivery and Form; Book-Entry" below. If any Regular Distribution Date or Special Distribution Date is not a business day, distributions scheduled to be made on such Regular Distribution Date or Special Distribution Date will be made on the next succeeding business day without additional interest. POOL FACTORS Unless there has been a redemption, purchase or a default in the payment of principal or interest in respect of one or more issues of the Equipment Notes held in a Trust, as described in "-- Indenture Events of Default and Certain Rights Upon an Indenture Event of Default" and "Description of the Equipment Notes Redemption", the Pool Factor with respect to each Trust will decline in proportion to the scheduled repayments of principal on the Equipment Notes held in such Trust as described below in "Description of the 65 67 Equipment Notes -- General". In the event of such redemption, purchase or default, the Pool Factor and the Pool Balance of each Trust so affected will be recomputed after giving effect thereto and notice thereof will be mailed to the Certificateholders of such Trust. Each Trust will have a separate Pool Factor. The "Pool Balance" for each Trust or for the Certificates issued by any Trust indicates, as of any date, the original aggregate face amount of the Certificates of such Trust less the aggregate amount of all payments made in respect of the Certificates of such Trust other than payments made in respect of interest or Make-Whole Amount thereon or reimbursement of any costs and expenses in connection therewith. The Pool Balance for each Trust or for the Certificates issued by any Trust as of any Regular Distribution Date or Special Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property held in such Trust and the distribution thereof to be made on that date. (Section 1.01) The "Pool Factor" for each Trust as of any Regular Distribution Date or Special Distribution Date is the quotient (rounded to the seventh decimal place) computed by dividing (i) the Pool Balance of such Trust as of such date by (ii) the original aggregate face amount of the Certificates of such Trust. The Pool Factor for each Trust as of any Regular Distribution Date or Special Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property held in such Trust and the distribution thereof to be made on that date. (Section 1.01) Assuming that no redemption, purchase or default, in respect of any Equipment Notes shall have occurred, the Pool Factor for each Trust will be 1.0000000 on the date of issuance of the Certificates; thereafter, the Pool Factor for each Trust will decline as described herein to reflect reductions in the Pool Balance of such Trust. The amount of a Certificateholder's pro rata share of the Pool Balance of a Trust can be determined by multiplying the par value of the holder's Certificate of such Trust by the Pool Factor for such Trust as of the applicable Regular Distribution Date or Special Distribution Date. Notice of the Pool Factor and the Pool Balance for each Trust will be mailed to Certificateholders of such Trust on each Regular Distribution Date and Special Distribution Date. (Section 4.03) 66 68 As of the date of sale by the Trustee of the Certificates and assuming that no redemption, purchase or default in the payment of principal, in respect of any Equipment Notes shall occur, the Scheduled Payments of principal on the Equipment Notes held in the Class A Trust, the Class B Trust, the Class C Trust and the Class D Trust, and the resulting Pool Factors for such Trusts after taking into account each Scheduled Payment, are set forth below:
CLASS A CLASS B CLASS C TRUST TRUST TRUST EQUIPMENT EQUIPMENT EQUIPMENT NOTES CLASS A NOTES CLASS B NOTES CLASS C SCHEDULED TRUST SCHEDULED TRUST SCHEDULED TRUST PAYMENTS OF EXPECTED PAYMENTS EXPECTED PAYMENTS OF EXPECTED DATES PRINCIPAL POOL FACTOR OF PRINCIPAL POOL FACTOR PRINCIPAL POOL FACTOR ----- ----------- ----------- ------------ ----------- ----------- ----------- ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... CLASS D TRUST EQUIPMENT NOTES CLASS D SCHEDULED TRUST PAYMENTS EXPECTED DATES OF PRINCIPAL POOL FACTOR ----- ------------ ----------- ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... ..................................... .....................................
Any failure to make expected principal distributions on any Class of Certificates on any Regular Distribution Date (other than the Final Legal Distribution Date) will not constitute a PTC Event of Default with respect to such Certificates. REPORTS TO CERTIFICATEHOLDERS On each Regular Distribution Date and Special Distribution Date, the applicable Trustee will include with each distribution of a Scheduled Payment or Special Payment, respectively, to Certificateholders of the related Trust a statement, giving effect to such distribution to be made on such Regular Distribution Date or Special Distribution Date, setting forth the following information (per $1,000 aggregate principal amount of Certificate for such Trust, as to (i) and (ii) below): (i) the amount of such distribution allocable to principal and the amount allocable to Make-Whole Amount (if any); (ii) the amount of such distribution allocable to interest; and (iii) the Pool Balance and the Pool Factor for such Trust. (Section 4.03) With respect to the Certificates registered in the name of DTC's nominee on the Record Date prior to each Distribution Date, the applicable Trustee will request from DTC a securities position listing setting forth the names of all DTC Participants reflected on DTC's books as holding interests in the Certificates on such Record Date. On each Distribution Date, the applicable Trustee will mail to each such DTC Participant the 67 69 statement described above and will make available additional copies as requested by such DTC participant for forwarding to holders of Certificates. (Section 4.03(a)) See "-- Delivery and Form; Book-Entry". In addition, after the end of each calendar year, the applicable Trustee will furnish to each Certificateholder of each Trust at any time during the preceding calendar year a report containing the sum of the amounts determined pursuant to clauses (i) and (ii) above with respect to the Trust for such calendar year or, in the event such person was a Certificateholder during only a portion of such calendar year, for the applicable portion of such calendar year, and such other items as are readily available to such Trustee and which a Certificateholder shall reasonably request as necessary for the purpose of such Certificateholder's preparation of its U.S. federal income tax returns. With respect to Certificates registered in the name of DTC's nominee, such report and such other items shall be prepared on the basis of information supplied to the applicable Trustee by the DTC Participants and shall be delivered by such Trustee to such DTC Participants to be available for forwarding by such DTC Participants to Certificate Owners in the manner described above. (Section 4.03(b)) INDENTURE EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN INDENTURE EVENT OF DEFAULT An event of default under an Indenture (an "Indenture Event of Default") will include an event of default under the related Lease (a "Lease Event of Default"). See "Description of Equipment Notes -- Indenture Events of Default; Notice and Waiver". Since the Equipment Notes issued under an Indenture will be held in more than one Trust, a continuing Indenture Event of Default under such Indenture would affect the Equipment Notes held by each such Trust. There are no cross-default provisions in the Indentures or the Leases. Consequently, events resulting in an Indenture Event of Default under any particular Indenture may or may not result in an Indenture Event of Default under any other Indenture. If an Indenture Event of Default occurs in fewer than all of the Indentures, notwithstanding the treatment of Equipment Notes issued under any Indenture under which an Indenture Event of Default has occurred, payments of principal and interest on the Equipment Notes issued pursuant to Indentures with respect to which an Indenture Event of Default has not occurred will continue to be distributed to the holders of the Certificates as originally scheduled, subject to the Intercreditor Agreement. See "Description of the Intercreditor Agreement - -- Priority of Distributions". With respect to each Aircraft, the applicable Owner Trustee and Owner Participant will, under the related Indenture, have the right under certain circumstances to cure Indenture Events of Default that result from the occurrence of a Lease Event of Default under the related Lease. If the Owner Trustee or the Owner Participant exercises any such cure right, the Indenture Event of Default will be deemed to have been cured. Because the Equipment Notes outstanding under an Indenture will be held by more than one Trust, the ability of the Certificateholders with respect to any one Trust to cause the Indenture Trustee with respect to any Equipment Notes held in such Trust to accelerate the Equipment Notes under the related Indenture or to direct the exercise of remedies by the Indenture Trustee under the related Indenture will depend, in part, upon the proportion between the aggregate unpaid principal amount of the Equipment Notes outstanding under such Indenture and held in such Trust and the aggregate unpaid principal amount of all Equipment Notes outstanding under such Indenture. Because the Equipment Notes outstanding under an Indenture will be held by more than one Trust, each Trust will hold Equipment Notes with different terms from the Equipment Notes held in the other Trusts and therefore the Certificateholders of a Trust may have divergent or conflicting interests from those of the Certificateholders of the other Trusts holding Equipment Notes relating to the same Indenture. In the event that the same institution acts as Trustee of multiple Trusts, in the absence of instructions from the Certificateholders of any such Trust, such Trustee could be faced with a potential conflict of interest upon an Indenture Event of Default. In such event, one or more Trustees may resign as Trustee of one or all such Trusts, and a successor trustee would then be appointed in accordance with the terms of the applicable Pass Through Trust Agreement. Fleet National Bank will be the initial Trustee under each Trust. 68 70 Upon the occurrence and during the continuation of any Indenture Event of Default under any Indenture, the Controlling Party shall direct the Indenture Trustee under such Indenture in the exercise of remedies thereunder and may accelerate and sell all (but not less than all) of the Equipment Notes issued under such Indenture to any person, subject to certain limitations. See "Description of the Intercreditor Agreement -- Sale of Equipment Notes and Aircraft". The proceeds of such sale will be distributed pursuant to the provisions of the Intercreditor Agreement. Any proceeds received by the applicable Trustee upon any such sale shall be deposited in the applicable Special Payments Account and shall be distributed to the Certificateholders of such Trust on a Special Distribution Date. (Sections 4.01 and 4.02) The market for Equipment Notes at the time of the existence of any Indenture Event of Default may be very limited, and there can be no assurance as to the price at which they could be sold. If the Controlling Party sells any such Equipment Notes for less than their outstanding principal amount, certain Certificateholders will receive a smaller amount of principal distributions than anticipated and will not have any claim for the shortfall against AWA, any Owner Trustee, any Owner Participant or any Trustee. Any amount, other than Scheduled Payments received on a Regular Distribution Date, distributed to the Trustee of any Trust by the Subordination Agent on account of the Equipment Notes or other Trust Property held in such Trust following an Indenture Event of Default under any Indenture shall be deposited in the Special Payments Account for such Trust and shall be distributed to the Certificateholders of such Trust on a Special Distribution Date. (Sections 4.01 and 4.02) In addition, if, following an Indenture Event of Default under any Indenture, the applicable Owner Participant or Owner Trustee exercises its option to purchase the outstanding Equipment Notes issued under such Indenture, the price paid by such Owner Participant or Owner Trustee for the Equipment Notes issued under such Indenture and distributed to such Trust by the Subordination Agent shall be deposited in the Special Payments Account for such Trust and shall be distributed to the Certificateholders of such Trust on a Special Distribution Date. (Sections 4.01 and 4.02) Any funds representing payments received with respect to any defaulted Equipment Notes held in a Trust, or the proceeds from the sale of any Equipment Notes, held by such Trustee in the Special Payments Account for such Trust shall, to the extent practicable, be invested and reinvested by such Trustee in Permitted Investments pending the distribution of such funds on a Special Distribution Date. (Section 4.04) Permitted Investments are defined as obligations of the United States or agencies or instrumentalities thereof the payment of which is backed by the full faith and credit of the United States and which mature in not more than 60 days or such lesser time as is required for the distribution of any such funds on a Special Distribution Date. (Section 1.01) Each Pass Through Trust Agreement provides that the Trustee of the related Trust shall, within 90 days after the occurrence of any default, give to the Certificateholders of such Trust notice, transmitted by mail, of all uncured or unwaived defaults with respect to such Trust known to it, provided that, except in the case of default in the payment of principal, Make-Whole Amount, if any, or interest on any Equipment Note the applicable Trustee shall be protected in withholding such notice if and so long as it in good faith determines that the withholding of such notice is in the interests of such Certificateholders. (Section 7.01) The term "default" as used in this paragraph with respect to any Trust only means the occurrence of an Indenture Event of Default under any Indenture pursuant to which Equipment Notes held by such Trust were issued, as described above, except that in determining whether any such Indenture Event of Default has occurred, any grace period or notice in connection therewith shall be disregarded. Each Pass Through Trust Agreement contains a provision entitling the Trustee of the related Trust, subject to the duty of such Trustee during a default to act with the required standard of care, to be offered reasonable security or indemnity by the holders of the Certificates of such Trust before proceeding to exercise any right or power under such Pass Through Agreement at the request of such Certificateholders. (Section 7.02(e)) In certain cases, the holders of the Certificates of a Trust evidencing fractional undivided interests aggregating not less than a majority in interest of such Trust may on behalf of the holders of all the Certificates of such Trust waive any past default under the related Pass Through Trust Agreement or, if the Trustee of such Trust is the Controlling Party, may direct the Trustee to instruct the applicable Indenture 69 71 Trustee to waive any past Indenture Event of Default with respect to Equipment Notes held in such Trust and thereby annul any direction given by such holders or the Trustee to such Indenture Trustee with respect thereto, except (i) a default in the deposit of any Scheduled Payment or Special Payment or in the distribution thereof, (ii) a default in payment of the principal, Make-Whole Amount, if any, or interest with respect to any of the Equipment Notes held in such Trust and (iii) a default in respect of any covenant or provision of the related Pass Through Trust Agreement that cannot be modified or amended without the consent of each Certificateholder of such Trust affected thereby. (Section 6.05) Each Indenture will provide that, with certain exceptions, the holders of the majority in aggregate unpaid principal amount of the Equipment Notes issued thereunder may on behalf of all such holders waive any past Indenture Event of Default thereunder. Notwithstanding the foregoing provisions of this paragraph, however, pursuant to the Intercreditor Agreement, only the Controlling Party will be entitled to waive any such past default or Indenture Event of Default. PURCHASE RIGHTS OF CERTIFICATEHOLDERS Upon the occurrence and during the continuation of a Triggering Event, with ten days' written notice to the Trustee and each other Certificateholder of the same Class, (i) the Class B Certificateholders shall have the right to purchase all, but not less than all, of the Class A Certificates, (ii) the Class C Certificateholders shall have the right to purchase all, but not less than all, of the Class A Certificates and the Class B Certificates and (iii) the Class D Certificateholders shall have the right to purchase all, but not less than all, of the Class A Certificates, the Class B Certificates and the Class C Certificates, in each case at a purchase price equal to the Pool Balance of the relevant Class or Classes of Certificates plus accrued and unpaid interest thereon to the date of purchase without any Make-Whole Amount but including any other amounts due to the Certificateholders of such Class or Classes. In each case, if prior to the end of the ten-day period, any other Certificateholder of the same Class notifies the purchasing Certificateholder that the other Certificateholder wants to participate in such purchase, then such other Certificateholder may join with the purchasing Certificateholder to purchase the Certificates pro rata based on the interest in the Trust held by each Certificateholder. (Section 6.01(b)) PTC EVENT OF DEFAULT A PTC Event of Default is defined under each Pass Through Trust Agreement as the failure to pay within 10 business days of the due date thereof: (i) the outstanding Pool Balance of the applicable Class of Certificates on the Final Legal Distribution Date for such Class or (ii) interest due on such Class of Certificates on any Distribution Date (unless, in the case of the Class A, B or C Certificates, the Subordination Agent shall have made an Interest Drawing with respect thereto in an amount sufficient to pay such interest and shall have distributed such amount to the Certificateholders entitled thereto). A PTC Event of Default with respect to the most senior Class of Certificates resulting from an Indenture Event of Default under all Indentures will constitute a Triggering Event. MERGER, CONSOLIDATION AND TRANSFER OF ASSETS AWA will be prohibited from consolidating with or merging into any other corporation or transferring substantially all of its assets as an entirety to any other corporation unless (i) the surviving successor or transferee corporation shall (a) be a "citizen of the United States" as defined in Section 40102(a)(15) of Title 49 of the United States Code, as amended, relating to aviation (the "Federal Aviation Act"), (b) be a United States certificated air carrier and (c) expressly assume all of the obligations of AWA contained in the Pass Through Trust Agreements, the Refunding Agreements, the Indentures, the Leases, and certain related documents; (ii) immediately after giving effect to such transaction, no Indenture Event of Default shall have occurred and be continuing; and (iii) AWA shall have delivered a certificate and an opinion or opinions of counsel indicating that such transaction complies with such conditions. (Section 5.02) The Pass Through Trust Agreements, the Leases, the Indentures and the Refunding Agreements will not contain any covenants or provisions which may afford the applicable Trustee or Certificateholders protection 70 72 in the event of a highly leveraged transaction, including transactions effected by management or affiliates, which may or may not result in a change in control of AWA. MODIFICATIONS OF THE PASS THROUGH TRUST AGREEMENTS AND CERTAIN OTHER AGREEMENTS Each Pass Through Trust Agreement contains provisions permitting the execution by AWA and the Trustee of one or more agreements supplemental to such Pass Through Trust Agreement or, if applicable, to the Intercreditor Agreement, any Refunding Agreement, any Liquidity Facility or any Indenture, without the consent of the holders of any of the Certificates of the related Trust, (i) to evidence the succession of another corporation to AWA and the assumption by such corporation of AWA's obligations under such Pass Through Trust Agreement, (ii) to add to the covenants of AWA for the benefit of holders of such Certificates or to surrender any right or power in such Pass Through Trust Agreement conferred upon AWA, (iii) to correct or supplement any provision of such Pass Through Trust Agreement, the Intercreditor Agreement, any Refunding Agreement, any Liquidity Facility or any Indenture which may be defective or inconsistent with any other provision in such Pass Through Trust Agreement or to cure any ambiguity, correct any mistake, or to modify any other provisions with respect to matters or questions arising under such Pass Through Trust Agreement, the Intercreditor Agreement, any Refunding Agreement, any Liquidity Facility or any Indenture, provided such action shall not materially adversely affect the interests of the holders of such Certificates, (iv) to add to such Pass Through Trust Agreement such other provisions as may be expressly permitted by the Trust Indenture Act and (v) to provide for a successor Trustee or to add to or change any provision of such Pass Through Trust Agreement as shall be necessary to facilitate the administration of the Trust thereunder by more than one Trustee, provided that in each case, such modification does not adversely affect the status of the Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Code for U.S. federal income tax purposes. (Section 9.01) Each Pass Through Trust Agreement also contains provisions permitting the execution, with the consent of the holders of the Certificates of the related Trust evidencing fractional undivided interests aggregating not less than a majority in interest of such Trust, and with the consent of the applicable Owner Trustee (such consent not to be unreasonably withheld), of supplemental trust agreements adding any provisions to or changing or eliminating any of the provisions of such Pass Through Trust Agreement or, if applicable, the Intercreditor Agreement, any Liquidity Facility or any Refunding Agreement or modifying the rights of the Certificateholders, except that no such supplemental agreement may, without the consent of the holder of each Certificate so affected thereby, (a) reduce in any manner the amount of, or delay the timing of, any receipt by the Trustee of payments on the Equipment Notes held in such Trust or distributions in respect of any Certificate related to such Trust, or change the date or place of any payment in respect of any Certificate, or make distributions payable in coin or currency other than that provided for in such Certificates, or impair the right of any Certificateholder of such Trust to institute suit for the enforcement of any such payment when due, (b) permit the disposition of any Equipment Note held in such Trust, except as provided in such Pass Through Trust Agreement, or otherwise deprive any Certificateholder of the benefit of the ownership of the applicable Equipment Notes, (c) alter the priority of distributions specified in the Intercreditor Agreement, (d) reduce the percentage of the aggregate fractional undivided interests of the Trust provided for in such Pass Through Trust Agreement, the consent of the holders of which is required for any such supplemental agreement or for any waiver provided for in such Pass Through Trust Agreement, (e) modify any of the provisions relating to supplemental agreements that may be executed with the consent of Certificateholders as described in this paragraph or relating to the rights of the Certificateholders in respect of the waiver of Events of Default or receipt of payment or (f) adversely affect the status of the Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Code for U.S. federal income tax purposes. (Section 9.02) TERMINATION OF THE TRUSTS The obligations of AWA, if any, and the Trustee with respect to a Trust will terminate upon the distribution to Certificateholders of such Trust of all amounts required to be distributed to them pursuant to the applicable Pass Through Trust Agreement and the disposition of all property held in such Trust. The 71 73 Trustee will send to each Certificateholder of record of such Trust notice of the termination of such Trust, the amount of the proposed final payment and the proposed date for the distribution of such final payment for such Trust. The final distribution to any Certificateholder of such Trust will be made only upon surrender of such Certificateholder's Certificates at the office or agency of the applicable Trustee specified in such notice of termination. (Section 11.01) THE TRUSTEE Fleet National Bank will act as Trustee and as paying agent and registrar for the Certificates of each Trust. With certain exceptions, the Trustee makes no representations as to the validity or sufficiency of the Basic Agreement, the Trust Supplements, the Refunding Agreements, the Intercreditor Agreement, the Certificates, the Equipment Notes, the Indentures, the Leases or other related documents. (Sections 7.03 and 7.14) The Trustee of any Trust shall not be liable, with respect to the Certificates of such Trust, for any action taken or omitted to be taken by it in good faith in accordance with the direction of the holders of a majority in principal amount of outstanding Certificates of such Trust. Subject to certain provisions, the Trustee shall be under no obligation to exercise any of its rights or powers under any Pass Through Trust Agreement at the request of any holders of Certificates issued thereunder unless there shall have been offered to the Trustee reasonable indemnity. (Section 7.02(e)) Each Pass Through Trust Agreement provides that the Trustee, in its individual or any other capacity, may acquire and hold Certificates issued thereunder and, subject to certain conditions, may otherwise deal with AWA, any Owner Trustees or the Indenture Trustees with the same rights it would have if it were not the Trustee. (Section 7.04) The Trustee may resign with respect to any or all of the Trusts at any time, in which event AWA will be obligated to appoint a successor trustee. If the Trustee ceases to be eligible to continue as Trustee with respect to a Trust or becomes incapable of acting as Trustee or becomes insolvent, AWA may remove such Trustee, or, alternatively, any Certificateholder of such Trust 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 such Trustee and the appointment of a successor trustee. (Sections 7.07 and 7.08) Any resignation or removal of the Trustee with respect to a Trust and appointment of a successor trustee for such Trust does not become effective until acceptance of the appointment by the successor trustee. Pursuant to such resignation and successor trustee provisions, it is possible that a different trustee could be appointed to act as the successor trustee with respect to each Trust. All references in this Prospectus to the Trustee should be read to take into account the possibility that the Trusts could have different successor trustees in the event of such a resignation or removal. The Basic Agreement provides that AWA will pay, or cause to be paid, the Trustee's fees and expenses and indemnify, or cause to be indemnified, the Trustee against certain liabilities. (Section 7.06) DELIVERY AND FORM; BOOK-ENTRY GENERAL Upon issuance, each Class of Certificates will be represented by one or more fully registered global certificates (the "Global Certificates"). Each Global Certificate will be deposited with, or on behalf of, The Depository Trust Company ("DTC ") and registered in the name of Cede & Co. ("Cede") or its nominee. No person acquiring an interest in such Global Certificates ("Certificate Owner") will be entitled to receive a certificate representing such person's interest in such Certificates, except as set forth below under "-- Definitive Certificates." Unless and until Definitive Certificates are issued under the limited circumstances described herein, all references to actions by Certificateholders shall refer to actions taken by DTC upon instructions from DTC Participants (as defined below), and all references herein to distributions, notices, reports and statements to Certificateholders shall refer, as the case may be, to distributions, notices, reports and statements to DTC or Cede, as the registered holder of such Global Certificates, or to DTC Participants for distribution to Certificate Owners in accordance with DTC procedures. DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and "clearing agency" registered pursuant to section 17A of the Exchange Act. DTC was 72 74 created to hold securities for its participants ("DTC Participants") and to facilitate the clearance and settlement of securities transactions between DTC Participants through electronic book-entries, thereby eliminating the need for physical transfer of certificates. DTC Participants include securities brokers and dealers, banks, trust companies and clearing corporations. Indirect access to the DTC system also is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant either directly or indirectly ("Indirect Participants"). Certificate Owners that are not DTC Participants or Indirect Participants but desire to purchase, sell or otherwise transfer ownership of, or other interests in, the Global Certificates may do so only through DTC Participants and Indirect Participants. In addition, Certificate Owners will receive all distributions of principal and interest from the Trustee through DTC Participants or Indirect Participants, as the case may be. Under a book-entry format, Certificate Owners may experience some delay in their receipt of payments, because such payments will be forwarded by the Trustee to Cede, as nominee for DTC. DTC will forward such payments in same-day funds to DTC Participants who are credited with ownership of the Certificates in amounts proportionate to the principal amount of each such DTC Participant's respective holdings of beneficial interests in the Global Certificates. DTC Participants will thereafter forward payments to Indirect Participants or Certificate Owners, as the case may be, in accordance with customary industry practices. The forwarding of such distributions to the Certificate Owners will be the responsibility of such DTC Participants. Unless and until the Definitive Certificates are issued under the limited circumstances described herein, the only "Certificateholder" will be Cede, as nominee of DTC. Certificate Owners will not be recognized by the Trustee as Certificateholders, as such term is used in the Basic Agreement, and Certificate Owners will be permitted to exercise the rights of Certificateholders only indirectly through DTC and DTC Participants. Under the rules, regulations and procedures creating and affecting DTC and its operations (the "Rules"), DTC is required to make book-entry transfers of the Certificates among DTC Participants on whose behalf it acts with respect to the Certificates and to receive and transmit distributions of principal, Make-Whole Amount, if any, and interest with respect to the Certificates. DTC Participants and Indirect Participants with which Certificate Owners have accounts with respect to the Certificates similarly are required to make book- entry transfers and receive and transmit such payments on behalf of their respective customers. Accordingly, although Certificate Owners will not possess the Certificates, the Rules provide a mechanism by which Certificate Owners will receive payments and will be able to transfer their interests. Because DTC can only act on behalf of DTC Participants, who in turn act on behalf of Indirect Participants, the ability of a Certificate Owner to pledge the Certificates to persons or entities that do not participate in the DTC system, or to otherwise act with respect to such Certificates, may be limited due to the lack of a physical certificate for such Certificates. DTC will take any action permitted to be taken by a Certificateholder under the Basic Agreement only at the direction of one or more DTC Participants to whose accounts with DTC the Certificates are credited. Additionally, DTC has advised that in the event any action requires approval by Certificateholders of a certain percentage of beneficial interest in each Trust, DTC will take such action only at the direction of and on behalf of DTC Participants whose holders include undivided interests that satisfy any such percentage. DTC may take conflicting actions with respect to other undivided interests to the extent that such actions are taken on behalf of DTC Participants whose holders include such undivided interests. Neither AWA nor the Trustee will have any liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Certificates held by Cede, as nominee for DTC, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that AWA believes to be reliable, but AWA takes no responsibility for the accuracy thereof. DEFINITIVE CERTIFICATES Certificates will be issued in certificated form ("Definitive Certificates") to Certificate Owners or their nominees, rather than to DTC or its nominee, only if (i) DTC advises the Trustee in writing that DTC is no 73 75 longer willing or able to discharge properly its responsibilities as depository with respect to such Certificates and AWA is unable to locate a qualified successor, (ii) AWA, at its option, elects to terminate the book-entry system through DTC or (iii) after the occurrence of an Indenture Event of Default, Certificate Owners with fractional undivided interests aggregating not less than a majority in interest in such Trust advise the Trustee, AWA and DTC through DTC Participants in writing that the continuation of a book-entry system through DTC (or a successor thereto) is no longer in the Certificate Owners' best interest. (Section 3.09(c)) Upon the occurrence of any event described in the immediately preceding paragraph, the Trustee will be required to notify all Certificate Owners through DTC Participants of the availability of Definitive Certificates. Upon surrender by DTC of the certificates representing the Certificates and receipt of instructions for re-registration, the Trustee will reissue the Certificates as Definitive Certificates to Certificate Owners. (Section 3.09(c)) Distributions of principal, Make-Whole Amount, if any, and interest with respect to Certificates will thereafter be made by the Trustee directly in accordance with the procedures set forth in the Basic Agreement and the applicable Trust Supplements, to holders in whose names the Definitive Certificates were registered at the close of business on the applicable record date. Such distributions will be made by check mailed to the address of such holder as it appears on the register maintained by the Trustee. (Section 4.02(a)) The final payment on any Certificate, however, will be made only upon presentation and surrender of such Certificate at the office or agency specified in the notice of final distribution to Certificateholders. (Section 11.01) Definitive Certificates will be freely transferable and exchangeable at the office of the Trustee upon compliance with the requirements set forth in the Pass Through Trust Agreements. No service charge will be imposed for any registration of transfer or exchange, but payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith shall be required. (Section 3.04) If any Definitive Certificate at any time is mutilated, destroyed, stolen or lost, such Definitive Certificate may be replaced at the cost of the applicant (including a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any fees and expenses of the Trustee and any registrar) at the office of the Trustee or the registrar, if applicable, upon provision of evidence satisfactory to the Trustee or the registrar, if applicable, that such Definitive Certificate was destroyed, stolen or lost, together with such indemnity as the Trustee and the registrar may require. Mutilated Definitive Certificates must be surrendered before replacements will be issued. (Section 3.05) CERTIFICATE AS TO COMPLIANCE Each Pass Through Trust Agreement provides that AWA is required to furnish to the Trustee, not less often than annually, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of AWA's compliance with all conditions and covenants under such Pass Through Trust Agreement (for such purposes, such compliance shall be determined without regard to any period of grace or requirement of notice provided under such Pass Through Trust Agreement). (Section 8.04(d)) 74 76 DESCRIPTION OF THE LIQUIDITY FACILITIES The following summary describes certain terms of the Liquidity Facilities and certain provisions of the Intercreditor Agreement relating to the Liquidity Facilities. Forms of the Liquidity Facilities and the Intercreditor Agreement have been filed as exhibits to the Registration Statement. The statements under this caption are a summary and do not purport to be complete. The summary makes use of terms defined in, and is qualified in its entirety by reference to, all of the provisions of the Liquidity Facilities and the Intercreditor Agreement. The provisions of the Liquidity Facilities are substantially identical except as otherwise indicated. Section references in parentheses are to relevant sections of the Liquidity Facilities and the Intercreditor Agreement. GENERAL With respect to the Certificates to be issued by each Trust (other than the Class D Trust), the Subordination Agent will enter into a separate Liquidity Facility with the Liquidity Provider pursuant to which the Liquidity Provider will make one or more advances to the Subordination Agent to pay interest on such Certificates subject to certain limitations. The Liquidity Facility for each Trust is intended to enhance the likelihood of timely receipt by the Certificateholders of such Trust of the interest payable on the Certificates of such Trust at the Stated Interest Rate therefor on three consecutive Regular Distribution Dates. If interest payment defaults occur which exceed the amount covered by or available under the Liquidity Facility for any Trust, the Certificateholders of such Trust will bear their allocable share of the deficiencies to the extent that there are no other sources of funds. Although Kredietbank N.V., acting through its New York branch, is the Liquidity Provider for each Trust entitled to the benefits of a Liquidity Facility, it may be replaced by another entity with respect to one or more such Trusts under certain circumstances. Therefore, the Liquidity Provider for a given Trust at any given time may be different from the Liquidity Provider for any other Trust. DRAWINGS The initial stated amount available under the Liquidity Facilities for the Class A Trust, the Class B Trust and the Class C Trust will be $ , $ and $ , respectively. Except as otherwise provided below, the Liquidity Facility for each Trust will enable the Subordination Agent to make Interest Drawings thereunder promptly after any Regular Distribution Date to pay interest then due and payable on the Certificates of such Trust at the Stated Interest Rate for such Trust to the extent that the amount, if any, available to the Subordination Agent on such Regular Distribution Date is not sufficient to pay such interest; provided, however, that the maximum amount available to be drawn at any time under such Liquidity Facility to fund any shortfall of interest on such Certificates will not exceed the Required Amount with respect to such Liquidity Facility. The Liquidity Facility for any Trust does not provide for drawings thereunder to pay for principal of, or Make-Whole Amount on the Certificates of such Trust or any interest on the Certificates of such Trust in excess of the Stated Interest Rate or principal of or interest or Make-Whole Amount on, the Certificates of any other Trust. (Liquidity Facilities, Section 2.2; Intercreditor Agreement, Section 3.6) Each payment by the Liquidity Provider under each Liquidity Facility reduces pro tanto the amount available to be drawn under such Liquidity Facility, subject to reinstatement as hereinafter described. With respect to any Interest Drawings under the Liquidity Facility for any Trust, upon reimbursement of the Liquidity Provider in full for the amount of such Interest Drawings plus interest thereon, the amount available to be drawn under such Liquidity Facility in respect of interest on the Certificates of such Trust shall be reinstated to the then Required Amount of such Liquidity Facility; provided, however, that such Liquidity Facility shall not be so reinstated at any time if (i) a Liquidity Event of Default shall have occurred and be continuing or (ii) both (A) a Triggering Event shall have occurred and be continuing and (B) a Performing Note Deficiency exists. With respect to any other drawings under such Liquidity Facility, amounts available to be drawn thereunder are not subject to reinstatement. The stated amount of the Liquidity Facility for any Trust will be automatically reduced from time to time to an amount equal to the next three successive interest payments due on the Certificates of such Trust (without regard to expected future payment of principal of such Certificates) at the Stated Interest Rate for such Trust. The Liquidity Provider will be paid a fee on the average amount available to be drawn under the initial Liquidity Facility until the earlier of the date when the 75 77 commitment under the Liquidity Facility terminates and the date when a Downgrade Drawing, if any, is made, in an amount and on the dates specified in the Liquidity Facilities. (Liquidity Facilities, Sections 2.2, 2.3 and 2.4(a); Intercreditor Agreement, Section 3.6(g) and (j)) If at any time the debt rating of the Liquidity Provider issued by either Rating Agency is lower than the applicable Threshold Rating, then the Liquidity Provider for the related Trust or the Subordination Agent, in consultation with AWA (whose recommendations the Subordination Agent will accept), may arrange for a Replacement Facility (as defined below). In the event that such Liquidity Facility is not replaced with a Replacement Facility within the period specified in the Intercreditor Agreement after notice of the downgrading and as otherwise provided in the Intercreditor Agreement, the Subordination Agent shall request the Downgrade Drawing in an amount equal to all available and undrawn amounts thereunder and shall hold the proceeds thereof in the Cash Collateral Account for such Trust as cash collateral to be used for the same purposes and under the same circumstances as cash payments of Interest Drawings under such Liquidity Facility would be used. (Liquidity Facilities, Sections 2.2(b) and 2.6; Intercreditor Agreement, Section 3.6(c) and (f)) A "Replacement Facility" for any Trust will mean an irrevocable liquidity facility in substantially the form of the initial Liquidity Facility for such Trust, including reinstatement provisions, or, subject to certain conditions, in such other form (which may include a letter of credit) as shall permit the Rating Agencies to confirm in writing their respective ratings then in effect for the Certificates (before downgrading of such ratings, if any, as a result of the downgrading of the Liquidity Provider), in a face amount equal to the Required Amount for such Liquidity Facility and issued by a person having unsecured debt ratings which are equal to or higher than the Threshold Rating. (Intercreditor Agreement, Section 1.1) The Liquidity Facility for each Trust provides that the Liquidity Provider's obligations thereunder will expire on the earliest of (i) 15 days later than the Final Legal Distribution Date for the Certificates of such Trust; (ii) the date on which the Subordination Agent delivers a certificate certifying that all of the Certificates of such Trust have been paid in full; (iii) the date on which the Subordination Agent delivers a certificate certifying that a Replacement Facility has been substituted for such Liquidity Facility; (iv) the date on which the Liquidity Provider makes the Final Drawing; and (v) the date on which no amount is or may (by reason of reinstatement) become available for drawing under such Liquidity Facility. (Liquidity Facilities, Sections 1.1(a) and 2.4(b)) The Subordination Agent, in consultation with AWA (whose recommendations the Subordination Agent will accept), may, subject to certain limitations, arrange for a Replacement Facility at any time to replace the Liquidity Facility for any Trust. If such Replacement Facility is provided at any time after a Downgrade Drawing under such Liquidity Facility, all funds on deposit in the relevant Cash Collateral Account will be returned to the Liquidity Provider being replaced. (Intercreditor Agreement, Section 3.6(e)) The Intercreditor Agreement provides that the Subordination Agent shall hold the proceeds of a Final Drawing (defined below) made in accordance with the provisions set forth under "-- Liquidity Events of Default" below in the Cash Collateral Account for the related Trust as cash collateral to be used for the same purposes and under the same circumstances, and subject to the same conditions, as cash payments of Interest Drawings under such Liquidity Facility would be used. The Intercreditor Agreement further provides that the Subordination Agent shall not fail to take any action which may be expressly required to be taken by the Subordination Agent in order to make a Final Drawing under a Liquidity Facility. (Intercreditor Agreement, Section 3.6(i)) Drawings (other than a Final Drawing) under any Liquidity Facility will be made by delivery by the Subordination Agent of a certificate in the form required by such Liquidity Facility. Upon receipt of such a certificate, the Liquidity Provider is obligated to make payment of the drawing requested thereby in immediately available funds. Upon payment by the Liquidity Provider of the amount specified in any drawing under any Liquidity Facility, the Liquidity Provider will be fully discharged of its obligations under such Liquidity Facility with respect to such drawing and will not thereafter be obligated to make any further payments under such Liquidity Facility in respect of such drawing to the Subordination Agent or any other 76 78 person or entity who makes a demand for payment in respect of interest on the related Certificates. (Liquidity Facilities, Section 2.2) REIMBURSEMENT OF DRAWINGS Amounts drawn under any Liquidity Facility by reason of an Interest Drawing or a Final Drawing, and any portion of a Downgrade Drawing applied to the payment of interest on the Certificates, will be immediately due and payable, together with interest on the amount of such drawing at a rate equal to (i) in the case of an Interest Drawing or the portion of a Downgrade Drawing applied to the payment of interest on the Certificates, with respect to the period from the date of its borrowing to (but excluding) the third business day following the applicable Liquidity Provider's receipt of the notice of the applicable drawing, at the Base Rate plus 1.50% per annum, and thereafter, at LIBOR for the applicable Interest Period plus 1.50% per annum and (ii) in the case of a Final Drawing, at the Base Rate; provided that the Subordination Agent will be obligated to reimburse such amounts only to the extent that the Subordination Agent has available funds therefor. The "Base Rate" will be a per annum interest rate, determined as provided in each Liquidity Facility, equal to the higher of (i) the base commercial lending rate announced from time to time by the Liquidity Provider and (ii) the rate quoted by the Liquidity Provider to dealers in the New York federal funds market for overnight offering of dollars by the Liquidity Provider for deposit, plus 0.50% per annum. "LIBOR" with respect to an Interest Period will be an interest rate, determined as provided in each Liquidity Facility, equal to the rate per annum at which deposits in U.S. dollars are offered for such Interest Period by the Liquidity Provider to prime banks in the London interbank market. The "Interest Period " with respect to a drawing which bears interest based on LIBOR will be each of the following periods: (i) the period beginning on the date such drawing began to bear interest based on LIBOR and ending on the next Regular Distribution Date and (ii) each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the next Regular Distribution Date. (Liquidity Facilities, Sections 1.1, 2.5 and 3.7) The amount drawn under the Liquidity Facility for any Trust by reason of the Downgrade Drawing and deposited in the Cash Collateral Account will be treated as follows: (i) such amount will be released on any Regular Distribution Date to the Liquidity Provider to the extent that such amount exceeds the Required Amount for such Trust; (ii) any portion of such amount withdrawn from the Cash Collateral Account for such Trust to pay interest on the related Certificates will be treated in the same way (including interest payable thereon) as Interest Drawings; and (iii) the balance of such amount will be invested in Eligible Investments. (Liquidity Facilities, Section 2.6; Intercreditor Agreement, Section 3.6(f)) The Downgrade Drawing under any Liquidity Facility (other than any portion thereof applied to the payment of interest on the Certificates) will bear interest at a rate equal to (i) during the period from the date of its borrowing to (but excluding) the third business day following the applicable Liquidity Provider's receipt of the notice of such Downgrade Drawing, at the Base Rate, and (ii) thereafter, at LIBOR for the applicable Interest Period plus 0.40% per annum; provided that the Subordination Agent will be obligated to pay such amount only to the extent that the Subordination Agent has funds available therefor. (Liquidity Facilities, Sections 2.6 and 3.7) LIQUIDITY EVENTS OF DEFAULT Events of Default under each Liquidity Facility (each, a "Liquidity Event of Default ") will consist of: (i) the acceleration of all the Equipment Notes; and (ii) the failure to pay all of the Equipment Notes at maturity. A Liquidity Event of Default shall not occur upon an automatic acceleration of the Equipment Notes as a result of certain bankruptcy events related to AWA. (Liquidity Facilities, Section 1.1) If (i) both (A) a Triggering Event shall have occurred and be continuing and (B) a Performing Note Deficiency exists or (ii) a Liquidity Event of Default shall have occurred and be continuing, the Liquidity Provider may, in its discretion, make a final drawing ("Final Drawing") of all available and undrawn amounts under the Liquidity Facilities whereupon (i) the Liquidity Provider shall have no further obligation to make drawings under the Liquidity Facility, (ii) any drawing remaining unreimbursed shall be automatically converted into a Final Drawing under such Liquidity Facility, and (iii) all amounts owing to the Liquidity Provider shall automatically become accelerated. (Liquidity Facilities, Section 6.1) Notwithstanding the foregoing, the Subordination Agent will be obligated to pay amounts owing to the Liquidity Provider only to 77 79 the extent of funds available therefor after giving effect to the payments in accordance with the provisions set forth under "Description of the Intercreditor Agreement -- Priority of Distributions". (Liquidity Facilities, Section 2.9) Upon the circumstances described below under "Description of the Intercreditor Agreement -- Intercreditor Rights", the Liquidity Provider may become the Controlling Party with respect to the exercise of remedies under the Indentures. (Intercreditor Agreement, Section 2.6(c)) LIQUIDITY PROVIDER The Liquidity Provider will be the Belgian bank Kredietbank N.V., acting through its New York branch. Kredietbank N.V. was established in 1935. As of December 31, 1996 Kredietbank N.V. had total assets of 3,624 billion Belgian francs (approximately $105 billion). Kredietbank N.V. provides commercial, investment banking and capital market services nationally and internationally to public, corporate and banking customers and has offices in 26 countries. Kredietbank N.V. currently has long-term unsecured debt ratings of Aa2 from Moody's and AA- from Standard & Poor's and short-term unsecured debt ratings of P-1 from Moody's and A1+ from Standard & Poor's. The New York branch of Kredietbank N.V. is licensed and subject to supervision and regulation by the Superintendent of Banks of the State of New York. It is examined by the New York State Banking Department and is subject to banking laws and regulations applicable to a foreign bank that operates a New York branch. It is also subject to review and supervision by the Federal Reserve Bank. Kredietbank N.V. has been active in aircraft finance since the mid 1980s and has a significant portfolio of loans secured by modern commercial jet and turboprop aircraft. Kredietbank N.V. has established business relationships with most leading international airlines and aircraft manufacturing companies. The information set forth above concerning Kredietbank N.V. and its New York branch was provided by Kredietbank N.V. and AWA takes no responsibility for the accuracy thereof. 78 80 DESCRIPTION OF THE INTERCREDITOR AGREEMENT The following summary describes certain provisions of the Intercreditor Agreement. A form of the Intercreditor Agreement has been filed as an exhibit to the Registration Statement. The summary does not purport to be complete. The summary makes use of terms defined in, and is qualified in its entirety by reference to, all of the provisions of the Intercreditor Agreement. Section references in parentheses are to relevant sections of the Intercreditor Agreement, unless otherwise indicated. INTERCREDITOR RIGHTS CONTROLLING PARTY Pursuant to the Intercreditor Agreement, each Trustee and the Liquidity Provider shall agree that, with respect to any Indenture at any given time, the Indenture Trustee will be directed (a) in taking, or refraining from taking, any action with respect to such Indenture or the related Equipment Notes by the holders of at least a majority of the outstanding principal amount of such Equipment Notes (provided that, for so long as the Subordination Agent is the registered holder of the Equipment Notes, the Subordination Agent shall act with respect to this clause (a) in accordance with the directions of the Trustees representing holders of Certificates representing an undivided interest in such principal amount of Equipment Notes), so long as no Indenture Event of Default shall have occurred and be continuing thereunder, and (b) after the occurrence and during the continuance of an Indenture Event of Default thereunder, in taking, or refraining from taking, any action with respect to such Indenture or such Equipment Notes, including exercising remedies thereunder (including accelerating such Equipment Notes or foreclosing the lien on the Aircraft securing such Equipment Notes), by the Controlling Party. (Section 2.6(a)) See "Description of the Certificates -- Indenture Events of Default and Certain Rights Upon an Indenture Event of Default" for a description of the rights of the Certificateholders of each Trust to direct the respective Trustee. The Person who shall be the Controlling Party with respect to any Indenture shall be: (w) the Class A Trustee; (x) upon payment of Final Distributions to the holders of Class A Certificates, the Class B Trustee; (y) upon payment of Final Distributions to the holders of Class B Certificates, the Class C Trustee; and (z) upon payment of Final Distributions to the holders of Class C Certificates, the Class D Trustee. For purposes of giving effect to the foregoing, the Trustees (other than the Controlling Party) shall irrevocably agree (and the Certificateholders (other than the Certificateholders represented by the Controlling Party) shall be deemed to agree by virtue of their purchase of Certificates) that the Subordination Agent, as record holder of the Equipment Notes, shall exercise its voting rights in respect of the Equipment Notes as directed by the Controlling Party. (Section 2.6(b)) Notwithstanding the foregoing, the Liquidity Provider with the greatest amount of unreimbursed Liquidity Obligations payable to it under the Liquidity Facilities shall have the right to elect to become the Controlling Party with respect to any such Indenture at any time from and including the date which is 18 months after the earlier of (i) the acceleration of the Equipment Notes under such Indenture and (ii) a Final Drawing with respect to the Liquidity Facilities, if, in the case of clause (i) or (ii) above, at the time of such election all Liquidity Obligations have not been paid in full. (Section 2.6(c)) SALE OF EQUIPMENT NOTES AND AIRCRAFT Following the occurrence and during the continuation of any Indenture Event of Default under any Indenture, the Controlling Party shall direct the related Indenture Trustee in the exercise of remedies thereunder and may accelerate and, subject to the provisions of the immediately following sentence, sell all (but not less than all) of the Equipment Notes issued under such Indenture to any person. So long as any Certificates remain outstanding, during the period ending on the date which is nine months after the earlier of (x) the acceleration of the Equipment Notes issued under any Indenture or (y) the bankruptcy or insolvency of AWA, then without the consent of each Trustee, (a) no Aircraft subject to the lien of such Indenture or such Equipment Notes may be sold if the net proceeds from such sale would be less than the Minimum Sale Price for such Aircraft or such Equipment Notes, and (b) the amount and payment dates of rentals payable by AWA under the Lease for such Aircraft may not be adjusted if, as a result of such adjustment, the discounted present value of all such rentals would be less than 75% of the discounted present value of the 79 81 rentals payable by AWA under such Lease before giving effect to such adjustment, in each case, using the weighted average interest rate of the Equipment Notes then outstanding under such Indenture as the discount rate. (Section 4.1(a)) After a Triggering Event occurs and any Equipment Note becomes a Non-Performing Equipment Note, the Subordination Agent will be required to obtain LTV Appraisals for the Aircraft as soon as practicable and additional LTV Appraisals on or prior to each anniversary of the date of such initial LTV Appraisals; provided that, if the Controlling Party reasonably objects to any such LTV Appraisals, the Controlling Party shall have the right to obtain or cause to be obtained substitute LTV Appraisals (including any LTV Appraisals based upon physical inspection of the Aircraft). (Section 4.1(a)) PRIORITY OF DISTRIBUTIONS So long as no Triggering Event shall have occurred, the payments in respect of the Equipment Notes and certain other payments received on each Distribution Date will be promptly distributed by the Subordination Agent on such Distribution Date in the following order of priority: (i) all accrued and unpaid Liquidity Obligations (other than the principal amount of any drawing under the Liquidity Facilities and any interest accrued on any Liquidity Obligations) (the "Liquidity Expenses") to each Liquidity Provider; (ii) interest accrued on all Liquidity Obligations to each Liquidity Provider; (iii) such amount necessary to pay or reimburse the Liquidity Provider for all Liquidity Obligations then due (other than amounts payable as described in clauses (i) and (ii) above) and, if applicable, to replenish each Cash Collateral Account up to its respective Required Amount; (iv) Expected Distributions to the holders of Class A Certificates; (v) Expected Distributions to the holders of Class B Certificates; (vi) Expected Distributions to the holders of Class C Certificates; (vii) Expected Distributions to the holders of Class D Certificates; and (viii) certain fees and expenses of the Subordination Agent and the Trustees. (Section 3.2) Upon the occurrence of a Triggering Event and at all times thereafter, all funds received by the Subordination Agent in respect of the Equipment Notes and certain other payments will be promptly distributed by the Subordination Agent in the following order of priority: (i) such amount necessary to reimburse (a) the Subordination Agent for any out-of-pocket costs and expenses actually incurred by it in the protection of, or the realization of value of, the Equipment Notes or any Trust Indenture Estate, (b) each Trustee for any amounts of the nature described in clause (a) above, and (c) each Liquidity Provider or any Certificateholder for payments, if any, made by it to the Subordination Agent or any Trustee in respect of amounts described in clause (a) above (collectively, the "Administration Expenses"); (ii) all accrued and unpaid Liquidity Expenses to each Liquidity Provider; (iii) all accrued and unpaid interest on the Liquidity Obligations as provided in the Liquidity Facilities to each Liquidity Provider; (iv) such amount necessary to the Liquidity Provider (a) to pay in full all Liquidity Obligations, whether or not then due (other than amounts payable pursuant to clauses (ii) and (iii) above) and/or (b) if applicable, so long as no Performing Note Deficiency exists and no Liquidity Event of Default has occurred and is continuing, to replenish the Cash Collateral Accounts up to their respective Required Amounts; (v) such amount necessary to reimburse or pay (a) the Subordination Agent for any tax (other than taxes imposed on compensation paid under the Intercreditor Agreement), expense, fee, charge or 80 82 other loss incurred by or any other amount payable to the Subordination Agent in connection with the transactions contemplated thereunder (to the extent not previously reimbursed), (b) each Trustee for any tax (other than taxes imposed on compensation paid under the applicable Trust Agreement), expense, fee, charge, loss or any other amount payable to such Trustee under the applicable Trust Agreements (to the extent not previously reimbursed), and (c) each Certificateholder for payments, if any, made by it in respect of amounts described in clause (a) above, which shall be distributed to the applicable Trustee for the account of such Certificateholder, in each such case pari passu on the basis of all amounts described in clauses (a) through (c) above (collectively, "Certain Taxes and Fees"); (vi) Adjusted Expected Distributions to the holders of Class A Certificates; (vii) Adjusted Expected Distributions to the holders of Class B Certificates; (viii) Adjusted Expected Distributions to the holders of Class C Certificates; and (ix) Adjusted Expected Distributions to the holders of Class D Certificates (Section 3.3). Interest Drawings under the Liquidity Facility and withdrawals from the Cash Collateral Account, in each case in respect of interest on the Certificates of any Trust (other than the Class D Trust), will be distributed to the Trustee for such Trust, notwithstanding the priority of distributions set forth in the Intercreditor Agreement. All amounts on deposit in the Cash Collateral Account for any Trust which are in excess of the Required Amount for such Trust and all investment earnings on such amounts on deposit in the Cash Collateral Account shall be deposited in an account maintained by the Subordination Agent pursuant to the Intercreditor Agreement. (Section 3.6). VOTING OF EQUIPMENT NOTES In the event that the Subordination Agent, as the registered holder of any Equipment Notes, receives a request for its consent to any amendment, modification or waiver under such Equipment Notes, the related Indenture, Lease, Refunding Agreement or other related document, if no Indenture Event of Default with respect thereto shall have occurred and be continuing, the Subordination Agent shall request instructions with respect to each Series of Equipment Notes from the Trustee of the Trust which holds such Equipment Notes. (Section 9.1(b)). The Trustee in turn will request directions from Certificateholders of such Trust, provided that the Trustee is not required to request directions if such consent will not adversely affect the Certificateholders or an Indenture Event of Default shall have occurred and be continuing under the Pass Through Agreement of such Trust. (Basic Agreement, Section 10.01) If any Indenture Event of Default shall have occurred and be continuing with respect to such Indenture, the Subordination Agent will exercise its voting rights as directed by the Controlling Party. (Section 9.1(b)) THE SUBORDINATION AGENT Fleet National Bank will be the Subordination Agent under the Intercreditor Agreement. AWA and its affiliates may from time to time enter into banking and trustee relationships with the Subordination Agent and its affiliates. The Subordination Agent's address is 777 Main Street, Hartford, Connecticut 06115, Attention: Corporate Trust Administration. The Subordination Agent may resign at any time by so notifying the Trustees and the Liquidity Providers, in which event a successor Subordination Agent will be promptly appointed. Either the Controlling Party or the Liquidity Provider may remove the Subordination Agent for cause and may appoint a successor Subordination Agent. No resignation or removal of the Subordination Agent will be effective until a successor is appointed. No appointment of a successor Subordination Agent will be effective until the Rating Agencies have delivered written confirmation that such action would not result in a downgrade, withdrawal or suspension of the rating of any Class of Certificates. (Section 8.1) 81 83 DESCRIPTION OF THE AIRCRAFT AND THE APPRAISALS THE AIRCRAFT The Aircraft consist of four Airbus Industrie model A320-231 aircraft. The Aircraft are designed to be in compliance with Stage III noise level standards, which constitute the most restrictive Federal regulatory standards currently in effect in the United States for aircraft noise abatement. The table below sets forth certain additional information concerning the Aircraft.
APPRAISED VALUE MANUFACTURER'S AIRCRAFT ENGINE DELIVERY ------------------------------------------ SERIAL NUMBER TYPE TYPE DATE(1) AISI BK MBA - -------------- --------------- --------- ----------------- ------------ ------------ ------------ 66 Airbus A320-231 IAE V2500 December 29, 1989 28,600,000 27,670,000 30,280,000 67 Airbus A320-231 IAE V2500 December 29, 1989 28,600,000 27,670,000 30,280,000 76 Airbus A320-231 IAE V2500 December 29, 1989 28,820,000 27,670,000 30,430,000 81 Airbus A320-231 IAE V2500 December 29, 1989 28,820,000 28,000,000 30,430,000 ------------ ------------ ------------ $114,840,000 $111,010,000 $121,420,000 ============ ============ ============
- --------------- (1) The delivery date indicated is for the purpose of the Leases. The original delivery dates for the Aircraft from the manufacturer were in November and December of 1989. APPRAISED VALUE The appraised values set forth in the foregoing chart were determined by BK as of March 26, 1997, AISI as of March 19, 1997 and MBA as of March 31, 1997. As part of this process, all three Appraisers performed "desktop" appraisals without any physical inspection of the Aircraft. The Appraisals are based on differing assumptions and methodologies, which vary among the Appraisers. The Appraisers have delivered letters setting forth their respective Appraisals, copies of which are annexed to this Prospectus as Appendix II. For a discussion of the assumptions and methodologies used in preparing each of the Appraisals, reference is hereby made to such reports. An appraisal is only an estimate of value and should not be relied upon as a measure of realizable value. The proceeds realized upon a sale of any Aircraft may be less than the appraised value thereof. In addition, the value of the Aircraft in the event of the exercise of remedies under the applicable Indenture will depend on market and economic conditions at the time, the availability of buyers, the condition of the Aircraft, whether the Aircraft are sold separately or as a block and other factors. Accordingly, there can be no assurance that the proceeds realized upon any such exercise with respect to the Equipment Notes and the Aircraft pursuant to the applicable Indenture would be as appraised or sufficient to satisfy in full remaining payments due on the Equipment Notes issued thereunder or the Certificates. 82 84 DESCRIPTION OF THE EQUIPMENT NOTES The following summary describes certain provisions of the Equipment Notes, the Indentures, the Leases, the Owner Trust Agreements and the Refunding Agreements. Forms of the Equipment Notes, the Indentures, the Leases and the Refunding Agreements have been filed as exhibits to the Registration Statement. The statements under this caption are summaries and do not purport to be complete. The summaries make use of terms defined in and are qualified in their entirety by reference to all of the provisions of the Equipment Notes, the Indentures, the Leases, the Owner Trust Agreements and the Refunding Agreements. Except as otherwise indicated, the following summaries relate to the Equipment Notes, the Indenture, the Lease, the Owner Trust Agreement and the Refunding Agreement relating to each Aircraft. Section references in parentheses are to relevant sections of the Indentures, the Leases, the Basic Agreement, and the Refunding Agreements. GENERAL The Equipment Notes with respect to each Aircraft will be issued in four series under a separate Indenture between the related Owner Trustee, as trustee of the related Owner Trust created for the benefit of the applicable Owner Participant who is the beneficial owner of the related Aircraft pursuant to a trust agreement (each, an "Owner Trust Agreement "), and the related Indenture Trustee. The Equipment Notes issued will be nonrecourse obligations of the applicable Owner Trust. All Equipment Notes issued under the same Indenture will relate to, and be secured by, an Aircraft, and such Aircraft will be leased to AWA pursuant to a Lease between the Owner Trustee under the applicable Owner Trust and AWA. Each Equipment Note will be authenticated under an Indenture by the applicable Indenture Trustee. The Chase Manhattan Bank will act as Indenture Trustee with respect to the issue of the Equipment Notes. Under each Lease, until the lien of the related Indenture is discharged, AWA will be unconditionally obligated to make or cause to be made rental and other payments to the related Indenture Trustee on behalf of the related Owner Trustee, which rental and other payments will be at least sufficient to pay in full when due all scheduled payments required to be made on the Equipment Notes issued with respect to the related Aircraft. The rental obligations of AWA under each Lease will be general obligations of AWA. However, the Equipment Notes will not be obligations of, or guaranteed by, AWA or Holdings. SUBORDINATION Series B Equipment Notes issued in respect of an Aircraft will be subordinated in right of payment to Series A Equipment Notes issued in respect of such Aircraft; Series C Equipment Notes issued in respect of such Aircraft will be subordinated in right of payment to Series A and B Equipment Notes issued in respect of such Aircraft; and Series D Equipment Notes issued in respect of such Aircraft will be subordinated in right of payment to Series A, B and C Equipment Notes issued in respect of such Aircraft. On each Equipment Note payment date, (i) payments of interest and principal due on Series A Equipment Notes issued in respect of any Aircraft will be made prior to payments of interest and principal due on any Series B, C and D Equipment Notes issued in respect of such Aircraft, (ii) payments of interest and principal due on Series B Equipment Notes will be made prior to payments of interest and principal due on any Series C and D Equipment Notes issued in respect of such Aircraft, and (iii) payments of interest and principal due on Series C Equipment Notes will be made prior to payments of interest and principal due on any Series D Equipment Notes issued in respect of such Aircraft. Only Equipment Notes having the same priority of payment may be held by the same Trust; accordingly all of the Series A Equipment Notes will be held by the Class A Trust, all of the Series B Equipment Notes will be held by the Class B Trust, all of the Series C Equipment Notes will be held by the Class C Trust and all of the Series D Equipment Notes will be held by the Class D Trust. PRINCIPAL AND INTEREST PAYMENTS Subject to the provisions of the Intercreditor Agreement, interest paid on the Equipment Notes held in each Trust will be passed through to the Certificateholders of such Trust on the dates and at the rate per annum set forth on the cover page of this Prospectus until the principal balance of such Certificates has been 83 85 reduced to zero. Subject to the provisions of the Intercreditor Agreement, scheduled principal payments made on the Equipment Notes held in each Trust will be passed through to the Certificateholders of each such Trust in accordance with the principal repayment schedule set forth herein until the principal balance of such Certificates has been reduced to zero. See "Description of the Intercreditor Agreement -- Priority of Distributions". The aggregate original principal amounts of the Equipment Notes to be issued with respect to each Aircraft, as such Equipment Notes will be held in each of the Trusts, are as follows:
MANUFACTURER'S CLASS A TRUST CLASS B TRUST CLASS C TRUST CLASS D TRUST SERIAL NUMBER EQUIPMENT NOTES EQUIPMENT NOTES EQUIPMENT NOTES EQUIPMENT NOTES TOTAL - -------------- --------------- --------------- --------------- --------------- ----------- 66 67 76 81 ----------- ----------- ----------- ----------- ----------- Total =========== =========== =========== =========== ===========
Interest will be payable on the unpaid principal amount of each Equipment Note at the rate applicable to such Equipment Note on January 2 and July 2 in each year, commencing January 2, 1998. Such interest will be computed on the basis of a 360-day year consisting of twelve 30-day months. Overdue amounts of principal and interest on each Series of Equipment Notes will bear interest at a rate equal to 1% per annum over the applicable rate on such Series of Equipment Notes. The principal of the Equipment Notes purchased by each Trust will be payable on the dates and in the amounts set forth in Appendix III. The final payment made under each Equipment Note is provided to be in an amount sufficient to discharge in full the unpaid principal amount of, all accrued and unpaid interest on, and any other amounts due under, such Equipment Note. (Indentures, Section 2.02) If any date on which a payment under the Equipment Notes becomes due and payable is not a business day, such payment will be made on the next succeeding business day without any additional interest. All payments of the principal amount of, interest on and all other amounts due with respect to an Equipment Note will be payable only from the income and proceeds from the collateral pledged pursuant to the related Indenture (the "Trust Indenture Estate"). (Indentures, Section 2.03) In the case of each Equipment Note, each payment of principal amount and interest or other amounts due thereon will, except as otherwise provided in the related Indenture, be applied in the following order: (i) to the payment of accrued interest on such Equipment Note (as well as any interest on any overdue principal amounts, any overdue interest and any other overdue amounts thereunder) to the date of such payment; (ii) to the payment of the principal amount of such Equipment Note (or a portion thereof) then due thereunder; (iii) to the payment of Make-Whole Amount, if any, and any other amount due under the related Indenture or under such Equipment Note; and (iv) the balance, if any, remaining thereafter, to the payment of the principal amount of such Equipment Note remaining unpaid (applied to the installments of principal amount in the inverse order of their normal maturity). (Indentures, Section 2.05) REDEMPTION The Equipment Notes issued with respect to any Aircraft will be redeemed, in whole, in each case at a price equal to the aggregate unpaid principal amount thereof together with accrued interest thereon to, but not including, the date of redemption, and all other amounts payable under the related Indenture or Refunding Agreement but without any Make-Whole Amount, upon the occurrence of an Event of Loss with respect to such Aircraft if such Aircraft is not replaced by AWA under the related Lease. (Indentures, Section 2.10) Either the Owner Trustee or the Owner Participant may purchase all, but not less than all, of the outstanding Equipment Notes issued under the related Indentures at a price equal to the aggregate unpaid principal amount thereof, plus accrued and unpaid interest thereon to, but not including, the date of purchase and all other amounts then payable under the related Indenture or Refunding Agreement but without any 84 86 Make-Whole Amount (except as described in the second following sentence). This option may be exercised (i) upon the Indenture Trustee with respect to the related Equipment Notes taking action, or notifying the applicable Owner Trustee that it intends to take action to foreclose the lien of the related Indenture or otherwise commence the exercise of any significant remedy under such Indenture or the related Lease, (ii) upon the Equipment Notes with respect to an Aircraft having been accelerated or (iii) in the event there shall have occurred and be continuing a Lease Event of Default. If such option is exercised at a time when a Lease Event of Default shall have occurred and be continuing for less than 120 days (and the events described in clauses (i) and (ii) of the preceding sentence do not apply), then the Make-Whole Amount will be added to the purchase price. (Indentures, Section 2.12) "Make-Whole Amount" means, with respect to any Equipment Note, the amount (as determined by an independent investment banker selected by AWA and reasonably acceptable to the related Indenture Trustee and Owner Participant) by which (a) the present value of the remaining scheduled payments of principal and interest from the redemption date to maturity of such Equipment Note computed by discounting such payments on a semi-annual basis from its respective Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to (i) in the case of Series A Equipment Notes and Series B Equipment Notes, the Treasury Yield and (ii) in the case of Series C Equipment Notes and Series D Equipment Notes, the Treasury Yield plus 0.75% exceeds (b) the outstanding principal amount of such Equipment Note plus accrued interest. (Indentures, Section 1.01) For purposes of determining the Make-Whole Amount, "Treasury Yield " means, at the time of determination with respect to any Equipment Note, the interest rate (expressed as a semi-annual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date of such Equipment Note and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in the public securities markets, (A) one maturing as close as possible to, but earlier than, the Average Life Date of such Equipment Note and (B) the other maturing as close as possible to, but later than, the Average Life Date of such Equipment Note, in each case as published in the most recent H.15 (519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Equipment Note is reported on the most recent H.15 (519), such weekly average yield to maturity as published in such H.15 (519). "H.15 (519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Amount shall be the third business day prior to the applicable redemption date and the "most recent H.15 (519)" means the H.15 (519) published prior to the close of business on the third business day prior to the applicable redemption date. (Indentures, Section 1.01) "Average Life Date" for any Equipment Note is the date which follows the redemption date by a period equal to the Remaining Weighted Average Life at the redemption date of such Equipment Note. "Remaining Weighted Average Life" with respect to any Equipment Note, at the redemption date of such Equipment Note, is the number of days equal to the quotient obtained by dividing (a) the sum of each of the products obtained by multiplying (i) the amount of each then remaining scheduled payment of principal of such Equipment Note, including the payment due on the maturity date of such Equipment Note, by (ii) the number of days from and including such redemption date to but excluding the date on which payment of principal is scheduled to be made; by (b) the then outstanding principal amount of such Equipment Note. (Indentures, Section 1.01) SECURITY The Equipment Notes issued with respect to each Aircraft will be secured by a perfected security interest in such Aircraft and an assignment to the related Indenture Trustee of certain of the Owner Trustee's rights under the related Lease, including the right to receive certain payments of rent thereunder, all profits, revenues and other income of such Aircraft, all required hull insurance and similar proceeds with respect to such Aircraft, all monies and securities deposited with the related Indenture Trustee, and all proceeds of the 85 87 foregoing. Basic Rent (as defined herein) payments for each Aircraft are payable semi-annually on each Basic Rent payment date. Such payments, together with certain other payments that AWA is obligated to make or cause to be made under the related Lease, have been assigned by the Owner Trustee under the related Indenture to provide the funds necessary to make payments of principal and interest due or expected to be due from the Owner Trustee on the Equipment Notes issued under such Indenture and Liquidity Obligations under the related Liquidity Facility. The balance of any such Basic Rent and other payments, after payment of amounts due on the related Equipment Notes and certain other amounts, including certain amounts owing to the Liquidity Provider, will be paid over to the related Owner Participant. (Indentures, Sections 3.01 and 3.06) Under the terms of each Lease, AWA's obligations in respect of each Aircraft will be those of a lessee under a "net lease". Accordingly, AWA will be obligated, among other things and at its expense, to cause each Aircraft to be duly registered, to pay all costs of operating the Aircraft and to maintain, service, repair and overhaul (or cause to be maintained, serviced, repaired and overhauled) the Aircraft. Unless an Indenture Event of Default with respect to an Aircraft has occurred and is continuing, the related Indenture Trustee may not exercise the Owner Trustee's rights under the related Lease except such Owner Trustee's right to receive rent. The assignment by the Owner Trustee to the Indenture Trustee of its rights under the related Lease excludes certain rights of the Owner Trustee and the Owner Participant, including the rights of the Owner Trustee, the Owner Participant and their respective affiliates relating to the proceeds of certain letters of credit issued for the account of AWA referred to under "The Leases -- Lease Events of Default" in the amount of $1 million for each Lease in respect of certain amounts which may become payable by AWA, indemnity payments and interest in respect thereof payable by AWA for certain matters, insurance proceeds payable to Wilmington Trust Company, in its individual capacity and not as Owner Trustee (the "Trust Company"), the Indenture Trustee in its individual capacity and to the Owner Participant under public liability insurance maintained in respect of the Aircraft, insurance proceeds payable to the Trust Company or to such Owner Participant under certain insurance maintained by or for the benefit of the Owner Participant (whether directly or through the Owner Trustee) and certain costs and expenses payable by AWA to the Trust Company, the Owner Trustee, the Indenture Trustee or such Owner Participant. (Indenture, Granting Clause and Section 1.01) The Equipment Notes are not cross-collateralized, and consequently the Equipment Notes issued in respect of any Aircraft are not secured by any of the other Aircraft (as described in "-- The Leases -- Events of Loss") or the Leases related thereto. Subject to the right of AWA to re-register the Aircraft in other jurisdictions, and subject to the cooperation of the applicable Owner Trustee and Indenture Trustee, AWA will keep each Aircraft registered under the Federal Aviation Act and will record the Indenture and the Lease and other relevant documents with respect to each Aircraft under the Federal Aviation Act. Such recordation of the Indenture, the Lease and other relevant documents with respect to each Aircraft will give the related Indenture Trustee a perfected security interest in the related Aircraft whenever it is located in the United States or any of its territories and possessions. In addition, the Convention on the International Recognition of Rights in Aircraft (the "Convention") provides that such security interest will also be recognized, with certain limited exceptions, in those jurisdictions that have ratified or adhere to the Convention. Each Aircraft may also be registered under the laws of, and each Aircraft may be operated by AWA or be under sublease or interchange arrangements in, countries that are not parties to the Convention. The extent to which the related Indenture Trustee's security interest would be recognized in Aircraft registered under the laws of or located in a country that is not a party to the Convention is uncertain. Moreover, in the case of an Indenture Event of Default, the ability of the related Indenture Trustee to realize upon its security interest in an Aircraft could be adversely affected as a legal or practical matter if such Aircraft were registered under the laws of any jurisdiction other than the United States or located outside the United States. Certain of the Aircraft are subject to Cross-Border Leases. In connection with the realization by the Indenture Trustee of its security interest in such Aircraft, it may be desirable to have such Cross-Border Leases terminated. See "-- Cross-Border Leases". 86 88 Funds, if any, held from time to time by an Indenture Trustee with respect to any Aircraft, including funds held as the result of an Event of Loss to such Aircraft or termination of the Lease, if any, relating thereto, will be invested and reinvested by such Indenture Trustee. Such investment and reinvestment will be at the direction of the related Owner Trustee or, in the event the Owner Trustee shall so specify, by the Lessee, in certain investments described in the related Indenture. (Indentures, Section 3.07) The net amount of any gain or loss resulting from any such investments will be for the account of AWA. LOAN TO VALUE RATIOS OF EQUIPMENT NOTES The following table sets forth LTV Ratios for the Equipment Notes issued in respect of each Aircraft as of the dates specified and was obtained by dividing (i) the outstanding balance (assuming no payment default) of such Equipment Notes determined immediately after giving effect to the payments scheduled to be made on each such date by (ii) the assumed value (the "Assumed Aircraft Value") of the Aircraft securing such Equipment Notes. The tables contain forward-looking information that is based on the assumption that the value of each Aircraft included in the Assumed Aircraft Value opposite May , 1997, which Assumed Aircraft Value reflects the lesser of the average and median value of such Aircraft as appraised by each of the Appraisers, depreciates by 2% per year until the fifteenth year after the year of delivery of such Aircraft by the manufacturers, by 4% per year thereafter until the twentieth year after the year of such delivery and by 6% per year thereafter. Other rates or methods of depreciation would result in materially different LTV Ratios and no assurance can be given (i) that the depreciation rates and methods assumed for the purposes of the table are the ones most likely to occur or (ii) as to the actual value of any Aircraft. Thus the table should not be considered a forecast or prediction of expected or likely LTV Ratios but simply a mathematical calculation based on one set of assumptions.
AIRCRAFT MANUFACTURER'S SERIAL AIRCRAFT MANUFACTURER'S SERIAL NUMBER 66 NUMBER 67 ---------------------------------- ---------------------------------- EQUIPMENT EQUIPMENT NOTE ASSUMED NOTE ASSUMED OUTSTANDING AIRCRAFT OUTSTANDING AIRCRAFT BALANCE VALUE LTV BALANCE VALUE LTV DATE (MILLIONS) (MILLIONS) RATIO (MILLIONS) (MILLIONS) RATIO ---- ----------- ---------- ----- ----------- ---------- ----- ............................. $ $ % $ $ % ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. ............................. .............................
87 89
AIRCRAFT MANUFACTURER'S SERIAL AIRCRAFT MANUFACTURER'S SERIAL NUMBER 76 NUMBER 81 ------------------------------------ ------------------------------------ EQUIPMENT EQUIPMENT NOTE ASSUMED NOTE ASSUMED OUTSTANDING AIRCRAFT OUTSTANDING AIRCRAFT BALANCE VALUE LTV BALANCE VALUE LTV DATE (MILLIONS) (MILLIONS) RATIO (MILLIONS) (MILLIONS) RATIO ---- ----------- ---------- ------- ----------- ---------- ------- .......................... $ $ % $ $ % .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... ..........................
LIMITATION OF LIABILITY The Equipment Notes will not be obligations of, or guaranteed by, AWA, Holdings, the Owner Participants or the Trust Company. None of the Owner Trustees, the Owner Participants or the Indenture Trustees, or any affiliates thereof, will be personally liable to any holder of an Equipment Note or, in the case of the Owner Trustees and the Owner Participants, to the Indenture Trustees for any amounts payable under the Equipment Notes or, except with respect to the Owner Trustee as provided in each Indenture, for any liability under such Indenture. All payments of principal amount of, interest on, and all other amounts due with respect to an Equipment Note will be payable only from the related Trust Indenture Estate. (Indentures, Section 2.03) Except as otherwise provided in the Indentures, the Trust Company will not be answerable or accountable under the Indentures or under the Equipment Notes under any circumstances except for its own willful misconduct, gross negligence, the inaccuracy of a representation or warranty when made or the failure to perform certain specified covenants. None of the Owner Participants will have any duty or responsibility under any of the Indentures or the Equipment Notes to the Indenture Trustees or to any holder of any Equipment Note. INDENTURE EVENTS OF DEFAULT; NOTICE AND WAIVER Indenture Events of Default under each Indenture will include: (a) the occurrence and continuance of any Lease Event of Default under the related Lease (other than the failure to make certain indemnity payments and other payments to the related Trust Company, Owner Trustee, Indenture Trustee or Owner Participant), (b) the failure by the Owner Trustee (other than as a result of a Lease Default) to pay any amount when due under such Indenture or under any Equipment Note issued thereunder and such failure shall have continued for, in the case of principal and interest, ten calendar days and in all other cases fifteen calendar days after notice thereof being given to the Owner Trustee from the Indenture Trustee or any holder of the Equipment Notes, (c) the failure by the Owner Participant, the Trust Company or the Owner Trustee to discharge certain liens, continued for a period of thirty calendar days after an officer of the Trust Company or of the Owner Participant with responsibility for or familiarity with the transactions contemplated under the related Indenture or Refunding Agreement (or any vice president) shall have actual knowledge of such lien, (d) any representation or warranty made by the related Owner Trustee, Trust Company or Owner Participant in such Indenture or the related Refunding Agreement or by any person guaranteeing or supporting the obligations of the Owner Participant under certain related documents or in any related guarantee or support agreement being false or incorrect when made and in any respect materially adverse to the rights and interests of the holders of the related Equipment Notes and remaining unremedied after notice and specified cure periods, (e) certain failures by the related Owner Trustee, Trust Company or Owner Participant to perform or observe certain covenants or obligations for the benefit of the Indenture Trustee or holders of Equipment Notes under such Indenture or the related Refunding Agreement that are not remedied after notice and 88 90 specified cure periods, (f) the occurrence of certain events of bankruptcy, reorganization or insolvency of the related Owner Trustee or Owner Participant or (g) any time when the related Aircraft shall be registered in a jurisdiction outside the United States and the related Owner Trustee, the Trust Company or the Owner Participant shall breach certain covenants agreed upon pursuant to the related Refunding Agreement as a result of which the lien of the related Indenture shall cease to be a valid and duly perfected lien on the related Trust Indenture Estate. (Indentures, Section 4.02) There will not be any cross-default provisions in the Indentures or the Leases. Consequently, events resulting in an Indenture Default under any particular Indenture may or may not result in an Indenture Event of Default occurring under any other Indenture. The Indenture Trustee will give the holders of the Equipment Notes, the Owner Trustee, AWA and the Owner Participant prompt written notice of any Indenture Event of Default of which the Indenture Trustee has knowledge. (Indentures, Section 5.01) If an Indenture Event of Default shall have occurred and be continuing, the Indenture Trustee may exercise certain rights and powers as enumerated under the related Indenture; if such Indenture Event of Default is a Lease Event of Default, the Indenture Trustee may exercise certain remedies pursuant to the related Lease, provided that such Indenture Trustee gives (i) ten days' written notice to the related Owner Trustee and the Owner Participant prior to the initial exercise of such remedies under the related Lease (if not stayed or otherwise precluded by applicable law from giving such notice) and (ii) thirty days' written notice to the related Owner Trustee and the Owner Participant of its intention to sell the related Aircraft. See "-- Remedies" below. (Indentures, Section 4.04) In the event that AWA fails to pay any installment of Basic Rent due under the related Lease, the Owner Participant may, within a specified period after notice of such default, pay a sum equal to the amount of all, but not less than all of the principal amount and interest due and payable on the Equipment Notes (without regard to any acceleration thereof), unless AWA shall have theretofore failed to pay Basic Rent in the manner required under the related Lease as to each of the three immediately preceding Basic Rent payment dates or in the aggregate more than six Basic Rent payment dates. In the event that AWA defaults in any obligation under the related Lease (other than the payment of Basic Rent) and such default can be remedied by the payment of money, the Owner Participant may, within a specified period after notice of such default, instruct the Owner Trustee to exercise the Owner Trustee's rights under the related Lease to perform such obligation on behalf of AWA. In the event such Lease Event of Default shall have been so remedied, then any declaration that the Lease is in default and that the related Equipment Notes are due and payable based upon such Lease Event of Default shall be deemed to be rescinded, and the Owner Participant or the Owner Trustee, as the case may be, shall be subrogated to the rights of the holders of the Equipment Notes to receive the applicable payment from the Indenture Trustee. (Indentures, Section 4.03) The holders of a majority in principal amount of the outstanding Equipment Notes issued with respect to any Aircraft, by notice to the Indenture Trustee, may on behalf of all the holders waive any existing default and its consequences under the Indenture with respect to such Aircraft, except a default in the payment of the principal amount of, or interest on, any such Equipment Notes or a default in respect of certain other covenants or provisions of such Indenture that cannot be modified or amended without the consent of each holder of Equipment Notes affected thereby. (Indentures, Section 4.08) REMEDIES Each Indenture will provide that if an Indenture Event of Default occurs and is continuing, the related Indenture Trustee may, and upon receipt of written demand from the holders of a majority in aggregate unpaid principal amount of the Equipment Notes outstanding under such Indenture shall, subject to the applicable Owner Participant's or Owner Trustee's right to cure, as discussed above, declare the unpaid principal amount of all such Equipment Notes issued thereunder immediately due and payable, together with all accrued but unpaid interest thereon (without a Make-Whole Amount); provided, however, that such principal and interest will immediately and without further act become due and payable upon the occurrence of certain events of bankruptcy, reorganization or insolvency with respect to the related Owner Trustee, the related Owner Participant or AWA. The holders of a majority in aggregate unpaid principal amount of Equipment Notes outstanding under such Indenture may rescind any such declaration at any time before the judgment or decree for the payment of the money so due shall be entered if (i) there has been paid to the 89 91 related Indenture Trustee an amount sufficient to pay all overdue principal amount of and interest on any such Equipment Notes, to the extent such amounts have become due otherwise than by such declaration of acceleration and (ii) all other Indenture Events of Default and potential Indenture Events of Default with respect to any covenant or provision of such Indenture have been cured or waived. (Indentures, Section 4.04) Each Indenture will provide that if an Indenture Event of Default under such Indenture has occurred and is continuing, the related Indenture Trustee may exercise certain rights or remedies available to it under such Indenture or under applicable law, including (if the corresponding Lease has been declared in default) one or more of the remedies under such Indenture or such Lease with respect to the Aircraft subject to such Lease. If there shall have occurred or be continuing a Lease Event of Default, the related Indenture Trustee's right to exercise remedies under such Indenture will be subject, with certain exceptions, to its having proceeded to exercise one or more of the remedies under the Lease to terminate the Lease or take possession of and/or sell the Aircraft; provided that the requirement to exercise such remedies under such Lease shall not apply in circumstances where such exercise has been stayed or prohibited by applicable law or court order for a continuous period in excess of 60 days or such other period as may be specified in Section 1110(a)(1)(A) of the Bankruptcy Code (plus an additional period, if any, resulting from (i) the trustee or the debtor-in- possession in such proceeding agreeing to perform its obligations under such Lease with the approval of the applicable court, (ii) such Indenture Trustee's consent to an extension of such 60-day or other period, (iii) AWA's assumption during such 60-day or other period with the approval of the relevant court of the related Lease pursuant to Section 365 of the Bankruptcy Code or (iv) such Indenture Trustee's own failure to give any requisite notice (unless such Indenture Trustee is stayed or otherwise precluded by applicable law from giving such notice)). (Indentures, Section 4.04(a)) Except as otherwise provided, such remedies may be exercised by the related Indenture Trustee to the exclusion of the related Owner Trustee, subject to certain conditions specified in such Indenture, and of AWA, subject to the terms of such Lease. Any Aircraft sold in the exercise of such remedies will be free and clear of any rights of those parties, including the rights of AWA under the Lease with respect to such Aircraft. (Indentures, Section 4.04; Leases, Section 18) If the Equipment Notes issued in respect of one or more Aircraft are in default and the Equipment Notes issued in respect of the remaining Aircraft are not in default, no remedies will be exercisable under the applicable Indentures with respect to such remaining Aircraft. Pursuant to each Indenture, notwithstanding any of the provisions of such Indenture or the related Owner Trust Agreement to the contrary, each holder of the related Equipment Notes, the related Indenture Trustee and the related Owner Trustee will agree for the benefit of AWA that it will not take any action contrary to AWA's rights under the related Lease, including the right of AWA to possession and use and quiet enjoyment of the related Aircraft, except in accordance with the provisions of such Lease. (Indentures, Section 10.05) Section 1110 of the Bankruptcy Code provides that the right of lessors, conditional vendors and holders of security interests with respect to "equipment" (as defined in Section 1110 of the Bankruptcy Code) to take possession of such equipment in compliance with the provisions of a lease, conditional sale contract or security agreement, as the case may be, is not affected by (a) the automatic stay provision of the Bankruptcy Code, which provision enjoins repossessions by creditors for the duration of the reorganization period, (b) the provision of the Bankruptcy Code allowing the trustee in reorganization to use property of the debtor during the reorganization period, (c) Section 1129 of the Bankruptcy Code (which governs the confirmation of plans of reorganization in Chapter 11 cases) and (d) any power of the bankruptcy court to enjoin a repossession. Section 1110 of the Bankruptcy Code provides, however, that the right to take possession of equipment may not be exercised for 60 days following the date of commencement of the reorganization proceedings and may not be exercised at all after such 60-day period (or such longer period consented to by the lessor, conditional vendor or holder of a security interest), if the trustee in reorganization agrees to perform the debtor's obligations that become due on or after such date and cures all existing defaults and within 30 days thereof, any future defaults (other than defaults resulting solely from the financial condition, bankruptcy, insolvency or reorganization of the debtor). "Equipment" is defined in Section 1110 of the Bankruptcy Code, in part, as "an aircraft, aircraft engine, propeller, appliance, or spare part (as defined in section 40102 of title 49) that is subject to a security interest granted by, leased to, or conditionally sold to a debtor that is a citizen of the United States (as defined in section 40102 of title 49) holding an air carrier operating certificate issued by the 90 92 Secretary of Transportation pursuant to chapter 447 of title 49 for aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of cargo". The Bankruptcy Reform Act amended Section 1110 by, among other things, providing that all lessors of equipment first placed in service after the date of enactment of that Act will be entitled to the benefits of Section 1110 even if such lease is in essence a security interest. The Bankruptcy Reform Act also provides that the lessor under a lease of equipment first placed in service on or prior to the date of the enactment of that Act will be entitled to the benefits of Section 1110 if the lessor and the lessee have expressed in the applicable agreement or in a substantially contemporaneous writing that the applicable agreement is to be treated as a lease for federal income tax purposes. Each of the Leases relating to Aircraft placed in service prior to the enactment of the Bankruptcy Reform Act contains such a written statement. Milbank, Tweed, Hadley & McCloy, counsel to the Underwriter, has advised the Indenture Trustees that, if AWA were to become a debtor under Chapter 11 of the Bankruptcy Code, the applicable Owner Trustee, as lessor under each Lease, and the related Indenture Trustee, as assignee of such Owner Trustee's rights under such Lease pursuant to such related Indenture, would be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to the airframe and engines comprising the related Aircraft. This opinion is subject to certain qualifications and assumptions, including the assumption that AWA is and will be a citizen of the United States holding an air carrier operating certificate issued by the Secretary of Transportation pursuant to chapter 447 of title 49 of the U.S. Code for aircraft capable of carrying ten or more individuals or 6,000 pounds or more of cargo and the assumption that the applicable Aircraft has a useful life in excess of the term of the related Lease, without giving effect to any optional renewal period during which fair market rent would be paid (which assumption will be supported by a letter to such effect issued by one of the Appraisers). See "-- The Leases -- Events of Loss". The opinion of Milbank, Tweed, Hadley & McCloy will not address the availability of Section 1110 with respect to the bankruptcy proceedings of any possible sublessee of Aircraft which may be subleased by AWA. The opinion of Milbank, Tweed, Hadley & McCloy will not address the possible substitution or replacement of Aircraft after an Event of Loss in the future, the consummation of which is conditioned upon the contemporaneous delivery of an opinion of counsel to the effect that the related Indenture Trustee's entitlement to Section 1110 benefits should not be diminished as a result of such substitution or replacement. For a description of certain limitations on the Indenture Trustee's exercise of rights contained in the Indentures, see "-- Indenture Events of Default; Notice and Waiver". In the event of bankruptcy, insolvency, receivership or similar proceedings involving an Owner Participant, it is possible that, notwithstanding that the applicable Aircraft is owned by the related Owner Trustee in trust, such Aircraft and the related Lease and Equipment Notes might become part of such proceeding. In such event, payments under such Lease or on such Equipment Notes may be interrupted and the ability of the related Indenture Trustee to exercise its remedies under the related Indenture might be restricted, though such Indenture Trustee would retain its status as a secured creditor in respect of the related Lease and the related Aircraft. Certain of the Aircraft are subject to Cross-Border Leases. In connection with the realization by the Indenture Trustee of its security interest in such Aircraft, it may be desirable to have such Cross-Border Leases terminated. In this regard, the bankruptcy, insolvency, receivership or like proceeding involving the Cross-Border Lessor or any partner therein might also impede the ability of the Indenture Trustee to exercise its remedies under the related Indenture. See "-- Cross-Border Leases". MODIFICATION OF INDENTURES AND LEASES Without the consent of holders of a majority in aggregate unpaid principal amount of the Equipment Notes outstanding under any Indenture, the provisions of such Indenture and the Lease, the Refunding Agreement and the Owner Trust Agreement corresponding thereto may not be amended or modified, except to the extent indicated below. 91 93 Certain provisions of any Indenture, and of the Lease, the Refunding Agreement, and the Owner Trust Agreement related thereto, may be amended or modified by the parties thereto without the consent of the relevant Indenture Trustee or the holders of the Equipment Notes outstanding under such Indenture, subject to certain conditions. In the case of each Lease, such provisions include, among others, provisions relating to maintenance of, and modifications to, the related Aircraft and the return to the related Owner Trustee of the related Aircraft at the end of the term of such Lease. (Indentures, Section 9.01(a)) Without the consent of each holder of an affected Equipment Note then outstanding, no amendment of or supplement to the related Indenture, Refunding Agreement or any other related document may (a) modify certain provisions of such Indenture, certain definitions under such Indenture, or the percentage of holders of the Equipment Notes required to take or approve any action under such Indenture, (b) reduce the amount, or change the time of payment or method of calculation of any amount of principal, Make-Whole Amount, if any, or interest with respect to any Equipment Note, or alter or modify certain provisions of such Indenture with respect to the order of priorities in which distributions thereunder shall be made among the holders of Equipment Notes, the related Owner Trustee and AWA, (c) reduce, modify or amend any indemnities in favor of the holders of Equipment Notes, (d) consent to any change in such Indenture or the related Lease which would permit redemption of Equipment Notes earlier than permitted under such Indenture, (e) release AWA from its obligations in respect of certain payments under the related Lease or (f) permit the creation of any lien on the related Trust Indenture Estate or deprive any holder of Equipment Notes of the benefit of the lien of such Indenture on such Trust Indenture Estate. (Indentures, Section 9.01(b)) INDEMNIFICATION AWA will be required to indemnify each Indenture Trustee, each Owner Participant, each Owner Trustee, each Pass Through Trustee and the Subordination Agent, but not any Certificateholder, for certain losses, claims and other matters (for example, among other things, AWA is not responsible for any losses, claims, and other matters relating to any of such persons' failure to make a payment to another person, which payment was made by AWA to such first person). Under certain circumstances AWA is required to counter-indemnify the Original Lessee for indemnities owing by the Original Lessee to each Owner Participant against the loss of depreciation deductions and certain other benefits allowable for certain income tax purposes with respect to the related Aircraft. Each Owner Trustee indemnifies the Indenture Trustee for certain losses, claims and other matters to the extent not reimbursed by AWA; however, recourse is limited to the related Trust Indenture Estate. Prior to seeking indemnification from the Trust Indenture Estate for any amount indemnified against by AWA under the related Lease, the Indenture Trustee will demand and take necessary action to pursue indemnification under such Lease. If necessary, the Indenture Trustee is entitled to indemnification from the related Trust Indenture Estate for any liability, obligation, loss, damage, penalty, claim or action to the extent not reimbursed by AWA or others. The Indenture Trustee is not indemnified, however, for, among other things, actions arising from its gross negligence (or negligence in the handling of funds), willful misconduct or for the inaccuracy of any representation or warranty made in its individual capacity under the relevant Refunding Agreement. (Indentures, Section 7.01) No Trust Company, Owner Participant or any director, officer, employee, stockholder, partner, agent or affiliate of the Trust Company or Owner Participant (the "Exculpated Person") will have any obligation, duty or liability of any kind whatsoever to the Indenture Trustee or holders of any Equipment Notes in connection with the exercise by any Exculpated Person of any rights of an Owner Trustee under the related Lease and the other related documents, or the taking of any action or the failure to take any action, in each case in connection with any rights of such Owner Trustee under the applicable Indenture and the related Lease. (Indentures, Section 7.02) Each Trust Company, Owner Trustee and Owner Participant is required to indemnify the related Indenture Trustee and the holders of the Equipment Notes issued with respect to the Aircraft in which such Owner Trustee has an interest for certain losses that may be suffered as a result of its failure to discharge certain liens or claims on or against the assets subject to the lien of the related Indenture (Refunding Agreements, Section 13). The Indenture Trustee is not under any obligation to take any action, risk liability or 92 94 expend its own funds under the relevant Indenture if it has reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk is not reasonably assured to it. (Indentures, Section 5.03) THE LEASES Each Aircraft is leased by an Owner Trustee to AWA under the relevant Lease. TERMS AND RENTALS Each Aircraft is leased separately under its respective Lease for a term commencing on the date of the delivery of such Aircraft to the Original Lessee and expiring on July 5, 2013, which in all cases is not earlier than the latest maturity date of the Equipment Notes issued pursuant to the related Indenture, unless earlier terminated as provided by the related Lease. Basic Rent payments for each Aircraft are payable semi-annually on each Basic Rent payment date. (Leases, Section 4 and Exhibit C) AWA's obligations to pay rent and to make, or cause to be made, other payments under each Lease are unsubordinated unsecured obligations of AWA and will rank pari passu in right of payment with all other unsubordinated unsecured indebtedness of AWA. The rental obligations will be effectively subordinated to any secured indebtedness of AWA to the extent of the value of the assets securing such indebtedness and would be effectively subordinated to all obligations of AWA's subsidiaries (if any). AWA has no right to purchase any Aircraft at the conclusion of the Term of such Lease. NET LEASE; MINIMUM PAYMENTS AWA's obligations in respect of each Lease of an Aircraft are those of a lessee under a "net lease". Lessee's obligations to pay all rent and perform all other obligations under the Leases are, by the terms of the Leases, stated to be absolute and unconditional. The Leases provide that (i) the Stipulated Loss Value for each Aircraft, together with the payment of all rent then due thereunder, as of any time shall be sufficient to pay in full the unpaid principal amount of the related Equipment Notes and all accrued and unpaid interest and (ii) Basic Rent payable on any Basic Rent payment date shall at least equal the amount of principal and interest due and payable on the related Equipment Notes on such Basic Rent payment date. (Leases, Section 4(b)) REGISTRATION; MAINTENANCE; MODIFICATIONS AWA is obligated to cause the Aircraft to be duly registered with the FAA in the name of the Owner Trustee (or with the aviation authority in certain other jurisdictions in connection with the re-registration of the Aircraft in such jurisdictions). Registration of the Aircraft in specified jurisdictions outside the United States is subject to, among other conditions specified in the related Refunding Agreement, the lien of the related Indenture continuing as a valid and duly perfected security interest in the related Aircraft and the related Lease. AWA is also obligated to the extent set forth in the related Lease, to maintain, service, repair and overhaul the Aircraft (or cause the Aircraft to be maintained, serviced, repaired and overhauled) in accordance with good industry practice and so as to keep the Aircraft in as good a condition as when delivered to AWA, ordinary wear and tear excepted, and in such condition as is necessary to enable the airworthiness certification of such Aircraft to be maintained in good standing at all times (a) under the Federal Aviation Act and any other applicable law, or (b) under the applicable laws of any other jurisdiction in which the Aircraft may be registered, except when any grounding of the Aircraft is fleetwide in nature so long as AWA or a Permitted Sublessee is contesting in good faith such grounding. AWA is also required to cause the Aircraft then subject to such Leases to be maintained in accordance with maintenance standards required by, or substantially equivalent to those required by, the central civil aviation authority of the country of registry, and, to the extent not inconsistent therewith, the FAA. AWA will maintain, service, repair and overhaul the Aircraft in the same manner and with the same care as used by AWA with respect to similar aircraft owned by AWA and, during any period in which a sublease permitted by the related Lease is in effect, will cause to be performed all maintenance, service, repair and overhaul of the Aircraft in the same manner and with the same care as used by the Permitted Sublessee with respect to similar aircraft owned by such Permitted Sublessee. (Leases, Section 6(d) and 6(e)) 93 95 AWA will not permit the Aircraft to be maintained, used, serviced, repaired or operated in violation of any law of any government having jurisdiction, or in violation of any airworthiness certificate, license or registration to the extent mandatory for operators similar to AWA or the Permitted Sublessee, except to the extent AWA (or any Permitted Sublessee) is in good faith contesting the validity of any such requirements by appropriate proceedings which, among other things specified in each Lease, do not impair the interest of the Owner Trustee in the Aircraft or the validity or the priority of the Lien of the Indenture. (Leases, Section 6(c)) AWA must make (or cause to be made) all alterations, modifications and additions to each Airframe and Engine necessary to meet the applicable standards of the FAA or any other applicable governmental authority having jurisdiction. AWA (or a Permitted Sublessee) may make other alterations, modifications and additions to any Airframe or any Engine as AWA (or a Permitted Sublessee) may deem desirable in the proper conduct of its business, so long as such alterations, modifications or additions do not, among other things specified in the related Lease, diminish the value, utility or remaining useful life, or impair the condition or airworthiness of such Airframe or Engine, below the value, utility or remaining useful life or condition or airworthiness thereof immediately prior to such alteration, modification or addition (assuming such Airframe or Engine was in the condition required by the terms of the related Lease). Title to parts incorporated or installed in or added to such Airframe or Engine as a result of such alterations, modifications or additions vests in the Owner Trustee subject to certain exceptions. In certain circumstances, AWA (or a Permitted Sublessee) is permitted to remove from an Airframe or Engine parts which were added by AWA (or a Permitted Sublessee) so long as certain conditions are met and any such removal does not, among other things specified in the related Lease, diminish or impair the value, utility, remaining useful life, condition or airworthiness, which such Airframe or Engine would have had at such time had such addition, alteration or modification not occurred. (Leases, Section 9) Subject to certain exceptions, including as set forth above, AWA is obligated to replace or cause to be replaced all parts incorporated or installed in or attached to any Airframe or any Engine that become worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use. Replacement parts become subject to the related Lease and the lien of the related Indenture in lieu of the part replaced. (Leases, Section 9(a)) SUBLEASING AND POSSESSION AWA is permitted, subject to certain limitations, to sublease any Aircraft to any Certificated Air Carrier or to certain foreign entities so long as the term of any such sublease does not extend beyond the term of the related Lease. In addition, subject to certain limitations, AWA is permitted to transfer possession of any Airframe or any Engine other than by sublease, including transfers of possession by AWA in connection with certain interchange and pooling arrangements, transfers to the United States government and any instrumentality or agency thereof, "wet leases" and transfers in connection with maintenance or modifications. Except that three of the Aircraft may not be used in Hong Kong or the People's Republic of China (Leases, Section 8(h)), there are no general geographical restrictions on AWA's (or any Permitted Sublessee's) ability to operate the Aircraft. The extent to which the relevant Indenture Trustee's lien would be recognized in any Aircraft if such Aircraft were located in certain countries is uncertain. See "Description of the Equipment Notes -- Security". While the Indenture Trustees' rights and remedies in the event of a default under each Lease include the right to terminate such Lease and repossess the Aircraft subject thereto, it may be difficult, expensive and time-consuming to obtain possession of such Aircraft, particularly when such Aircraft has been registered in a foreign jurisdiction or is located outside the United States or is subleased to a foreign operator. Any such exercise of the right to repossess Aircraft will be subject to the limitations and requirements of applicable law, which could include the need to obtain approvals for deregistration or re-export of the Aircraft, which may be subject to delays and to political risk. When a defaulting Permitted Sublessee or other permitted transferee is the subject of a bankruptcy, insolvency or similar event, such as protective administration, additional limitations on the exercise of remedies may apply. Furthermore, certain jurisdictions may accord higher priority to certain other liens or other third-party rights over the Aircraft. In addition, at the time of obtaining repossession of the Aircraft under the related Lease or foreclosing on the lien on the Aircraft under the related Indenture, an Airframe subject to such Lease may not be equipped with engines owned by the applicable Owner Trustee and, in such case, AWA is required to deliver engines 94 96 attached to such Airframe of the same model and equivalent modification status as the Engines or, at AWA's option, an engine of an improved model suitable for installation and use on the Airframe without diminishing the value, utility and remaining useful life of such Airframe, in each case having a value, utility and remaining useful life at least equal to, and being in an operating condition as good as, the Engines subject to such Lease. (Leases, Section 16(c)) Notwithstanding AWA's agreement in the related Lease, in the event AWA fails to transfer title to engines not owned by the applicable Owner Trustee that are attached to an Airframe on repossession or return thereof, at the time of obtaining repossession of the Aircraft it could be difficult, expensive and time-consuming to assemble an Aircraft consisting of an Airframe and related Engines subject to such Lease. See "Risk Factors -- Factors Relating to the Certificates and the Offering -- Repossession". LIENS AWA is required to maintain each Aircraft, Airframe and Engine free of any liens, other than specified permitted liens including the respective rights of AWA, the relevant Owner Trustee, Owner Participant and Indenture Trustee and any other rights as provided in the related Lease and any rights of others to possession of the Aircraft in accordance with the terms of the related Lease (including Permitted Sublessees); liens, the removal of which is the responsibility of other parties; liens for taxes either not yet due or being diligently contested in good faith by appropriate proceedings so long as such proceedings or such liens do not, among other things as may be specified in the related Lease, involve any material danger of the sale, forfeiture or loss of such Aircraft, Airframe or Engine or any interest of the related Owner Trustee or Indenture Trustee therein; inchoate materialmen's, mechanics' and other similar inchoate liens arising in the ordinary course of AWA's business for sums not overdue for a period of more than 45 days or being diligently contested in good faith so long as such proceedings or such liens do not involve any material danger of the sale, forfeiture or loss of such Aircraft, Airframe or Engines or any interest of the related Owner Trustee or Indenture Trustee therein; judgment liens discharged, vacated or reversed within a period of 30 days as specified in, and subject to other limitations which may be contained in, the related Lease, and any other lien with respect to which AWA (or a Permitted Sublessee) has provided a bond adequate in the reasonable opinion of the Owner Participant and the Indenture Trustee. (Leases, Section 14) INSURANCE Subject to certain exceptions, AWA is obligated, at its expense, to maintain or cause to be maintained on each Aircraft, with reputable and creditworthy insurers of recognized responsibility and standing experienced in aircraft insurance, comprehensive aircraft and general public liability insurance (exclusive of manufacturer's product liability insurance) and property damage insurance in an amount not less than $350 million, combined single limit, per occurrence or such higher amount, and of such types and terms as are customarily carried by prudent certificated air carriers, similarly situated to AWA, operating aircraft of similar size and engines. AWA is also obligated, at its expense, to maintain or cause to be maintained, "all-risk" ground and flight aircraft hull insurance and "all-risk" coverage including transit insurance with respect to Engines while not installed on an Airframe, of such type, on such terms and in such amounts as customarily maintained by prudent certificated air carriers, similarly situated to AWA, operating aircraft of similar size and engines; provided, however, that, subject to permitted deductibles, such all-risk insurance shall be for an amount on an "agreed value" basis not less than the Stipulated Loss Value (as set forth in the related Lease) determined from time to time for such Aircraft. (Leases, Sections 12(a) and 12(b)) Subject to certain exceptions, the proceeds of policies covering loss of or damage to an Aircraft shall be payable, up to the Stipulated Loss Value for such Aircraft, to the related Indenture Trustee for any loss involving proceeds in excess of $500,000 and the entire amount of any loss involving proceeds of $500,000 or less shall be paid to AWA (or a Permitted Sublessee) so long as no Lease Event of Default or Lease Default exists. AWA (and any Permitted Sublessee) may self-insure for such loss or damage to the extent of up to a $1 million deductible per Aircraft. (Leases, Sections 12(b) and 12(d)) In respect of each Aircraft, AWA is required to cause the related Owner Trustee, Owner Participant and Indenture Trustee and certain other persons, but not the Certificateholders, to be included as additional 95 97 insureds as their respective interests may appear under all insurance policies required by the terms of the Lease with respect to such Aircraft. (Leases, Sections 12(a) and 12(b)) AWA may not operate (or permit any Permitted Sublessee to operate) any Aircraft in any area that is excluded from coverage by any insurance policy in effect with respect to such Aircraft and required by the related Lease unless the Aircraft is covered by a United States government indemnity. (Leases, Section 6(c)) AWA's obligation to provide any insurance required by any Lease shall be satisfied if indemnification from the United States government is provided to the extent and subject to the terms and conditions of such Lease. (Leases, Section 12(k)) RENEWAL OPTION Prior to the end of the Basic Term and subject to certain conditions, AWA will have an option to renew each Lease for one Renewal Term consisting of a period equal to five years. The Renewal Rent for the Renewal Term shall be the "fair market rental value" of the Aircraft for such Renewal Term as determined in accordance with the related Lease. (Leases, Section 20(i)) EVENTS OF LOSS If an Event of Loss occurs with respect to any Airframe or any Airframe and any Engines then installed thereon, AWA is obligated either (i) to replace such Airframe or Airframe and Engines or (ii) to pay to the related Owner Trustee the applicable Stipulated Loss Value, as adjusted, together with certain additional amounts. If AWA elects to replace such Airframe or Airframe and Engines, it must do so not later than the 120th day after the related Event of Loss, with an airframe or airframe and engine(s), as applicable, meeting required specifications and free and clear of all liens (other than certain permitted liens) and having a value, utility and remaining useful life at least equal to, and being in at least as good operating condition as, such airframe or airframe and engines prior to the Event of Loss, assuming maintenance thereof in accordance with the related Lease. If AWA elects to pay the Stipulated Loss Value for such Airframe or Airframe and Engines, AWA must make such payment not later than 120 days after the related Event of Loss. Upon making such payment, together with all other amounts then due under the related Lease with respect to such Airframe or Airframe and Engines, the Lease for such Aircraft shall terminate and the obligation of AWA to make the scheduled Basic Rent payments with respect thereto shall cease. (Leases, Section 11(a)) If an Event of Loss occurs with respect to an Engine, AWA is required to replace such Engine within 60 days from the date of such Event of Loss with another engine, free and clear of all liens (other than certain permitted liens), meeting required specifications and having a value, utility and remaining useful life at least equal to, and being in at least as good operating condition as, the Engine being replaced (assuming that such Engine had been maintained in accordance with the related Lease) suitable for installation and use on the Airframe without diminishing the value, remaining useful life or utility of such Airframe. (Leases, Section 11(b)) An "Event of Loss" with respect to an Aircraft, Airframe or Engine means any of the following events with respect thereto: (a) loss of such property or the use thereof due to theft or disappearance for the period set forth in the relevant Lease; (b) destruction or damage of such property that renders repair uneconomic or such property permanently unfit for normal use by AWA (or a Permitted Sublessee) for any reason whatsoever; (c) any loss or disappearance of or damage to or destruction of such property which results in an insurance settlement with respect to such property on the basis of an actual or constructive total loss; (d) the condemnation, confiscation, appropriation, seizure or requisition of title to any such property by any governmental entity which results in the loss of title by Owner Trustee for ten days or more but excluding requisition for use or hire which does not involve requisition of title; 96 98 (e) the condemnation, confiscation, appropriation, seizure or requisition of the use of such property by any governmental entity (other than a requisition for use by the federal government of the United States or any instrumentality or agency thereof bearing the full faith and credit of the United States of America), which in any such case shall have resulted in the loss of possession thereof by AWA for the period set forth in the relevant Lease (or for such shorter period ending on the date which is the next business day after the date of receipt of an insurance settlement with respect to such property on the basis of a total loss); (f) the requisition for use of such property by the federal government of the United States or any agency or instrumentality thereof bearing the full faith and credit of the United States of America, which purports to or does continue beyond the Term of the relevant Lease; (g) as a result of any law, rule, regulation, order or other action by the FAA, the Department of Transportation or any other governmental entity having jurisdiction, the use of such Aircraft, Airframe or Engine in the normal course of AWA's (or a Permitted Sublessee's) business of air transportation of passengers shall have been prohibited for a period of six consecutive months, unless AWA (or a Permitted Sublessee), prior to the expiration of such six-month period, has undertaken and is diligently carrying forward all steps which are necessary or desirable to permit normal use of such item of equipment by AWA (or a Permitted Sublessee), or, in any event, if such normal use shall have been so prohibited by any such governmental entity for the period set forth in the relevant Lease; or (h) as otherwise provided in the relevant Lease. An Event of Loss with respect to an Aircraft is deemed to have occurred if an Event of Loss occurs with respect to the Airframe which is a part of such Aircraft. An Event of Loss with respect to an Engine shall not, absent an Event of Loss with respect to the relevant Airframe, be deemed an Event of Loss with respect to such Airframe. (Leases, Section 1) INDEMNIFICATION Subject to certain exceptions, AWA has agreed to indemnify, among others, each Owner Participant, each Owner Trustee, each of the Trustees and each of the Indenture Trustees, but not the holders of the Certificates, for certain liabilities, losses, fees and expenses and for certain other matters arising out of the transactions described herein or relating to the Aircraft. In addition, under certain circumstances AWA is required to indemnify such persons, but not the holders of the Certificates, against certain taxes, levies, duties, withholdings and for certain other matters (but excluding, among other things, certain income and capital gains taxes) relating to such transactions or the Aircraft. (Leases, Sections 10 and 13) LEASE EVENTS OF DEFAULT The Lease Events of Default include, among other things, (i) failure by AWA to make any payment of Basic Rent, Renewal Rent or Stipulated Loss Value within three business days after such payment is due, or any other payment of Supplemental Rent within ten business days after the same shall have become due and AWA has received written demand therefor by the party entitled thereto (provided that failure to pay amounts owed under certain related documents shall not constitute a Lease Event of Default unless the Owner Trustee or the Owner Participant delivers notice to AWA that such failure shall constitute a Lease Event of Default); (ii) failure by AWA to perform or observe any covenant, condition or agreement to be performed or observed by it under the related Lease or certain related documents, and such failure shall have continued unremedied after notice and specified cure periods; (iii) any representation or warranty made by AWA under the related Refunding Agreement and certain related documents or in any certificate furnished by AWA in connection therewith, shall have proved to have been incorrect in any material respect when made and continued unremedied after notice and specified cure periods; (iv) the occurrence of certain events of bankruptcy, reorganization or insolvency of AWA; (v) AWA's loss or suspension of its United States air carrier license or certificate under Part 121 of the Federal Aviation Regulations or its certificate of public convenience and necessity under Section 41102(a) of the Federal Aviation Act or, subject to certain exceptions, its cessation of 97 99 business as, or cessation of a preponderance of its business to be, that of a commercial passenger Certificated Air Carrier and (vi) the failure of AWA to obtain and maintain (or cause to be obtained and maintained) insurance on or in respect of any Aircraft in accordance with the provisions of the relevant Lease, or the operation of any Aircraft outside of the scope or in violation of the terms of such insurance. (Leases, Section 17) The Leases require AWA to provide to the relevant Owner Trustee as beneficiary thereof irrevocable standby letters of credit for drawdown upon the occurrence of certain Lease Defaults or Lease Events of Default. These letters of credit will not be assigned to the related Indenture Trustee under its Indenture. There are no cross-default provisions in the Leases. Consequently, events resulting in a Lease Event of Default under any particular Lease may or may not result in a Lease Event of Default occurring under any other Lease. (Leases, Section 17) If a Lease Event of Default has occurred and is continuing and the related Lease has been declared to be in default, the Owner Trustee may, subject to certain limitations imposed by law, exercise one or more of the remedies provided in such Lease with respect to the related Aircraft. Such remedies include the right to repossess such Aircraft, to sell or re-lease such Aircraft free and clear of AWA's rights and retain the proceeds and to require AWA to pay liquidated damages as computed in accordance with such Lease. (Leases, Section 18) SECTION 1110 In each Lease, AWA covenants and agrees that it will support any motion, petition or application filed by the related Owner Trustee, as lessor under the related Lease, with any bankruptcy court having jurisdiction over AWA, whereby such Owner Trustee seeks recovery of possession of the Aircraft under Section 1110 of the Bankruptcy Code. (Lease, Section 8(i)) See "Description of the Equipment Notes -- Remedies". CERTAIN DEFINED TERMS UNDER THE LEASES "Airframe" means, with respect to each Aircraft, such Aircraft (except Engines or engines from time to time installed thereon) and any such model aircraft (except Engines or engines from time to time installed thereon) which may from time to time be substituted for such Aircraft (except Engines or engines from time to time installed thereon) in accordance with the provisions of the related Lease. "Basic Rent" means, for any Aircraft, the scheduled basic rent in respect of such Aircraft payable semi-annually for the Term of the related Lease. "Basic Term" means, for any Aircraft, a term commencing on the date of delivery of such Aircraft to the Original Lessee under the related Lease and expiring not earlier than the latest maturity date of the Equipment Notes issued pursuant to the related Indenture, unless earlier terminated as provided by the related Lease. "Certificated Air Carrier" means any corporation (except the United States government) domiciled in the United States of America and holding a Certificate of Convenience and Necessity issued under Section 41102(a) of the Federal Aviation Act by the Department of Transportation. "Engine" means with respect to each Aircraft, (i) each of the two IAE Model V2500 engines initially installed on the Airframe whether or not from time to time thereafter no longer installed on the Airframe or installed on any other aircraft or airframe, and (ii) any replacement engine which may from time to time be substituted for any Engine in accordance with the provisions of the related Lease. "Lease Default" means an event or condition which would constitute a Lease Event of Default with the lapse of time or the giving of notice or both. "Lease Payment Dates" means, with respect to each Lease, January 2 and July 2 of each year, commencing on January 2, 1998. "Permitted Sublessee" means any sublessee permitted under a Lease from time to time. 98 100 "Renewal Rent" means the rent payable during the Renewal Term for any Aircraft pursuant to the related Lease. "Renewal Term" means the period following the end of the Basic Term if AWA has exercised its renewal option for such Aircraft pursuant to the related Lease. "Supplemental Rent" means all amounts, liabilities and obligations (other than Basic Rent or Renewal Rent) which AWA assumes or agrees to pay under each Lease or the other agreements related thereto. "Term" means, with respect to a Lease, collectively, the Basic Term and, if AWA has exercised its renewal option for such Aircraft pursuant to such Lease, the Renewal Term. CROSS-BORDER LEASES "Cross-Border Lease" means each of the lease agreements between a Cross-Border Lessor and the applicable Cross-Border Lessee. "Cross-Border Lessee" means each of the lessees of an Aircraft under a Cross-Border Lease. "Cross-Border Lessor" means each of the foreign lessors of an Aircraft. Three Aircraft securing the obligations under the three related Indentures are subject to Hong Kong Cross-Border Lease financings with terms expiring in 2006. Under the terms of each of the Cross-Border Lease financings, title to the relevant Aircraft is held by the relevant Owner Trustee as assignee of the title holder of the Aircraft, which, under a hire purchase agreement, has been hired by the original title holder to a Hong Kong entity acting as the Cross-Border Lessor of such Aircraft. In summary, the Hong Kong lease financing documentation provides that, subject to various terms and conditions, the Cross-Border Lessor has the right to acquire title to the Aircraft from that relevant Owner Trustee upon the termination of the hire purchase agreement. The relevant documents further provide that the relevant Owner Trustee, as assignee of the Cross-Border Lessee, in each of the Hong Kong transactions can concurrently re-acquire title to the relevant Aircraft from the Cross-Border Lessor, if such lessor exercises its option to acquire title to the relevant Aircraft upon the termination of the hire purchase agreement, or the Owner Trustee, as assignee of the title holder of the Aircraft, can retain title if the Cross-Border Lessor does not or cannot exercise its option to acquire the Aircraft upon termination of the hire purchase agreement. The rights of the Cross-Border Lessee under each of these financings have been assigned to the relevant Owner Trustees. Under the terms of the financing, the Owner Trustee, as assignee of the Cross-Border Lessee, has the right to cause the termination of such cross-border financing upon the occurrence and continuance of a Lease Event of Default under the related U.S. Lease and the exercise of remedies under the U.S. Lease (to the extent not stayed). By virtue of an agreed defeasance arrangement, the monetary obligations of the Cross-Border Lessees under the Hong Kong Cross-Border Leases have been assumed by certain financial institutions or other parties. The relevant Owner Trustee's right to take title to the Aircraft free of the Cross-Border Lease financing is not conditioned upon the payment of any sum by any such parties. In addition, the relevant Cross-Border Lessor and the partners therein have expressly agreed that, after giving effect to the provisions of the Cross-Border Lease financing documentation, they shall not have any right to retain or assert any interest in the relevant Aircraft upon the termination of the relevant Cross-Border Lease financing. The ability of an Indenture Trustee to realize upon its security interest in an Aircraft that is subject to a Cross-Border Lease financing could be adversely affected if the relevant Cross-Border Lessor or any partner therein were to become a debtor in a bankruptcy or similar proceeding in its home jurisdiction and a creditor, trustee in bankruptcy, liquidator, receiver or similar official were to take the position that the related Aircraft should be treated as part of the estate of such lessor or partner therein, as the case may be (particularly, if at the same time the Indenture Trustee is seeking to exercise remedies under the related Indenture). If such a position were to be taken in such a proceeding, a delay in the clearing of title to such Aircraft free of the Cross-Border Lease financing could occur. Such a delay might impede the ability of an Indenture Trustee to realize upon the Aircraft collateral securing the related Equipment Notes. 99 101 Legal opinions from Hong Kong and English counsel (based on certain assumptions and qualifications) will be given to the effect that upon the occurrence of an insolvency, bankruptcy, liquidation or any other similar event with respect to the Cross-Border Lessor or any partner therein, neither the Cross-Border Lessor nor any partner therein nor any trustee in bankruptcy, liquidator, receiver or any other similar official in relation to the Cross-Border Lessor or any partner therein would be entitled to acquire and retain title to the relevant Aircraft. There can be no assurance, however, that the circumstances or the law upon which such counsel based their opinions will not change, that a court of competent jurisdiction in Hong Kong or England would not find differently, that such opinions would prove to be correct or that the law of another jurisdiction would not apply. In this regard, Hong Kong counsel advises that the Sino-British Joint Declaration on the future of Hong Kong provides that the laws of Hong Kong in force on June 30, 1997 will be maintained except for laws that contravene the Basic Law. Hong Kong counsel will be giving an opinion that, in their view, the Basic Law does not contain any provision which would be contravened by any provision of Hong Kong law relevant to their opinion referred to above, but that this is a matter for interpretation by the Standing Committee of the National People's Congress of the People's Republic of China, in which the power of interpretation of the Basic law is vested. In connection with the realization by the Indenture Trustee of its security interest in an Aircraft subject to a Cross-Border Lease Financing, it may be desirable to have the related Cross-Border Leases terminated. The information set forth above concerning Cross-Border Lease financings was provided by GPA and AWA takes no responsibility for the accuracy thereof. THE REFUNDING AGREEMENTS TRANSFER OF OWNER PARTICIPANT INTERESTS Subject to certain restrictions, the Owner Participant may transfer its beneficial interest in the relevant Owner Trust. (Refunding Agreements, Section 10) REGISTRATION OF AIRCRAFT The Aircraft have been registered under the Federal Aviation Act in the name of the relevant Owner Trustee. AWA may, under certain circumstances, request the re-registration of such Aircraft in certain jurisdictions outside of the United States, subject to, among other conditions specified in the related Refunding Agreement, the lien of the related Indenture continuing as a perfected security interest in such Aircraft and the related Lease. (Refunding Agreements, Section 11) 100 102 CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES GENERAL The following discussion describes the principal U.S. federal income tax consequences to Certificateholders of the purchase, ownership and disposition of the Certificates. In the opinion of Andrews & Kurth L.L.P., special tax counsel to AWA ("Special Tax Counsel") such discussion is accurate in all material respects of the matters discussed herein. Except as otherwise specified, the discussion is addressed to beneficial owners of Certificates ("U.S. Certificateholders") that are citizens or residents of the United States, corporations, partnerships or other entities created or organized in or under the laws of the United States or any State, estates the income of which is subject to U.S. federal income taxation regardless of its source or a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States fiduciaries have authority to control all substantial decisions of the trust ("U.S. Persons") that will hold the Certificates as capital assets. This discussion does not address the tax treatment of U.S. Certificateholders that may be subject to special tax rules, such as banks, insurance companies, dealers in securities or commodities, tax-exempt entities, holders that will hold Certificates as part of a straddle or holders that have a "functional currency" other than the U.S. Dollar, nor does it address the tax treatment of U.S. Certificateholders that do not acquire Certificates at the initial offering price as part of the initial offering. This discussion does not describe any tax consequences arising under the laws of any State, locality or taxing jurisdiction other than the United States. This discussion is based upon the tax laws of the United States as in effect on the date of this Prospectus, as well as judicial and administrative interpretations thereof (in final or proposed form) available on or before such date. All of the foregoing are subject to change or differing interpretations, which could apply retroactively. Prospective investors should note that no rulings have been or will be sought from the Internal Revenue Service (the "IRS ") with respect to any of the federal income tax consequences discussed below, and no assurance can be given the IRS will not take contrary positions. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE CERTIFICATES. TAX STATUS OF THE TRUSTS In the opinion of Special Tax Counsel, each Trust will be classified as a grantor trust under subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Code and not as an association taxable as a corporation for U.S. federal income tax purposes. Accordingly, each U.S. Certificateholder will be subject to federal income taxation as if it owned directly a pro rata undivided interest in each asset owned by the corresponding Trust and paid directly, its share of fees and expenses paid by such Trust. TAXATION OF CERTIFICATEHOLDERS GENERALLY A U.S. Certificateholder will be treated as owning its pro rata undivided interest in each of the Equipment Notes and any other property held by the related Trust. Accordingly, each U.S. Certificateholder's share of interest paid on the Equipment Notes will be taxable as ordinary income, as it is paid or accrued, in accordance with such owner's method of accounting for U.S. federal income tax purposes. Any amounts received by a Trust from Interest Drawings under the relevant Liquidity Facility will be treated for U.S. federal income tax purposes as having the same characteristics as the payments they replace. Each U.S. Certificateholder will be entitled to deduct, consistent with its method of accounting, its pro rata share of fees and expenses paid or incurred by the corresponding Trust as provided in Section 162 or 212 of the Code. Certain fees and expenses, including fees paid to the Trustee and the Liquidity Provider, will be borne by parties other than the Certificateholders. It is possible that such fees and expenses will be treated as constructively received by the Trust, in which event a U.S. Certificateholder will be required to include in income and will be entitled to deduct its pro rata share of such fees and expenses. If a U.S. Certificateholder is an individual, estate or trust, the deduction for such holder's share of such fees or expenses will be allowed only to the extent that all of such holder's miscellaneous itemized deductions, including such holder's share of such fees and expenses, exceed 2% of such holder's adjusted gross income. In addition, in the case of U.S. 101 103 Certificateholders who are individuals, certain otherwise allowable itemized deductions will be subject generally to additional limitations on itemized deductions under the applicable provisions of the Code. EFFECT OF SUBORDINATION OF SUBORDINATED CERTIFICATEHOLDERS If any of the Class B Trust, the Class C Trust or the Class D Trust (such Trusts being the "Subordinated Trusts" and the related Certificates being the "Subordinated Certificates") receives less than the full amount of the receipts of principal or interest paid with respect to the Equipment Notes held by it (any shortfall in such receipts being the "Shortfall Amounts") because of the subordination of the Equipment Notes held by such Trust under the Intercreditor Agreement, the corresponding owners of beneficial interests in the Subordinated Certificates (the "Subordinated Certificateholders") would probably be treated for federal income tax purposes as if they had (1) received as distributions their full share of such receipts, (2) paid over to the relevant preferred class of Certificateholders an amount equal to their share of such Shortfall Amount, and (3) retained the right to reimbursement of such amounts to the extent of future amounts payable to such Subordinated Certificateholders with respect to such Shortfall Amount. Under this analysis, (1) Subordinated Certificateholders incurring a Shortfall Amount would be required to include as current income any interest or other income of the corresponding Subordinated Trust that was a component of the Shortfall Amount, even though such amount was in fact paid to another class of Certificateholders, (2) a loss would only be allowed to such Subordinated Certificateholders when their right to receive reimbursement of such Shortfall Amount became worthless (i.e., when it becomes clear that funds will not be available from any source to reimburse such loss), and (3) reimbursement of such Shortfall Amount prior to such a claim of worthlessness would not be taxable income to Subordinated Certificateholders because such amount was previously included in income. These results should not significantly affect the inclusion of income for Subordinated Certificateholders on the accrual method of accounting, but could accelerate inclusion of income to Subordinated Certificateholders on the cash method of accounting by, in effect, placing them on the accrual method. SALE OR OTHER DISPOSITION OF THE CERTIFICATES Upon the sale, exchange or other disposition of a Certificate, a U.S. Certificateholder generally will recognize capital gain or loss equal to the difference between the amount realized on the disposition (other than any amount attributable to accrued interest which will be taxable as ordinary income) and the U.S. Certificateholder's adjusted tax basis in the related Equipment Notes and any other assets held by the corresponding Trust. A U.S. Certificateholder's adjusted tax basis will equal the holder's cost for its Certificate, plus any market discount previously included in income or less any amortized bond premium or any previously recognized losses or prior principal payments. Any gain or loss generally will be capital gain or loss (other than accrued market discount not previously included in income) if the Certificate was held as a capital asset and will be long-term capital gain or loss if the Certificate has been held for more than one year. FOREIGN CERTIFICATEHOLDERS Subject to the discussion of backup withholding below, payments of principal and interest on the Equipment Notes to, or on behalf of, any beneficial owner of a Certificate that is not a U.S. Person (a "Non-U.S. Certificateholder") will not be subject to U.S. federal withholding tax; provided, in the case of interest, that (i) such Non-U.S. Certificateholder does not actually or constructively own 10% or more of the total combined voting power of all classes of the stock of any Owner Participant or any transferee of such interest, (ii) such Non-U.S. Certificateholder is not a controlled foreign corporation for U.S. tax purposes that is related to an Owner Participant or any transferee of such interest and (iii) either (A) the Non-U.S. Certificateholder certifies, under penalties of perjury, that it is not a U.S. Person and provides its name and address or (B) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "financial institution") and holds the Certificate certifies, under penalties of perjury, that such statement has been received from the Non-U.S. Certificateholder by it or by another financial institution and furnishes the payor with a copy thereof. Regulations proposed by the IRS on April 15, 1996, if finalized in their current form, would modify the 102 104 certification requirements described in clause (iii) above with respect to certain payments after December 31, 1997. AWA has no obligation to indemnify any Certificateholder with respect to withholding taxes. Any capital gain realized upon the sale, exchange, retirement or other disposition of a Certificate by a Non-U.S. Certificateholder will not be subject to U.S. federal income or withholding taxes if (i) such gain is not effectively connected with a U.S. trade or business of the holder and (ii) in the case of an individual, such holder is not present in the United States for 183 days or more in the taxable year of the sale, exchange, retirement or other disposition or receipt. BACKUP WITHHOLDING Payments made on the Certificates and proceeds from the sale of Certificates will not be subject to a backup withholding tax of 31% unless, in general, the Certificateholder fails to comply with certain reporting procedures or otherwise fails to establish an exemption from such tax under applicable provisions of the Code. STATE TAX CONSIDERATIONS The Trustee is a national banking association with its principal corporate trust office in Hartford, Connecticut. Shipman & Goodwin LLP, special counsel for the Trustee, has advised AWA that, in its opinion, prior to a default and under currently applicable law, assuming that each Trust will not be classified as an association taxable as a corporation for federal income tax purposes, but rather will be classified as a grantor trust under Section 671 of the Code, (i) the Trust will not be subject to any tax, fee or other governmental charge under the laws of the State of Connecticut or any political subdivision thereof and (ii) Certificateholders that are not residents of or otherwise subject to tax in the State of Connecticut will not be subject to any tax, fee or other governmental charge under the laws of the State of Connecticut or any political subdivision thereof as a result of purchasing, owning or selling a Certificate. 103 105 ERISA CONSIDERATIONS IN GENERAL Title I of ERISA imposes certain requirements on employee benefit plans subject to ERISA ("ERISA Plans"), and on those persons who are fiduciaries with respect to ERISA Plans. Investments by ERISA Plans are subject to ERISA's general fiduciary requirements, including the requirement of investment prudence and diversification and the requirement that an ERISA Plan's investment be made in accordance with the documents governing the ERISA Plan. Section 406 of ERISA and Section 4975 of the Code prohibit certain transactions involving the assets of Plans and certain persons (referred to as "parties in interest" or "disqualified persons") having certain relationships to such Plans, unless a statutory or administrative exemption is applicable to the transaction. A party in interest or disqualified person who engages in a prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code. The U.S. Department of Labor has promulgated a regulation, 29 CFR Section 2510.3-101 (the "Plan Asset Regulation"), describing what constitutes the assets of a Plan with respect to the Plan's investment in an entity for purposes of ERISA and Section 4975 of the Code. Under the Plan Asset Regulation, if a Plan invests in a Certificate, the Plan's assets would include both the Certificate and an undivided interest in each of the underlying assets of the corresponding Trust, including the Equipment Notes held by such Trust, unless it is established that equity participation in the Trust by "benefit plan investors" (including Plans and entities whose underlying assets include plan assets by reason of an employee benefit plan's investment in the entity) is not "significant" within the meaning of the Plan Asset Regulation. In that regard, the extent to which there is equity participation in a particular Trust on the part of benefit plan investors will not be monitored. If the assets of a Trust were deemed to constitute the assets of a Plan, transactions involving the assets of such Trust could be subject to the prohibited transaction provisions of ERISA and Section 4975 of the Code unless a statutory or administrative exemption were applicable to the transaction. The fiduciary of a Plan that proposes to purchase and hold any Certificates should consider whether such purchase and holding may involve the indirect extension of credit to a party in interest or a disqualified person. In addition, whether or not the assets of a Trust are deemed to be Plan Assets under the Plan Asset Regulation, if Certificates are purchased by a Plan and Certificates of a subordinate Class are held by a party in interest or a disqualified person with respect to such Plan, the exercise by the holder of the subordinate Class of Certificates of its right to purchase the senior Classes of Certificates upon the occurrence and during the continuation of a Triggering Event could be considered to constitute a prohibited transaction unless a statutory or administrative exemption were applicable. Depending on the identity of the Plan fiduciary making the decision to acquire or hold Certificates on behalf of a Plan, PTCE 91-38 (relating to investments by bank collective investment funds), PTCE 84-14 (relating to transactions effected by a "qualified professional asset manager"), PTCE 95-60 (relating to investment by an insurance company general account), PTCE 90-1 (relating to investments by insurance company pooled separate accounts) or PTCE 96-23 (relating to transactions effected by an "in-house asset manager") (collectively, the "Class Exemptions") could provide an exemption from the prohibited transaction provisions of ERISA and Section 4975 of the Code. There can be no assurance that any of these Class Exemptions or any other exemption will be available with respect to any particular transaction involving the Certificates. Governmental plans and certain church plans, while not subject to the fiduciary responsibility provisions of ERISA or the provisions of Section 4975 of the Code, may nevertheless be subject to state or other federal laws that are substantially similar to the foregoing provisions of ERISA and the Code. Fiduciaries of any such plans should consult with their counsel before purchasing any Certificates. Any Plan fiduciary which proposes to cause a Plan to purchase any Certificates should consult with its counsel regarding the applicability of the fiduciary responsibility and prohibited transaction provisions of ERISA and Section 4975 of the Code to such an investment, and to confirm that such purchase and holding will not constitute or result in a non-exempt prohibited transaction or any other violation of an applicable requirement of ERISA. 104 106 CLASS A CERTIFICATES In addition to the Class Exemptions, an individual exemption may apply to the purchase, holding and secondary market sale of Class A Certificates by Plans, provided that certain specified conditions are met. In particular, the U.S. Department of Labor has issued an administrative exemption to the Underwriter, Prohibited Transaction Exemption 90-24 (55 Fed. Reg. 20,548 (1990)) (the "Underwriters Exemption"), which generally exempts from the application of certain, but not all, of the prohibited transaction provisions of Section 406 of ERISA and Section 4975 of the Code certain transactions relating to the initial purchase, holding and subsequent secondary market sale of pass-through certificates which represent an interest in a trust, the assets of which include equipment notes secured by leases, provided that certain conditions set forth in the Underwriters Exemption are satisfied. The Underwriters Exemption sets forth a number of general and specific conditions which must be satisfied for a transaction involving the initial purchase, holding or secondary market sale of Class A Certificates to be eligible for exemptive relief thereunder. In particular, the acquisition of Class A Certificates by a Plan must be on terms that are at least as favorable to the Plan as they would be in an arm's length transaction with an unrelated party; the rights and interests evidenced by the Certificates must not be subordinated to the rights and interests evidenced by other Certificates of the same trust estate; the certificates at the time of acquisition by the Plan must be rated in one of the three highest generic rating categories by Moody's, Standard & Poor's, Duff & Phelps Inc. or Fitch Investors Services, L.P.; and the investing Plan must be an accredited investor as defined in Rule 501(a)(1) of Regulation D of the Commission under the Securities Act. The Underwriters Exemption does not apply to the Class B Certificates, the Class C Certificates or the Class D Certificates. Even if all of the conditions of the Underwriters Exemption are satisfied with respect to the Class A Certificates, no assurance can be given that the Underwriters Exemption would apply with respect to all transactions involving the Class A Certificates or the assets of the Class A Trust. In particular, it appears that the Underwriters Exemption would not apply to the purchase by Class B Certificateholders, Class C Certificateholders or Class D Certificateholders of Class A Certificates in connection with the exercise of their rights upon the occurrence and during the continuance of a Triggering Event. Therefore, the fiduciary of a Plan considering the purchase of a Class A Certificate should consider the availability of the exemptive relief provided by the Underwriters Exemption, as well as the availability of any other exemptions with respect to transactions to which the Underwriters Exemption may not apply. By acceptance of a Class A Certificate, each Certificateholder that is a Plan will be deemed to have represented that it is an "accredited investor" as defined in Rule 501(a)(1) of Regulation D of the Commission under the Securities Act. CLASS B, CLASS C AND CLASS D CERTIFICATES The Class B Certificates, Class C Certificates and Class D Certificates may not be acquired with the assets of a Plan; provided, however, that such Certificates may be acquired with the assets of an insurance company general account that may be deemed to contain Plan assets if the conditions of Prohibited Transaction Class Exemption 95-60 (60 Fed. Reg. 35,925) have been satisfied. By the acceptance of a Class B, C or D Certificates, each Certificateholder will be deemed to have represented that either (i) no Plan assets have been used to purchase such Certificate or (ii) the purchase and holding of such Certificate is exempt from the prohibited transaction restrictions of ERISA and the Code pursuant to PTCE 95-60. EACH PLAN FIDUCIARY (AND EACH FIDUCIARY FOR A GOVERNMENTAL OR CHURCH PLAN SUBJECT TO RULES SIMILAR TO THOSE IMPOSED ON PLANS UNDER ERISA) SHOULD CONSULT WITH ITS LEGAL ADVISOR CONCERNING AN INVESTMENT IN ANY OF THE CERTIFICATES. 105 107 UNDERWRITING Subject to the terms and conditions set forth in the Underwriting Agreement dated , 1997 (the "Underwriting Agreement") among AWA, GPA, a U.S. domiciled subsidiary of GPA and Morgan Stanley & Co. Incorporated (the "Underwriter"), the Underwriter has agreed to purchase from the Trusts, at the price set forth on the cover page of this Prospectus, Class A Certificates, Class B Certificates, Class C Certificates and Class D Certificates in the initial aggregate principal amounts of $ , $ , $ and $ , respectively. The Underwriting Agreement provides that the obligations of the Underwriter to pay for and accept delivery of the Certificates is subject to the approval of certain legal matters by its counsel and to certain other conditions. The Underwriter is obligated to take and pay for all of the Certificates to be purchased by it if any are taken. The Underwriter initially proposes to offer all or part of the Certificates directly to the public at the public offering price indicated on the cover page of this Prospectus, and may offer a portion of the Certificates to dealers at a price which represents a concession not in excess of the amounts set forth below for the respective designations of the Certificates. The Underwriter may allow to certain dealers, and such dealers may reallow, a concession not in excess of the amounts set forth below for the respective designations of the Certificates. After the initial public offering of the Certificates, the public offering prices, such concessions and other selling terms may from time to time be varied by the Underwriter.
PASS THROUGH CONCESSION REALLOWANCE CERTIFICATE DESIGNATIONS TO DEALERS CONCESSION - ------------------------ ---------- ----------- Class A % % Class B Class C Class D
In connection with the sale of Certificates, the Underwriter may be deemed to have received compensation from AWA or GPA in the form of commissions and may also receive commissions from purchasers of Certificates for whom they may act as agent. When the Underwriter sells the Certificates to or through dealers, such dealers may receive commissions from the Underwriter and/or commissions (which may be changed from time to time) from the purchasers for whom it acts as agent. Underwriters, dealers and agents participating in the distribution of the Certificates may be deemed to be underwriters, and any discounts and commissions received by them and any profit realized by them on resale of the Certificates may be deemed to be underwriting discounts and commissions under the Securities Act. The Underwriting Agreement provides that AWA, on the one hand, and GPA and a GPA subsidiary party thereto, on the other hand, will, severally and not jointly, indemnify the Underwriter against certain liabilities, including liabilities under applicable securities laws or will contribute to payments the Underwriter may be required to make in respect thereof. In addition GPA and such subsidiary will reimburse the Underwriter for certain of its expenses incurred in connection with the offering of the Certificates, including certain fees and expenses of counsel for the Underwriter. The Certificates are new securities for which there currently is no market. AWA does not intend to apply for listing of the Certificates on a national securities exchange, but has been advised by the Underwriter that it currently intends to make a market in the Certificates. The Underwriter is not obligated, however, to make a market in the Certificates, and any such market-making may be discontinued at any time at the sole discretion of the Underwriter. Accordingly, no assurance can be given as to the development or liquidity of any market for the Certificates. The Underwriter and its affiliates have provided or are currently providing investment banking and other advisory or financial services to AWA and GPA and certain of their respective affiliates for which they receive customary compensation, and may continue to provide such services in the future. 106 108 It is expected that delivery of the Certificates will be made against payment therefor on or about the Closing Date, which will be the fifth business day following the date of pricing of the Certificates (such settlement cycle being herein referred to as "T+4"). Under Rule 15c6-1 under the Exchange Act, trades in the secondary market generally are required to settle in three business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade Certificates on any day prior to the third business day before the Closing Date will be required, by virtue of the fact that the Certificates initially will settle in T+5, to specify an alternate settlement cycle at the time of any such trade to prevent a failed settlement. Purchasers of Certificates who wish to trade Certificates on any day prior to the third business day before the Closing Date should consult their own advisor. In order to facilitate the offering of the Certificates, the Underwriter may engage in transactions that stabilize, maintain or otherwise affect the price of the Certificates. Specifically, the Underwriter may overallot in connection with the offering, creating a short position in the Certificates for its own account. In addition, to cover overallotments or to stabilize the price of the Certificates, the Underwriter may bid for, and purchase, the Certificates in the open market. Finally, the underwriting syndicate may reclaim selling concessions allowed to an underwriter or a dealer for distributing the Certificates in the offering, if the syndicate repurchases previously distributed Certificates in transactions to cover syndicate short positions, in stabilization transactions or otherwise. Any of these activities may stabilize or maintain the market price of the Certificates above independent market levels. The Underwriter is not required to engage in these activities, and may end any of these activities at any time. LEGAL MATTERS The validity of the Certificates offered hereby will be passed upon for AWA by Andrews & Kurth L.L.P., Houston, Texas, and for the Underwriter by Milbank, Tweed, Hadley & McCloy, New York, New York. Certain federal income tax matters with respect to the Trust and Certificateholders will be passed upon by Andrews & Kurth L.L.P., special tax counsel to AWA. The respective counsel for AWA and the Underwriter may rely upon Shipman & Goodwin LLP, counsel to the Trustee, as to certain matters relating to the authorization, execution and delivery of the Basic Agreement, each Trust Supplement and the issuance of the Certificates. EXPERTS The financial statements and financial statement schedule of AWA as of and for the years ended December 31, 1996 and 1995, the period August 26, 1994 through December 31, 1994, and the period January 1, 1994 through August 25, 1994, have been included and incorporated by reference herein and in the Registration Statement in reliance upon the reports of KPMG Peat Marwick LLP, independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. The reports of KPMG Peat Marwick LLP as of and for the years ended December 31, 1996 and 1995, the period August 26, 1994 through December 31, 1994, and the period January 1, 1994 through August 25, 1994 contain an explanatory paragraph that states the financial statements of the Reorganized Company reflect the impact of adjustments to reflect the fair value of assets and liabilities under fresh start reporting. As a result, the financial statements of the Reorganized Company are presented on a different basis than those of the Predecessor Company and therefore, are not comparable in all respects. The references to BK, AISI, and MBA, and to their respective appraisal reports, dated as of March 26, 1997 in the case of BK, March 19, 1997 in the case of AISI and March 31, 1997 in the case of MBA, are included herein in reliance upon the authority of each such firm as an expert with respect to the matters contained in its appraisal report. 107 109 INDEX TO FINANCIAL STATEMENTS
PAGE ---- CONDENSED FINANCIAL STATEMENTS AS OF MARCH 31, 1997 Condensed Balance Sheets as of March 31, 1997 (Unaudited) and December 31, 1996..................................... F-2 Condensed Statements of Income for the three months ended March 31, 1997 and 1996 (Unaudited)....................... F-3 Condensed Statements of Cash Flows for the three months ended March 31, 1997 and 1996 (Unaudited)................. F-4 Notes to Condensed Financial Statements..................... F-5 FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996 Independent Auditors' Report................................ F-7 Balance Sheets as of December 31, 1996 and 1995............. F-8 Statements of Income for the years ended December 31, 1996 and 1995, the period August 26, 1994 through December 31, 1994, and the period January 1, 1994 through August 25, 1994...................................................... F-9 Statements of Cash Flows for the years ended December 31, 1996 and 1995, the period August 26, 1994 through December 31, 1994, and the period January 1, 1994 through August 25, 1994.................................................. F-10 Statements of Stockholder's Equity for the years ended December 31, 1996 and 1995, the period August 26, 1994 through December 31, 1994, and the period January 1, 1994 through August 25, 1994........................................... F-11 Notes to Financial Statements............................... F-12
F-1 110 AMERICA WEST AIRLINES, INC. CONDENSED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE DATA) ASSETS
MARCH 31, DECEMBER 31, 1997 1996 ----------- ------------ (UNAUDITED) Current assets: Cash and cash equivalents................................. $ 136,323 $ 137,499 Short-term investments.................................... 29,385 39,131 Accounts receivable, less allowance for doubtful accounts of $3,056 in 1997 and $3,091 in 1996................... 95,019 106,215 Expendable spare parts and supplies, less allowance for obsolescence of $1,911 in 1997 and $1,713 in 1996...... 21,735 21,423 Prepaid expenses.......................................... 56,917 47,545 ---------- ---------- Total current assets.............................. 339,379 351,813 ---------- ---------- Property and equipment: Flight equipment.......................................... 704,346 669,654 Other property and equipment.............................. 112,749 107,993 Equipment purchase deposits............................... 68,355 56,665 ---------- ---------- 885,450 834,312 Less accumulated depreciation and amortization............ 189,265 163,718 ---------- ---------- Total property and equipment...................... 696,185 670,594 ---------- ---------- Other assets: Restricted cash........................................... 28,638 26,433 Reorganization value in excess of amounts allocable to identifiable assets, net............................... 435,789 447,044 Deferred income taxes..................................... 74,700 74,700 Other assets, net......................................... 27,391 27,093 ---------- ---------- Total other assets................................ 566,518 575,270 ---------- ---------- $1,602,082 $1,597,677 ========== ========== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Current maturities of long-term debt...................... $ 44,211 $ 46,238 Accounts payable.......................................... 132,621 115,458 Air traffic liability..................................... 232,984 214,056 Accrued compensation and vacation benefits................ 26,269 30,085 Accrued taxes............................................. 46,470 72,047 Other accrued liabilities................................. 45,307 44,836 ---------- ---------- Total current liabilities......................... 527,862 522,720 ---------- ---------- Long-term debt, less current maturities..................... 333,685 330,148 Deferred credits and other liabilities...................... 117,153 122,029 Commitments and contingencies Stockholder's equity: Common Stock $.01 par value. Authorized, issued and outstanding; 1,000 shares.............................. -- -- Additional paid-in capital................................ 539,301 552,643 Retained earnings......................................... 84,081 70,137 ---------- ---------- Total stockholder's equity........................ 623,382 622,780 ---------- ---------- $1,602,082 $1,597,677 ========== ==========
See accompanying notes to condensed financial statements. F-2 111 AMERICA WEST AIRLINES, INC. CONDENSED STATEMENTS OF INCOME (IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, -------------------- 1997 1996 -------- -------- Operating revenues: Passenger................................................. $435,540 $387,802 Cargo..................................................... 12,756 10,757 Other..................................................... 13,891 14,591 -------- -------- Total operating revenues.......................... 462,187 413,150 -------- -------- Operating expenses: Salaries and related costs................................ 101,017 94,702 Aircraft rents............................................ 54,932 47,272 Other rents and landing fees.............................. 30,816 26,567 Aircraft fuel............................................. 69,116 49,176 Agency commissions........................................ 38,312 32,599 Aircraft maintenance materials and repairs................ 31,312 27,025 Depreciation and amortization............................. 12,077 13,232 Amortization of excess reorganization value............... 6,255 6,549 Other..................................................... 84,887 81,710 -------- -------- Total operating expenses.......................... 428,724 378,832 -------- -------- Operating income............................................ 33,463 34,318 -------- -------- Nonoperating income (expenses): Interest income........................................... 4,240 3,170 Interest expense.......................................... (12,081) (12,268) Other, net................................................ 296 200 -------- -------- Total nonoperating expenses, net.................. (7,545) (8,898) -------- -------- Income before income taxes.................................. 25,918 25,420 -------- -------- Income taxes................................................ 11,974 11,693 -------- -------- Net income.................................................. $ 13,944 $ 13,727 ======== ========
See accompanying notes to condensed financial statements. F-3 112 AMERICA WEST AIRLINES, INC. CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, -------------------- 1997 1996 -------- -------- Cash flows from operating activities: Net income................................................ $ 13,944 $ 13,727 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.......................... 12,077 13,232 Amortization of capitalized maintenance................ 14,434 6,602 Amortization of excess reorganization value............ 6,255 6,549 Amortization of deferred credits....................... (2,793) (2,901) Other.................................................. 1,131 520 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable, net........... 11,196 (29,622) Decrease (increase) in spare parts and supplies, net...... (312) 244 Increase in prepaid expenses.............................. (9,372) (4,852) Decrease (increase) in other assets, net.................. 2,497 (2,341) Increase in accounts payable.............................. 17,163 11,004 Increase in air traffic liability......................... 18,928 67,936 Decrease in accrued compensation and vacation benefits.... (3,816) (19,570) Decrease in accrued taxes................................. (25,577) (430) Increase in other accrued liabilities..................... 471 121 Decrease in other liabilities............................. (2,564) (1,542) -------- -------- Net cash provided by operating activities......... 53,662 58,677 Cash flows from investing activities: Purchases of property and equipment....................... (41,062) (32,795) Decrease in short-term investments........................ 9,746 Other..................................................... 91 (69) -------- -------- Net cash used in investing activities............. (31,225) (32,864) Cash flows from financing activities: Repayment of debt......................................... (10,271) (15,812) Repurchase of warrants.................................... (13,342) -- Issuance of common stock.................................. -- 2,174 -------- -------- Net cash used in financing activities............. (23,613) (13,638) -------- -------- Net increase (decrease) in cash and cash equivalents........ (1,176) 12,175 -------- -------- Cash and cash equivalents at beginning of period............ 137,499 224,367 -------- -------- Cash and cash equivalents at end of period.................. $136,323 $236,542 ======== ======== Cash, cash equivalents, and short-term investments at end of period.................................................... $165,708 $236,542 ======== ========
See accompanying notes to condensed financial statements. F-4 113 AMERICA WEST AIRLINES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS MARCH 31, 1997 1. BASIS OF PRESENTATION The unaudited condensed financial statements included herein have been prepared by America West Airlines, Inc., ("AWA" or the "Company"), a wholly-owned subsidiary of America West Holdings Corporation ("Holdings"), pursuant to the rules and regulations of the Securities and Exchange Commission but do not include all information and footnotes required by generally accepted accounting principles. In the opinion of management, the condensed financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation. Certain prior year amounts have been reclassified to conform with current year presentation. The accompanying condensed financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. 2. INCOME TAXES The Company recorded income tax expense as follows:
THREE MONTHS ENDED MARCH 31, ------------------ 1997 1996 ------- ------- (IN THOUSANDS) Current taxes: Federal................................................... $ 544 $ 364 State..................................................... 488 326 ------- ------- 1,032 690 Deferred taxes.............................................. -- -- Income tax expense allocable to reorganization items........ 10,942 11,003 ------- ------- Income tax expense.......................................... $11,974 $11,693 ======= =======
As reflected in the above table, for the three months ended March 31, 1997 and 1996, income tax expense pertains both to income from operations as well as to certain adjustments necessitated by the Company's emergence from bankruptcy in 1994 and the resultant fresh start adjustments to the Company's financial statements. The Company's reorganization gave rise to significant items of expense for financial reporting purposes that are not deductible for income tax purposes. In large measure, it is these nondeductible (for income tax purposes) expenses that result in income tax expense (for financial reporting purposes) significantly greater than taxes computed at the current U.S. corporate statutory rate of 35 percent. Nevertheless, the Company's actual cash income tax liability (i.e., income taxes payable) is considerably lower than income tax expense shown for financial reporting purposes. 3. SUPPLEMENTAL INFORMATION TO CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, ------------------ 1997 1996 ------- ------- (IN THOUSANDS) Cash paid for interest and income taxes: Interest, net of amounts capitalized ($606 in 1996)....... $10,612 $13,312 Income taxes.............................................. 40 16 Non-cash financing activities: Notes payable issued for equipment purchase deposits...... 11,690 7,814
F-5 114 4. WARRANTS In March 1997, the Company repurchased 1.91 million of its publicly traded warrants from TPG Partners, L.P. and certain of its affiliates for approximately $13.3 million. 5. COMMITMENTS AND CONTINGENCIES (a) Leases In February 1997, the Company entered into an agreement to lease one A320 aircraft for a term of 50 months with rents payable monthly. (b) Contingent Legal Obligations Certain administrative and priority tax claims are pending against the Company which, if ultimately allowed by the bankruptcy court, would represent general obligations of the Company. Such claims include claims of various state and local tax authorities and certain potential contractual indemnification obligations. The Company is also a defendant in various lawsuits. Management cannot reasonably predict the outcome of the pending lawsuits and administrative and priority tax claims. However, management believes, after considering a number of factors, including the advice of outside counsel, the nature of the contingencies to which the Company is subject and its prior experience, that although the outcome of those matters could adversely affect future operating results, the resolution of these actions will not have a material adverse effect on the Company's financial condition. F-6 115 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholder America West Airlines, Inc.: We have audited the accompanying balance sheets of America West Airlines, Inc. as of December 31, 1996 and 1995, and the related statements of income, cash flows and stockholder's equity for the years ended December 31, 1996 and 1995, the period August 26, 1994 through December 31, 1994, and the period January 1, 1994 through August 25, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of America West Airlines, Inc. as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years ended December 31, 1996 and 1995, the period August 26, 1994 through December 31, 1994, and the period January 1, 1994 through August 25, 1994, in conformity with generally accepted accounting principles. As discussed in Note 13 to the financial statements, on August 25, 1994, America West Airlines, Inc. emerged from bankruptcy. The financial statements of the Reorganized Company reflect the impact of adjustments to reflect the fair value of assets and liabilities under fresh start reporting. As a result, the financial statements of the Reorganized Company are presented on a different basis of accounting than those of the Predecessor Company and, therefore, are not comparable in all respects. /s/ KPMG Peat Marwick LLP Phoenix, Arizona February 28, 1997 F-7 116 AMERICA WEST AIRLINES, INC. BALANCE SHEETS DECEMBER 31, 1996 AND 1995 (IN THOUSANDS EXCEPT SHARE DATA)
1996 1995 ---------- ---------- ASSETS Current assets: Cash and cash equivalents................................. $ 137,499 $ 224,367 Short-term investments.................................... 39,131 -- Accounts receivable, less allowance for doubtful accounts of $3,091 in 1996 and $2,515 in 1995.................... 106,215 69,094 Expendable spare parts and supplies, less allowance for obsolescence of $1,713 in 1996 and $2,115 in 1995....... 21,423 28,643 Prepaid expenses.......................................... 47,545 43,315 ---------- ---------- Total current assets............................... 351,813 365,419 ---------- ---------- Property and equipment: Flight equipment.......................................... 669,654 546,591 Other property and equipment.............................. 107,993 104,106 Equipment purchase deposits............................... 56,665 27,489 ---------- ---------- 834,312 678,186 Less accumulated depreciation and amortization............ 163,718 76,123 ---------- ---------- 670,594 602,063 ---------- ---------- Other assets: Restricted cash........................................... 26,433 31,694 Reorganization value in excess of amounts allocable to identifiable assets, net................................ 447,044 489,045 Deferred income taxes..................................... 74,700 74,700 Other assets, net......................................... 27,093 25,788 ---------- ---------- 575,270 621,227 ---------- ---------- $1,597,677 $1,588,709 ========== ========== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Current maturities of long-term debt...................... $ 46,238 $ 54,157 Accounts payable.......................................... 115,458 89,157 Air traffic liability..................................... 214,056 191,744 Accrued compensation and vacation benefits................ 30,085 41,616 Accrued taxes............................................. 72,047 34,359 Other accrued liabilities................................. 44,836 24,802 ---------- ---------- Total current liabilities.......................... 522,720 435,835 ---------- ---------- Long-term debt, less current maturities..................... 330,148 373,964 Deferred credits and other liabilities...................... 122,029 129,438 Commitments and contingencies Stockholder's equity: Preferred stock, $.01 par value. Authorized 48,800,000 shares; no shares issued................................ -- -- Class A common stock, $.01 par value. Authorized 1,200,000 shares; issued and outstanding 1,200,000 shares in 1995.................................................... -- 12 Class B common stock, $.01 par value. Authorized 1,000 shares; issued and outstanding 1,000 shares in 1996; Authorized 100,000,000 shares; issued and outstanding 44,141,330 shares in 1995............................... -- 441 Additional paid-in capital................................ 552,643 588,927 Retained earnings......................................... 70,137 61,632 ---------- ---------- 622,780 651,012 Less: cost of Class B common stock in treasury, 112,000 shares in 1995.......................................... -- (1,540) ---------- ---------- Total stockholder's equity......................... 622,780 649,472 ---------- ---------- $1,597,677 $1,588,709 ========== ==========
See accompanying notes to financial statements. F-8 117 AMERICA WEST AIRLINES, INC. STATEMENTS OF INCOME (IN THOUSANDS)
PREDECESSOR COMPANY REORGANIZED COMPANY ------------ -------------------------------------- PERIOD PERIOD FROM FROM YEAR ENDED DECEMBER 31, AUGUST 26 TO JANUARY 1 TO ----------------------- DECEMBER 31, AUGUST 25, 1996 1995 1994 1994 ---------- ---------- ------------ ------------ Operating revenues: Passenger.................................. $1,637,762 $1,452,261 $437,775 $ 882,140 Cargo...................................... 46,519 44,425 16,648 27,645 Other...................................... 55,245 53,956 15,343 29,243 ---------- ---------- -------- --------- Total operating revenues........... 1,739,526 1,550,642 469,766 939,028 ---------- ---------- -------- --------- Operating expenses: Salaries and related costs................. 385,840 382,032 117,562 213,722 Aircraft rents............................. 202,237 173,571 54,983 105,547 Other rents and landing fees............... 111,947 108,264 35,839 68,163 Aircraft fuel.............................. 233,522 174,195 58,165 100,646 Agency commissions......................... 133,015 124,146 37,265 78,988 Aircraft maintenance materials and repairs................................. 125,768 65,925 17,590 28,109 Depreciation and amortization.............. 52,937 49,083 15,538 56,694 Amortization of reorganization value in excess of amounts allocable to identifiable assets..................... 25,263 31,958 11,145 -- Restructuring and other nonrecurring special charges......................... 65,098 10,500 -- -- Other...................................... 335,233 276,236 82,808 179,653 ---------- ---------- -------- --------- Total operating expenses........... 1,670,860 1,395,910 430,895 831,522 ---------- ---------- -------- --------- Operating income............................. 68,666 154,732 38,871 107,506 ---------- ---------- -------- --------- Nonoperating income (expenses): Interest income............................ 12,861 15,045 3,834 470 Interest expense (contractual interest of $44,747 for the period ended August 25, 1994)................................... (46,866) (58,598) (22,636) (33,998) Gain (loss) on disposition of property and equipment............................... 1,288 (2,734) (398) (1,659) Reorganization expense, net................ -- -- -- (273,659) Other, net................................. (1,456) (67) 65 131 ---------- ---------- -------- --------- Total nonoperating expenses, net... (34,173) (46,354) (19,135) (308,715) ---------- ---------- -------- --------- Income (loss) before income taxes and extraordinary items.......... 34,493 108,378 19,736 (201,209) Income taxes................................. 24,883 53,608 11,890 2,059 ---------- ---------- -------- --------- Income (loss) before extraordinary items............................ 9,610 54,770 7,846 (203,268) Extraordinary items, net of tax.............. (1,105) (984) -- 257,660 ---------- ---------- -------- --------- Net income......................... $ 8,505 $ 53,786 $ 7,846 $ 54,392 ========== ========== ======== =========
See accompanying notes to financial statements. F-9 118 AMERICA WEST AIRLINES, INC. STATEMENTS OF CASH FLOWS (IN THOUSANDS)
PREDECESSOR REORGANIZED COMPANY COMPANY ---------------------------------------- ------------ PERIOD PERIOD FROM FROM AUGUST 26 JANUARY 1 YEAR ENDED DECEMBER 31, TO TO ------------------------ DECEMBER 31, AUGUST 25, 1996 1995 1994 1994 ---------- ---------- ------------ ------------ Cash flows from operating activities: Net income......................................... $ 8,505 $ 53,786 $ 7,846 $ 54,392 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization.................... 52,937 49,083 15,538 56,694 Amortization of capitalized maintenance.......... 39,679 11,934 356 -- Amortization of reorganization value............. 25,263 31,958 11,145 -- Income taxes attributable to reorganization items and other...................................... 23,091 52,913 11,854 -- Amortization of deferred credits................. (11,563) (10,952) (3,961) (2,966) Nonrecurring special charge...................... 65,098 -- -- -- Reorganization items............................. -- -- -- 185,226 Extraordinary items.............................. 1,105 984 -- (257,660) Other............................................ 2,099 7,199 1,576 1,276 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable, net.... (37,121) (11,172) 27,439 (18,769) Decrease (increase) in expendable spare parts and supplies, net.................................... (3,793) (4,819) 1,165 397 Decrease (increase) in prepaid expenses............ (1,467) (14,031) 4,371 1,284 Decrease (increase) in other assets, net........... (3,173) (7,312) (10,635) 12,971 Increase (decrease) in accounts payable............ 26,301 10,308 (17,289) (15,557) Increase (decrease) in air traffic liability....... 22,312 64,388 (26,452) 30,510 Increase (decrease) in accrued compensation and vacation benefits................................ (11,531) 25,840 (11,667) 15,739 Increase (decrease) in accrued taxes............... 37,688 7,298 (2,104) 25,999 Increase (decrease) in other accrued liabilities... 8,315 (663) (13,785) 67,429 Increase (decrease) in other liabilities........... (13,411) (6,314) 2,521 (14,749) --------- --------- -------- --------- Net cash provided by (used in) operating activities................................ 230,334 260,428 (2,082) 142,216 --------- --------- -------- --------- Cash flows from investing activities: Purchases of property and equipment................ (155,742) (107,387) (14,658) (61,271) Increase in short-term investments................. (39,131) -- -- -- Other.............................................. (4,082) (9) 600 334 --------- --------- -------- --------- Net cash used in investing activities....... (198,955) (107,396) (14,058) (60,937) --------- --------- -------- --------- Cash flows from financing activities: Proceeds from issuance of debt..................... -- 29,300 -- 100,000 Repayment of debt.................................. (79,216) (137,421) (23,355) (173,699) Issuance of common stock........................... 3,074 1,545 3 114,862 Debt issuance cost................................. -- (3,130) -- -- Acquisition of treasury stock...................... (23,964) (1,540) -- -- Acquisition of warrants............................ (18,141) -- -- -- --------- --------- -------- --------- Net cash provided by (used in) financing activities................................ (118,247) (111,246) (23,352) 41,163 --------- --------- -------- --------- Net increase (decrease) in cash and cash equivalents............................... (86,868) 41,786 (39,492) 122,442 --------- --------- -------- --------- Cash and cash equivalents at beginning of period..... 224,367 182,581 222,073 99,631 --------- --------- -------- --------- Cash and cash equivalents at end of period........... $ 137,499 $ 224,367 $182,581 $ 222,073 ========= ========= ======== ========= Cash, cash equivalents and short-term investments at end of period...................................... $ 176,630 $ 224,367 $182,581 $ 222,073 ========= ========= ======== =========
See accompanying notes to financial statements. F-10 119 AMERICA WEST AIRLINES, INC. STATEMENTS OF STOCKHOLDER'S EQUITY FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995, THE PERIOD AUGUST 26 THROUGH DECEMBER 31, 1994, AND THE PERIOD JANUARY 1 THROUGH AUGUST 25, 1994 (IN THOUSANDS EXCEPT SHARE DATA)
DEFERRED COMPENSATION AND NOTES RECEIVABLE -- CONVERTIBLE CLASS A CLASS B ADDITIONAL RETAINED CLASS B EMPLOYEE PREFERRED COMMON COMMON COMMON PAID-IN EARNINGS/ TREASURY STOCK STOCK STOCK STOCK STOCK CAPITAL (DEFICIT) STOCK PURCHASE PLANS ----------- ------- ------- ------ ---------- --------- -------- -------------- BALANCE AT JANUARY 1, 1994.......... $ 18 $ -- $ -- $6,323 $197,010 $(438,626) $ -- $(18,987) ---- ---- ----- ------ -------- --------- -------- -------- Issuance of 336,277 shares of common stock pursuant to convertible preferred stock dividends......... -- -- -- 84 2,932 -- -- -- Employee stock purchase plan: Cancellation of 7,678 shares of common stock at: $1.19-$4.03 per share........... -- -- -- (2) (49) -- -- 43 Deferred compensation........... -- -- -- -- (1) -- -- 606 Issuance of 108,825 shares of common stock pursuant to exercise of stock options..................... -- -- -- 27 166 -- -- -- Net income.......................... -- -- -- -- -- 54,392 -- -- Eliminate predecessor equity accounts in connection with fresh start............................. (18) -- -- (6,432) (200,058) 206,508 -- -- Eliminate employee stock receivable........................ -- -- -- -- -- (18,338) -- 18,338 Record excess of reorganization value over identifiable assets.... -- -- -- -- -- 668,702 -- -- Sale of 1,200,000 shares of Class A common stock and 14,000,000 shares of Class B common stock........... -- 12 140 -- 114,710 -- -- -- Issuance of 29,925,000 shares of new Class B common stock.............. -- -- 299 -- 472,339 (472,638) -- -- ---- ---- ----- ------ -------- --------- -------- -------- BALANCE AT AUGUST 25, 1994.......... -- 12 439 -- 587,049 -- -- -- ---- ---- ----- ------ -------- --------- -------- -------- Issuance of common stock............ -- -- -- -- 100 -- -- -- Net income.......................... -- -- -- -- -- 7,846 -- -- ---- ---- ----- ------ -------- --------- -------- -------- BALANCE AT DECEMBER 31, 1994........ -- 12 439 -- 587,149 7,846 -- -- ---- ---- ----- ------ -------- --------- -------- -------- Issuance of 4,057 shares and 170,667 shares of common stock pursuant to the exercise of stock warrants and stock options..................... -- -- 2 -- 1,543 -- -- -- Issuance of 30,334 shares of restricted stock.................. -- -- -- -- 235 -- -- -- Acquisition of 112,000 shares of treasury stock at: $13.63-$14.00 per share........... -- -- -- -- -- -- (1,540) -- Net income.......................... -- -- -- -- -- 53,786 -- -- ---- ---- ----- ------ -------- --------- -------- -------- BALANCE AT DECEMBER 31, 1995........ -- 12 441 -- 588,927 61,632 (1,540) -- ---- ---- ----- ------ -------- --------- -------- -------- Issuance of 12,725 shares and 314,001 shares of common stock pursuant to the exercise of stock warrants and stock options........ -- -- 3 -- 3,071 -- -- -- Issuance of 158,000 shares of restricted stock.................. -- -- 2 -- 2,761 -- -- -- Acquisition and issuance of treasury stock at: $13.63-$21.88 per share........... -- -- -- -- 649 -- (23,569) -- Repurchase of 2,187,475 warrants at $8.29 per warrant................. -- -- -- -- (18,141) -- -- -- Net income.......................... -- -- -- -- -- 8,505 -- -- Purchase of stock option from Holdings.......................... -- -- -- -- (62,373) -- -- -- Contribution of capital by Holdings.......................... -- -- -- -- 62,400 -- -- -- Reorganization as wholly-owned subsidiary of Holdings............ -- (12) (446) -- (24,651) -- 25,109 -- ---- ---- ----- ------ -------- --------- -------- -------- BALANCE AT DECEMBER 31, 1996........ $ -- $ -- $ -- $ -- $552,643 $ 70,137 $ -- $ -- ==== ==== ===== ====== ======== ========= ======== ======== TOTAL --------- BALANCE AT JANUARY 1, 1994.......... $(254,262) --------- Issuance of 336,277 shares of common stock pursuant to convertible preferred stock dividends......... 3,016 Employee stock purchase plan: Cancellation of 7,678 shares of common stock at: $1.19-$4.03 per share........... (8) Deferred compensation........... 605 Issuance of 108,825 shares of common stock pursuant to exercise of stock options..................... 193 Net income.......................... 54,392 Eliminate predecessor equity accounts in connection with fresh start............................. -- Eliminate employee stock receivable........................ -- Record excess of reorganization value over identifiable assets.... 668,702 Sale of 1,200,000 shares of Class A common stock and 14,000,000 shares of Class B common stock........... 114,862 Issuance of 29,925,000 shares of new Class B common stock.............. -- --------- BALANCE AT AUGUST 25, 1994.......... 587,500 --------- Issuance of common stock............ 100 Net income.......................... 7,846 --------- BALANCE AT DECEMBER 31, 1994........ 595,446 --------- Issuance of 4,057 shares and 170,667 shares of common stock pursuant to the exercise of stock warrants and stock options..................... 1,545 Issuance of 30,334 shares of restricted stock.................. 235 Acquisition of 112,000 shares of treasury stock at: $13.63-$14.00 per share........... (1,540) Net income.......................... 53,786 --------- BALANCE AT DECEMBER 31, 1995........ 649,472 --------- Issuance of 12,725 shares and 314,001 shares of common stock pursuant to the exercise of stock warrants and stock options........ 3,074 Issuance of 158,000 shares of restricted stock.................. 2,763 Acquisition and issuance of treasury stock at: $13.63-$21.88 per share........... (22,920) Repurchase of 2,187,475 warrants at $8.29 per warrant................. (18,141) Net income.......................... 8,505 Purchase of stock option from Holdings.......................... (62,373) Contribution of capital by Holdings.......................... 62,400 Reorganization as wholly-owned subsidiary of Holdings............ -- --------- BALANCE AT DECEMBER 31, 1996........ $ 622,780 =========
See accompanying notes to financial statements. F-11 120 AMERICA WEST AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995, AND 1994 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES America West Holdings Corporation ("Holdings"), a Delaware corporation, became the holding company for America West Airlines, Inc. ("AWA" or the "Company"), effective midnight, December 31, 1996. Holdings' primary business activity is ownership of all the capital stock of AWA, the ninth largest commercial airline carrier in the United States serving more than 90 destinations in the U.S., Canada and Mexico. (a) Basis of Presentation The accompanying financial statements include the accounts of America West Airlines, Inc., a wholly-owned subsidiary of Holdings. America West Airlines, Inc., D.I.P. (the "Predecessor Company") filed a voluntary petition on June 27, 1991, to reorganize under Chapter 11 of the Federal Bankruptcy Code. On August 10, 1994, the Plan of Reorganization ("Plan"), filed by the Predecessor Company, was confirmed and became effective on August 25, 1994 (the "Effective Date"). On August 25, 1994, AWA, (the "Reorganized Company") adopted fresh start reporting in accordance with Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7") of the American Institute of Certified Public Accountants. Accordingly, the Company's post-reorganization balance sheet and statements of income have not been prepared on a consistent basis with such pre-reorganization financial statements and are not comparable in all respects to financial statements prior to reorganization. For accounting purposes, the inception date of the Reorganized Company is deemed to be August 26, 1994. A vertical black line is shown in the financial statements to separate the Reorganized Company from the Predecessor Company since they have not been prepared on a consistent basis of accounting. (b) Cash and Cash Equivalents Cash equivalents consist of all highly liquid debt instruments purchased with original maturities of three months or less. The debt instruments are classified as held-to-maturity and are carried at amortized cost which approximates fair value. (See Note 8, "Investments in Debt Securities.") (c) Short-term Investments Short-term investments consist of cash invested in certain debt securities with original maturities greater than 90 days. The debt securities are classified as held to maturity and are carried at amortized cost which approximates fair value. (See Note 8, "Investments in Debt Securities.") (d) Expendable Spare Parts and Supplies Flight equipment expendable spare parts and supplies are valued at average cost. Allowances for obsolescence are provided, over the estimated useful life of the related aircraft and engines, for spare parts expected to be on hand at the date the aircraft are retired from service. (e) Property and Equipment Property and equipment are recorded at cost. Interest capitalized on advance payments for aircraft acquisitions and on expenditures for aircraft improvements are part of these costs. No interest was capitalized in the year ended December 31, 1996 due to the pending restructuring of the aircraft purchase agreement with AVSA S.A.R.L., an affiliate of Airbus Industrie ("AVSA") (See Note 10, "Commitments and Contingencies"). Interest capitalized for the year ended December 31, 1995 was $2.7 million. Property and equipment is depreciated and amortized to residual values over the estimated useful lives or the lease term, whichever is less, using the straight-line method. F-12 121 AMERICA WEST AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) The estimated useful lives for the Company's ground property and equipment range from three to 12 years for owned property and equipment and to 30 years for the reservation and training center and technical support facilities. The estimated useful lives of the Company's owned aircraft, jet engines, flight equipment and rotable parts range from 11 to 22 years. Leasehold improvements relating to flight equipment and other property on operating leases are amortized over the life of the lease or the life of the asset, whichever is shorter. (f) Restricted Cash Restricted cash includes cash deposits securing certain letters of credit. (g) Aircraft Maintenance and Repairs Routine maintenance and repairs are charged to expense as incurred. The cost of major scheduled airframe, engine and certain component overhauls are capitalized and amortized over the periods benefited and are included in aircraft maintenance materials and repairs expense for the Reorganized Company as part of fresh start reporting and in depreciation and amortization expense for the Predecessor Company. The balance of capitalized maintenance relating to aircraft and engines was reduced as part of the revaluation of property and equipment and operating leases under fresh start reporting. Additionally, a provision for the estimated cost of scheduled airframe and engine overhauls required to be performed on leased aircraft prior to their return to the lessors has been recorded. (h) Reorganization Value in Excess of Amounts Allocable to Identifiable Assets Reorganization value in excess of amounts allocable to identifiable assets is amortized on a straight line basis over 20 years. Accumulated amortization at December 31, 1996 and 1995 was $68.4 million and $43.1 million, respectively. During the years ended December 31, 1996 and 1995, reductions in reorganization value of $16.7 million and $50 million were recorded as a result of the utilization of the Predecessor Company tax attributes including net operating loss carryforwards. Additionally, in 1995 the Company established a deferred tax asset, which reduced reorganization value by $74.7 million. The Company assesses the recoverability of this asset based upon expected future undiscounted cash flows and other relevant information. (i) Frequent Flyer Awards The Company maintains a frequent travel award program known as "FlightFund" that provides a variety of awards to program members based on accumulated mileage. The estimated cost of providing the free travel, using the incremental cost method as adjusted for estimated redemption rates, is recognized as a liability and charged to operations as program members accumulate mileage. (j) Deferred Credit-Operating Leases Operating leases were adjusted to fair market value at the Effective Date. The net present value of the difference between the stated lease rates and the fair market rates has been recorded as a deferred credit in the accompanying balance sheets. The deferred credit will be increased through charges to interest expense and decreased on a straight-line basis as a reduction in rent expense over the applicable lease periods. At December 31, 1996 and 1995, the unamortized balance of the deferred credit was $95.6 million and $107.2 million, respectively. (k) Passenger Revenue Passenger revenue is recognized when the transportation is provided. Ticket sales for transportation which has not yet been provided are recorded as air traffic liability. Passenger traffic commissions and related fees are F-13 122 AMERICA WEST AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) expensed when the related revenue is recognized. Passenger traffic commissions and related fees not yet recognized are included as a prepaid expense. (l) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (m) Use of Estimates Management of the Company has made certain estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (n) Advertising Costs The Company expenses the costs of advertising as incurred. Advertising expense for the years ended December 31, 1996, 1995 and for the combined period ending December 31, 1994 was $26.6 million, $25.2 million and $23.8 million, respectively. (o) Reclassification Certain reclassifications have been made in the prior year's financial statements to conform them to the current presentation. F-14 123 AMERICA WEST AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 2. LONG-TERM DEBT Long-term debt at December 31 consists of the following:
1996 1995 -------- -------- (IN THOUSANDS) SECURED Notes payable, primarily fixed interest rates of 9.53% to 10.79%, averaging 10.32%, installments due 1999 through 2008...................................................... $234,494 $274,751 Borrowings under lines of credit, floating interest rates of Prime +1% to three months LIBOR +4%, averaging 9.42%, installments due through 1999. No available borrowings remain.................................................... 8,277 14,794 Industrial development revenue bonds, variable interest rate of 2.9% to 5.6%, averaging 3.83%, due 2016(a)............. 29,300 29,300 -------- -------- 272,071 318,845 -------- -------- UNSECURED 10 3/4% Senior Notes, face amount of $50 million, interest only payment until due in 2005(b)......................... 48,197 71,984 Notes payable, interest rates of 8% to 90-day LIBOR +3%, averaging 8.39%, installments due through 2000............ 55,910 36,708 Other....................................................... 208 584 -------- -------- 104,315 109,276 -------- -------- Total long-term debt.............................. 376,386 428,121 Less: current maturities.................................... 46,238 54,157 -------- -------- $330,148 $373,964 ======== ========
- --------------- (a) The industrial development revenue bonds are backed by an irrevocable direct pay letter of credit issued by the Industrial Bank of Japan, Limited, Los Angeles Agency; the letter of credit is secured by the Company's maintenance facility and related improvements, seventeen spare engines and a flight simulator with a combined net book value of $42.1 million and a pledge of $3.2 million in cash. The interest rate varies weekly and from January 1, 1996 to December 31, 1996 ranged from 2.9% to 5.6%. The bondholders have the right to put the bonds back to the Company on a weekly basis if the bonds bear interest at the weekly rate or monthly if the bonds bear interest at a monthly rate. If the bonds are put back to the Company, the remarketing agent or the transfer agent will, at the direction of the Company, remarket such bonds. Any bonds not remarketed will be retired utilizing the $29.9 million letter of credit which represents the principal plus 60 days of interest at a maximum rate of 12%. The letter of credit was extended in November 1996 for one year and is subject to mandatory redemption under certain circumstances. The estimated annual cost for the letter of credit is approximately $1.1 million. (b) In June 1996, the Company prepaid $25 million in principal of the 10 3/4% Senior Notes. The 10 3/4% Senior Notes mature on September 1, 2005 and interest is payable in arrears semi-annually commencing on March 1, 1996. The 10 3/4% Senior Notes may be redeemed at the option of the Company on or after September 1, 2001 at any time in whole or from time to time in part, at a redemption price equal to the F-15 124 AMERICA WEST AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) following percentage of principal redeemed, plus accrued and unpaid interest to the date of redemption, if redeemed during the 12-month period beginning:
SEPTEMBER 1, PERCENTAGE ------------ ---------- 2000............................................................. 105.375% 2001............................................................. 103.583% 2002............................................................. 101.792% 2003 and thereafter.............................................. 100.000%
Secured financings totaling $272.1 million are collateralized by assets, primarily aircraft and engines, with a net book value of $388.5 million at December 31, 1996. At December 31, 1996, the estimated maturities of long-term debt are as follows:
(IN THOUSANDS) -------------- 1997........................................................ $ 46,238 1998........................................................ 43,210 1999........................................................ 70,430 2000........................................................ 28,000 2001........................................................ 20,720 Thereafter.................................................. 167,788 -------- $376,386 ========
Certain of the Company's long-term debt agreements contain minimum cash balance requirements, leverage ratios, coverage ratios, limitations on investments and restricted payments including cash dividends, and other financial covenants with which the Company was in compliance at December 31, 1996. 3. CAPITAL STOCK Effective midnight, December 31, 1996, AWA became a wholly owned subsidiary of Holdings and each share of AWA Class A and Class B Common Stock and options to purchase Class B Common Stock were exchanged for one share of Holdings Class A or Class B Common Stock and options to purchase Class B Common Stock. Holdings' Class B Common Stock is listed on the New York Stock Exchange. On August 25, 1994, AWA issued approximately 10.4 million warrants to purchase Class B Common Stock with an exercise price of $12.74 per share. The warrants are exercisable by the holders any time before August 25, 1999 and 10.4 million shares of Class B Common Stock have been reserved for the exercise of these warrants. In May 1996, approximately 2.2 million warrants were repurchased by AWA for approximately $18 million. As of December 31, 1996, 17,054 warrants have been exercised at $12.74 per share. Pursuant to their terms, as part of the holding company formation transaction the AWA warrants became rights to acquire shares of Holdings Class B Common Stock. AWA has made arrangements for the issuance of Holdings Class B Common Stock upon the exercise of such warrants by purchasing an option from Holdings to acquire such stock. AWA issued a $62.4 million note payable due December 31, 2005 with an interest rate of 11%. Subsequently, Holdings made a capital contribution to AWA issuing a note payable to AWA for $62.4 million due December 31, 2045 with an interest rate of 10 7/8%. AWA has the right on December 31, 2005 to repay all or a portion of the then outstanding principal balance of its note payable by offsetting by an equal amount the then outstanding principal balance of its note receivable and thus, these notes have been offset in the accompanying financial statements in accordance with applicable accounting standards. F-16 125 AMERICA WEST AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 4. EMPLOYEE BENEFIT PLAN The Company has a 401(k) defined contribution plan, covering essentially all employees of the Company. Participants may contribute from 1 to 15% of their pretax earnings to a maximum of $9,500 in 1996. The Company's matching contribution is 50% of a participant's contributions up to 6% of the participant's annual pretax earnings or 25% of a participant's contributions, whichever is greater. The Company's contribution expense to the plan totaled $5.9 million, $5.9 million and $3.8 million in 1996, 1995 and the combined 1994 period, respectively. 5. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (a) Fair Value of Financial Instruments Cash Equivalents and Short-term Investments The carrying amount approximates fair value because of the short-term maturity of these instruments. Long-term Debt At December 31, 1996 and 1995, the fair value of long-term debt was approximately $379 million and $431 million, respectively, based on quoted market prices for the same or similar debt including debt of comparable remaining maturities. (b) Fuel Price Risk Management The Company is exposed to risk from fluctuating jet fuel prices. To manage this risk, the Company implemented a fuel hedging program in late 1996. Oversight of this program is the responsibility of the Fuel Hedge Committee ("FHC"), a group of the Company's senior officers, which sets acceptable levels of risk and reviews hedging activities. Under the program, the Company may enter into certain cap and swap transactions with approved counterparties for a period not to exceed twelve months. Gains and losses on such transactions are recorded as adjustments to fuel expense when the underlying fuel being hedged is used. As of December 31, 1996, there were no transactions outstanding. The Company is exposed to credit risks in the event any counterparty fails to meet its obligations. The Company does not anticipate such non-performance as counterparties are selected based on credit ratings, exposure to any one counterparty is limited based on formal guidelines and the relative market positions with such counterparty are monitored by the FHC. (c) Concentration of Credit Risk The Company does not believe it is subject to any significant concentration of credit risk. Most of the Company's receivables result from tickets sold to individual passengers through the use of major credit cards or to tickets sold by other airlines and used by passengers on AWA. These receivables are short-term, generally being settled shortly after the sale. F-17 126 AMERICA WEST AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 6. INCOME TAXES The Company recorded income tax expense for the periods shown below (exclusive of extraordinary items) as follows:
PREDECESSOR COMPANY REORGANIZED COMPANY ------------ -------------------------------------- PERIOD PERIOD FROM FROM YEAR ENDED DECEMBER 31, AUGUST 26 TO JANUARY 1 TO ----------------------- DECEMBER 31, AUGUST 25, 1996 1995 1994 1994 --------- --------- ------------ ------------ (IN THOUSANDS) Current Taxes: Federal............................... $ 943 $ 505 $ -- $1,869 State................................. 849 190 36 190 ------- ------- ------- ------ Total current taxes........... 1,792 695 36 2,059 ------- ------- ------- ------ Deferred taxes.......................... -- -- -- -- ------- ------- ------- ------ Income taxes attributable to reorganization items and other........ 23,091 52,913 11,854 -- ------- ------- ------- ------ Total income tax expense...... $24,883 $53,608 $11,890 $2,059 ======= ======= ======= ======
With respect to the years ended December 31, 1996 and 1995 and the period August 26, 1994 through December 31, 1994, income tax expense pertains both to income before extraordinary items as well as certain adjustments necessitated by the effectiveness of the Plan and the resultant fresh start adjustments to the Company's financial statements. The Company's reorganization and the associated implementation of fresh start reporting gave rise to significant items of expense for financial reporting purposes that are not deductible for income tax purposes. In large measure, it is these nondeductible (for income tax purposes) expenses that result in an effective tax rate (for financial reporting purposes) significantly greater than the current U.S. corporate statutory rate of 35%. Nevertheless, the Company's actual cash income tax liability (i.e., income taxes payable) is considerably lower than income tax expense shown for financial reporting purposes. This difference in financial expense compared to actual income tax liability is in part attributable to the utilization of certain tax attributes of the Predecessor Company that serve to reduce the Company's actual income tax liability. The excess of financial expense over the Company's actual income tax liability ($16.7 million for 1996) is applied to reduce the carrying balance of the Company's reorganization value in excess of amounts allocable to identifiable assets. For the years ended December 31, 1996 and 1995, the Company recognized income tax benefit of $918,000 and $984,000, respectively, arising from extraordinary charges. For the periods January 1, 1994 through August 25, 1994 and August 26 through December 31, 1994, income tax expense pertains solely to income before extraordinary item. No income tax expense was recognized with respect to the extraordinary gain resulting from the cancellation of indebtedness that occurred in connection with the effectiveness of the Plan as such gain is not subject to income taxation. F-18 127 AMERICA WEST AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Income tax expense, exclusive of extraordinary items, recorded for the periods shown below, differs from amounts computed at the federal statutory income tax rate as follows:
PREDECESSOR REORGANIZED COMPANY COMPANY ---------------------------------------- ------------ PERIOD FROM PERIOD FROM YEAR ENDED DECEMBER 31, AUGUST 26 TO JANUARY 1 TO ------------------------ DECEMBER 31, AUGUST 25, 1996 1995 1994 1994 ---------- ---------- ------------ ------------ (IN THOUSANDS) Income tax expense at U.S. statutory rate................. $12,073 $37,932 $ 6,908 $19,758 State income taxes, net of federal income tax benefit..... 1,984 4,505 1,663 190 Nondeductible amortization of reorganization value in excess of amounts allocable to identifiable assets............ 8,842 11,188 3,901 -- Benefit of loss carryforwards.... -- -- -- (17,889) Other, net....................... 1,984 (17) (582) -- ------- ------- ------- ------- Total.................. $24,883 $53,608 $11,890 $ 2,059 ======= ======= ======= =======
As of December 31, 1996, the Company has available net operating loss, business tax credit and alternative minimum tax credit carryforwards for Federal income tax purposes of approximately $498.7 million, $12.7 million and $1.2 million, respectively. The net operating loss carryforwards expire during the years 1999 through 2009 while the business credit carryforwards expire during the years 1997 through 2006. However, such carryforwards are not fully available to offset federal (and in certain circumstances, state) alternative minimum taxable income. Further, as a result of a statutory "ownership change" (as defined for purposes of Section 382 of the Internal Revenue Code) that occurred as a result of the effectiveness of the Company's Plan of Reorganization, the Company's ability to utilize its net operating loss and business tax credit carryforwards may be restricted. The alternative minimum tax credit may be carried forward without expiration and is available to offset future income tax payable. F-19 128 AMERICA WEST AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Composition of Deferred Tax Items: Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. As of December 31, the significant components of the Company's deferred tax assets and liabilities are a result of the temporary differences related to the items described as follows:
1996 1995 --------- --------- (IN THOUSANDS) Deferred income tax liabilities: Property and equipment, principally depreciation and "fresh start" differences............................. $(111,989) $ (89,766) Deferred tax assets: Aircraft leases.......................................... 32,789 39,812 Reorganization expenses.................................. 21,356 23,591 Net operating loss carryforwards......................... 190,548 203,879 Tax credit carryforwards................................. 13,861 13,777 Other.................................................... 16,568 14,240 --------- --------- Total deferred tax assets........................ 275,122 295,299 --------- --------- Valuation allowance........................................ (88,433) (130,833) --------- --------- Net deferred tax asset........................... $ 74,700 $ 74,700 ========= =========
SFAS 109 requires a "more likely than not" criterion be applied when evaluating the realizability of a deferred tax asset. In 1996 the Company reduced the valuation allowance by $42.4 million from its 1995 balance principally for the portion of its net operating loss carryforwards (a Predecessor Company tax attribute) that it anticipates will, more likely than not, be utilized. The remaining valuation allowance of $88.4 million is necessary as at this time, the Company has not determined it is more likely than not that the balance of the deferred tax assets will be realized. The Company continues to monitor the valuation allowance and will make adjustments as appropriate. If in future tax periods, the Company were to recognize additional tax benefits related to items attributable to the Predecessor Company such as net operating loss and other carryforwards, such benefits would be applied to further reduce reorganization value in excess of amounts allocable to identifiable assets. F-20 129 AMERICA WEST AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) 7. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS Supplemental disclosure of cash flow information and non-cash investing and financing activities were as follows:
PREDECESSOR REORGANIZED COMPANY COMPANY ---------------------------------------- ------------ PERIOD FROM PERIOD FROM YEAR ENDED DECEMBER 31, AUGUST 26 TO JANUARY 1 TO ------------------------ DECEMBER 31, AUGUST 25, 1996 1995 1994 1994 ---------- ---------- ------------ ------------ (IN THOUSANDS) Non-cash transactions: Notes payable issued to seller...................... $26,112 $ 5,723 $ -- $ -- Accrued interest reclassified to long-term debt......... -- 65 -- 5,563 Issuance of stock as success bonus....................... -- -- -- 1,224 Equipment acquired through capital leases.............. -- -- -- 138 Cash transactions: Interest paid, net of amounts capitalized.................... 37,555 50,293 11,262 29,253 Income taxes paid.............. 498 795 425 1,253
Cash flows from reorganization items in connection with the Chapter 11 proceedings included interest received on cash accumulations of $3.7 million and professional fees paid for services rendered of $23.6 million. 8. INVESTMENTS IN DEBT SECURITIES Cash equivalents and short-term investments consist of highly liquid debt instruments with original maturities of three months or less while short-term investments consists of highly liquid debt instruments with original maturities in excess of three months. The highly liquid debt instruments as of December 31 are classified as follows:
1996 1995 -------- -------- (IN THOUSANDS) Held to Maturity: Debt securities issued by the U.S. Treasury and other U.S. government agencies.................................. $ 36,973 $129,288 Bankers acceptances....................................... 49,141 37,686 Corporate debt securities................................. 90,418 20,466 Other debt securities..................................... 98 1,341 -------- -------- 176,630 188,781 Cash...................................................... -- 35,586 -------- -------- Total cash, cash equivalents and short-term investments..................................... $176,630 $224,367 ======== ========
9. EXTRAORDINARY GAINS AND LOSSES In June 1996, the Company had an extraordinary loss of $1.1 million net of an income tax benefit of $918,000 for the write-off of debt issuance cost relating to the prepayment of $25 million of its 10 3/4% Senior Notes. In August 1995, the Company had an extraordinary loss of $984,000, net of a tax benefit of $984,000 for the write-off of debt issuance cost, relating to the prepayment of $48 million of its $123 million 11 1/4% F-21 130 AMERICA WEST AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Senior Notes and the exchange of the remaining $75 million of such notes for $75 million of 10 3/4% Senior Notes. The extraordinary gain recorded in the period January 1 through August 25, 1994 includes $257.7 million from the discharge of indebtedness pursuant to the consummation of the Plan of Reorganization. No income tax expense was recognized with respect to the extraordinary gain resulting from the cancellation of indebtedness that occurred in connection with the effectiveness of the Plan as such gain is not subject to income taxation. 10. COMMITMENTS AND CONTINGENCIES (a) Leases As of December 31, 1996, the Company had 82 aircraft under operating leases with remaining terms ranging from five months to approximately 22 years. The Company has options to purchase certain of the aircraft at fair market values at the end of the lease terms. Certain of the Company's aircraft lessors have the option to call their respective aircraft. Usually, if such call options are exercised, the Company has the right of first refusal to retain the aircraft. None of these options have been exercised and the last of these call options expires in July 1997. The Company does not believe that the possible exercise of any or all of these options will have a material effect on its operations. Certain of the agreements require security deposits, minimum return provisions and maintenance reserve payments and provide the aircraft lessor the option to reset their respective rentals to the greater of the existing rentals being paid under the leases or the then current fair market rates. The Company also leases certain terminal space, ground facilities and computer and other equipment under noncancelable operating leases. At December 31, 1996, the scheduled future minimum cash rental payments under noncancelable operating leases with initial terms of more than one year are as follows:
(IN THOUSANDS) 1997........................................................ $ 237,545 1998........................................................ 201,575 1999........................................................ 188,575 2000........................................................ 176,186 2001........................................................ 154,127 Thereafter.................................................. 920,002 ---------- $1,878,010 ==========
Rent expense (excluding landing fees) was approximately $281 million, $251 million, $81 million and $154 million for the years ended December 31, 1996 and 1995, for the period August 26 through December 31, 1994, and the period January 1 through August 25, 1994, respectively. Collectively, the operating lease agreements require security deposits with lessors of $9.7 million and bank letters of credit of $17.6 million. The letters of credit are collateralized by $17.6 million of restricted cash as of December 31, 1996 and 1995. (b) Revenue Bonds Special facility revenue bonds issued by a municipality have been used to fund the acquisition of leasehold improvements at the Phoenix Sky Harbor airport which have been leased by the Company. Under the operating lease agreements, the Company is required to make rental payments sufficient to pay principal and interest when due on the bonds. F-22 131 AMERICA WEST AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Pursuant to the agreement, payment of principal and interest at 8.3% on the Series 1994A Bonds ends on January 1, 2006 while payment of principal and interest at 8.2% on the Series 1994B Bonds ends on January 1, 1999. At December 31, 1996, the outstanding balance of Series 1994 Bonds was $16.1 million. (c) Aircraft Acquisitions In September 1996, the Company and AVSA signed a term sheet (the "AVSA Term Sheet"), which, subject to the satisfaction of a number of conditions provides for the restructuring of the Company's arrangements with AVSA, and specifically that (i) the number of aircraft ordered by the Company would be increased from 22 to 34 (including 24 A320 aircraft and 10 A319 aircraft), (ii) the orders subject to cancellation would be increased from five to 12 (resulting in the Company being committed to purchase 12 A320s and 10 A319s), (iii) AVSA and the manufacturer of the engines for the aircraft would agree to provide certain financing support for 16 of the 22 firm orders, and (iv) the financing terms and conditions under which aircraft would be purchased would be improved from the Company's perspective. There can be no assurance that the conditions to the restructuring of the Company's arrangements with AVSA will be satisfied or that a final agreement will be reached or finalized in the form described above. At December 31, 1996, the Company had commitments to AVSA, for a total of 22 Airbus A320-200 aircraft with delivery dates that fall in the years 1999 through 2001. The aggregate net cost of such aircraft is based on formulae that include certain price indices (including indices for various aircraft components such as metal products) for periods preceding the various delivery dates. Based on an assumed 5% annual price escalation, the Company estimates such aggregate net cost to be approximately $1.1 billion. The Company has the option to cancel without cause up to five of these aircraft. If the Company exercised its existing rights to cancel five aircraft under the AVSA agreement, the aggregate net cost (based upon the assumptions described above) of commitments under such agreement would be reduced to approximately $850 million. In December 1994, the Company entered into a support contract with International Aero Engines ("IAE") which provides for the purchase by the Company of six new V2500-A5 spare engines scheduled for delivery beginning in 1998 through 2000 for use on certain of the A320 fleet. Such engines have an estimated aggregate cost of $42 million. The following table reflects estimated cash payments under the aircraft and engine purchase contracts. Actual payments may vary due to inflation factor adjustments and changes in the delivery schedule of the equipment. The estimated cash payments include the progress payments that will be made in cash, as opposed to being financed under an existing progress payment financing facility.
(IN THOUSANDS) 1997........................................................ $ 63,134 1998........................................................ 106,218 1999........................................................ 264,707 2000........................................................ 297,368 2001........................................................ 328,207 ---------- $1,059,634 ==========
At December 31, 1996, the Company has significant capital commitments for a number of aircraft, as discussed above. Although the Company has arranged for financing for up to one-half of such commitment, the Company will require substantial capital from external sources to meet the remaining financial commitments. The Company intends to seek additional financing (which may include public debt financing or private financing) in the future when and as appropriate. There can be no assurance that sufficient financing will be obtained for all aircraft and other capital requirements. A default by the Company under any such commitment could have a material adverse effect on the Company. F-23 132 AMERICA WEST AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) In November 1996, the America West Airlines 1996-1 Pass Through Trusts issued $218.6 million of Pass Through Certificates, representing fractional undivided interests in such trusts. The certificates were issued in connection with the refinancing of eight Airbus A320 aircraft and three IAE V2500 spare jet engines. The combined effective interest rate on the financing was 7.05%. The proceeds of the transaction were used to refinance the indebtedness incurred by the owners of the aircraft and engines leased to the Company. Under the arrangements, the financial benefits of the transactions are shared among the Company, the equity investors in leverage leases covering the aircraft and U.S. subsidiaries of GPA Group plc ("GPA"), the original lessees under the restructured leases. Benefit to the Company include the agreed termination of arrangements with GPA pursuant to which GPA could cause the Company to lease up to four aircraft under a put agreement over the balance of the decade and a reduction in rental expense approximating $500,000 per year. The Pass Through Certificates were issued by separate pass through trusts. The equipment notes are secured by a security interest in the aircraft and engines and an assignment of the Company's leases. Neither the equipment notes nor the pass through certificates are direct obligations of, or guaranteed by, the Company, and the corresponding debt and interest expense are not included in the Company's consolidated financial statements. (d) Contingent Legal Obligations Certain administrative and priority tax claims are pending against the Company which, if ultimately allowed by the Bankruptcy Court, would represent general obligations of the Company. Such claims include claims of various state and local tax authorities and certain contractual indemnification obligations. The Company is also a defendant in various lawsuits. Management cannot reasonably predict the outcome of the pending lawsuits and administrative and priority tax claims. However, management believes, after considering a number of factors, including the advice of outside counsel, the nature of the contingencies to which the Company is subject and its prior experience, that although the outcome of these matters could adversely affect future operating results, the resolution of these actions will not have a material adverse effect on the Company's financial condition. As discussed in Note 13, "Restructuring and Other Non-recurring Special Charges," the Company has recorded a liability for loss contingencies in accordance with generally accepted accounting principles. 11. RELATED PARTY TRANSACTIONS In exchange for certain concessions principally arising from cancellation of the right of GPA to lease to America West 10 Airbus A320 aircraft at specified rates, GPA received on August 25, 1994, (i) 900,000 shares of Class B Common Stock; (ii) 1,384,615 warrants to purchase shares of Class B Common Stock at an exercise price of $12.74 per share; (iii) a cash payment of approximately $30.5 million and (iv) the rights to require the Company to lease up to eight aircraft of types operated by the Company, which was terminated in September 1996. During 1996, GPA sold 900,000 shares of Class B Common Stock, and the Company repurchased all of the outstanding warrants (discussed in (ii) above) from GPA as part of the buy back program authorized by the Board of Directors. In February 1996, certain stockholders of the Company who hold shares of Class B Common Stock registered under the Company's shelf registration statement sold 7.2 million of such shares pursuant to an underwritten public offering. The selling stockholders were affiliates of TPG Partners, L.P. ("TPG"), Mesa Air Group ("Mesa"), Continental Airlines, Inc. (" Continental") and Lehman Brothers, Inc. ("Lehman"). The shares offered were purchased by the selling stockholders in connection with AWA's emergence from bankruptcy in August 1994. The Company has entered into various aircraft acquisitions and leasing arrangements with GPA at terms comparable to those obtained from third parties for similar transactions. The Company currently leases eight F-24 133 AMERICA WEST AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) aircraft from GPA and the rental payments for such leases and the eight aircraft refinanced under the America West Airlines 1996-1 Pass Through Trusts amount to $62.4 million, $68 million, and $63.3 million for the twelve months ended December 31, 1996, 1995 and 1994, respectively. As of December 31, 1996, the Company was obligated to pay approximately $500 million under the GPA leases which expire at various times through the year 2013. As part of the Reorganization, both Continental and Mesa made an investment in the Company, and the Company entered into Alliance agreements with Continental and Mesa. Pursuant to a code-sharing agreement entered into with Mesa in December 1992, the Company collects a per-passenger charge for facilities, reservations and other services from Mesa for enplanements in Phoenix on the Mesa system. Such payments by Mesa to the Company totaled $3.5 million, $2.9 million and $2.5 million for the twelve months ended December 31, 1996, 1995 and 1994, respectively. In addition, the Company maintains agreements with Continental related to code-sharing arrangements and ground handling operations. The Company paid Continental approximately $21.7 million, $14 million and $2 million and also received approximately $13 million, $11 million and $1 million in 1996, 1995 and 1994, respectively, from Continental for such services. 12. RESTRUCTURING AND OTHER NONRECURRING SPECIAL CHARGES During the third quarter of 1996, the Company recorded a nonrecurring special charge of approximately $65.1 million. Approximately $49.7 million of the charge was associated with the Company's renegotiation of an aircraft purchase agreement with AVSA (See Note 10, "Commitments and Contingencies"), the re-evaluation of its facilities, and completing its plan for the disposition of certain aircraft inventories and equipment. The charge includes $18.8 million for cancellation penalty payments, write-off of capitalized interest on advance payments; a provision for maintenance costs on certain leased aircraft currently scheduled to be returned due to accelerated deliveries under the new agreement; $7.5 million to reduce the carrying value to estimated fair value of certain under-utilized facilities and $23.4 million to write-down certain aircraft related inventories and equipment to estimated fair value. The remaining $15.4 million of the charge represents loss contingencies based on estimated settlements of pending and threatened litigation. The $65.1 million represents the Company's best estimate of the expected charge. However, the actual charge may be different from the amount estimated. In December 1995, the Company recorded a $10.5 million restructuring charge. The amount includes severance costs of approximately $9.5 million for approximately 500 employees, and $1.0 million for other costs related to the outsourcing of the heavy aircraft maintenance work. 13. CHAPTER 11 REORGANIZATION AND FRESH START REPORTING Chapter 11 Reorganization Upon the Company's emerging from bankruptcy on August 25, 1994, the partners of AmWest Partners, L.P., a limited partnership which includes TPG; Continental; and Mesa; together with Lehman and Fidelity Investments ("Fidelity"), as assignees of AmWest, invested $205.3 million in consideration for the issuance of securities by the Reorganized Company, consisting of (i) 1,200,000 shares of Class A Common Stock at a price of $7.467 per share; (ii) 12,981,636 shares of Class B Common Stock, consisting of 12,259,821 shares at a price of $7.467 per share and 721,815 shares at $8.889 per share (representing shares acquired as a result of cash elections made by unsecured creditors); (iii) 2,769,231 warrants to purchase shares of Class B Common Stock at an exercise price of $12.74 per share and (iv) $100 million principal amount of 11 1/4% Senior Unsecured Notes, due September 1, 2001. The Plan of Reorganization also provided for many other matters, including the satisfaction of certain other prepetition claims in accordance with negotiated settlement agreements, the disposition of the various F-25 134 AMERICA WEST AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) types of claims asserted against the Company, the adherence to the Company's aircraft lease agreements, the amendment of the Company's aircraft purchase agreements and the release of the Company's employees from all obligations arising under the Company's stock purchase plan in consideration for the cancellation of the shares of Predecessor Company stock securing such obligations. As of December 31, 1996, distributions on $307.9 million of allowed general unsecured claims have been made. Approximately 25.6 million shares of the Company's Class B Common Stock and cash proceeds equivalent to an additional 783,936 shares have been distributed in settlement. The remaining shares will be distributed as the remaining general unsecured claims are allowed. To the extent that the total allowed amount of claims is less than the $312 million reserve set by the Bankruptcy Court, the holders of such claims will receive a supplemental distribution. Reorganization expense recorded by the Predecessor Company consisted of the following:
PERIOD FROM JANUARY 1 TO AUGUST 25, 1994 --------------- (IN THOUSANDS) Professional fees and other expenses directly related to the Chapter 11 proceedings.................................... $ 31,959 Adjustments of assets and liabilities to fair value......... 166,829 Provisions for settlement of claims......................... 66,626 Reorganization success bonuses.............................. 11,956 Interest income............................................. (3,711) --------- $ 273,659 =========
Fresh Start Reporting In connection with its emergence from bankruptcy, the Company adopted fresh start reporting in accordance with SOP 90-7. The fresh start reporting common equity value of $587.5 million was determined by the Company with the assistance of its financial advisors. The significant factors used in the determination of this value were analyses of industry, economic and overall market conditions and the historical and estimated performance of the Company as well as of the airline industry, discussions with various potential investors and certain other financial analyses. Under fresh start reporting, the reorganization value of the entity has been allocated to the Company's assets and liabilities on a basis substantially consistent with purchase accounting. The portion of reorganization value not attributable to specific tangible assets has been recorded as "Reorganization Value in Excess of Amounts Allocable to Identifiable Assets" in the accompanying balance sheet. The fresh start reporting adjustments, primarily related to the adjustment of the Company's assets and liabilities to fair market values, will have a significant effect on the Company's future statements of income. The more significant of these adjustments relate to reduced depreciation expense on property and equipment, increased amortization expense relating to reorganization value in excess of amounts allocable to identifiable assets and increased interest expense. F-26 135 AMERICA WEST AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) The effects of the Plan and fresh start reporting on the balance sheet at the Effective Date are as follows:
PREDECESSOR REORGANIZED COMPANY COMPANY ----------- (B) -------------- (A) ISSUE OF (C) AUGUST 25, DEBT DEBT AND FRESH START AUGUST 25, 1994 DISCHARGE STOCK ADJUSTMENTS 1994 ----------- ---------- ---------- ----------- -------------- ASSETS Current assets: Cash and cash equivalents................. $ 156,401 $ (140,284) $ 205,956 $ -- $ 222,073 Accounts receivable, net.................. 77,682 -- 6,831 -- 84,513 Expendable spare parts and supplies....... 27,715 -- -- (2,371) 25,344 Prepaid expenses.......................... 34,540 -- -- (885) 33,655 ---------- ---------- ---------- ---------- ---------- Total current assets............... 296,338 (140,284) 212,787 (3,256) 365,585 Property and equipment, net................. 702,442 -- -- (138,830) 563,612 Restricted cash............................. 30,503 -- -- -- 30,503 Reorganization value in excess of amounts allocable to identifiable assets.......... -- -- -- 668,702 668,702 Other assets, net........................... 24,497 -- 1,575 (2,449) 23,623 ---------- ---------- ---------- ---------- ---------- Total assets....................... $1,053,780 $ (140,284) $ 214,362 $ 524,167 $1,652,025 ========== ========== ========== ========== ========== LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIENCY) Current liabilities: Current maturities of long-term debt...... $ 119,185 $ (65,014) $ -- $ -- $ 54,171 Accounts payable.......................... 98,080 6,500 -- 969 105,549 Air traffic liability..................... 153,808 -- -- -- 153,808 Accrued compensation and vacation benefits................................ 27,443 -- -- -- 27,443 Accrued interest.......................... 5,620 -- -- -- 5,620 Accrued taxes............................. 26,613 14,405 -- -- 41,018 Other accrued liabilities................. 29,161 -- -- -- 29,161 ---------- ---------- ---------- ---------- ---------- Total current liabilities.......... 459,910 (44,109) -- 969 416,770 Estimated liabilities subject to Chapter 11 proceedings............................... 382,769 (382,769) -- -- -- Long-term debt, less current maturities..... 368,939 28,934 100,000 -- 497,873 Manufacturers' and deferred credits......... 70,625 -- -- 51,530 122,155 Other liabilities........................... 57,932 -- -- (30,205) 27,727 Stockholder's equity (deficiency) Preferred stock........................... 18 -- -- (18) -- Common stock, Predecessor Company......... 6,432 -- -- (6,432) -- Common stock, Reorganized Company......... -- -- 152 299 451 Additional paid in capital................ 200,058 -- 114,710 272,281 587,049 Accumulated deficit....................... (474,565) 257,660 (500) 217,405 -- ---------- ---------- ---------- ---------- ---------- (268,057) 257,660 114,362 483,535 587,500 Deferred compensation and notes receivable -- employee stock purchase plans................................... 18,338 -- -- (18,338) -- ---------- ---------- ---------- ---------- ---------- Total stockholder's equity (deficiency)..................... (286,395) 257,660 114,362 501,873 587,500 ---------- ---------- ---------- ---------- ---------- Total liabilities and stockholder's equity (deficiency).............. $1,053,780 $ (140,284) $ 214,362 $ 524,167 $1,652,025 ========== ========== ========== ========== ==========
- --------------- (a) To record the discharge or reclassification of prepetition obligations pursuant to the Plan of Reorganization, as well as the repayment in cash of $77.6 million of D.I.P. financing and a $62.7 million priority term loan. (b) To record proceeds received from the issuance of new debt and equity securities and to record the preferred stock settlement payment of $500,000 and the receipt of approximately $1.1 million for the purchase of Class B Common Stock. (c) To record adjustments to reflect assets and liabilities at fair market values and to record reorganization value in excess of amounts allocable to identifiable assets. F-27 136 AMERICA WEST AIRLINES, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) During the reorganization period, pursuant to SOP 90-7, prepetition liabilities were reported in the basis of the expected amounts of such allowed claims, as opposed to the amounts for which those allowed claims may be settled and were classified as "Estimated liabilities subject to Chapter 11 proceedings." The accrual for interest on such unsecured or undersecured liabilities was discontinued from the period June 27, 1991 to August 25, 1994, the Effective Date of the Plan. 14. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data for 1996 and 1995 are as follows (in thousands of dollars):
1ST 2ND 3RD 4TH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- 1996 Total operating revenues (a).................. $413,150 $463,949 $422,518 $439,909 Operating income (loss) (b)................... 34,318 62,083 (53,143) 25,408 Nonoperating expense, net..................... (8,898) (8,293) (8,377) (8,605) Income tax (expense) benefit.................. (11,693) (24,268) 15,813 (4,735) Net income (loss)................... 13,727 28,417 (45,707) 12,068 1995 Total operating revenues...................... $345,790 $399,916 $408,627 $396,309 Operating income (c).......................... 24,895 52,957 54,160 22,720 Nonoperating expense, net..................... (13,927) (11,760) (11,047) (9,620) Income tax expense............................ (5,758) (20,324) (20,414) (7,112) Net income.......................... 5,210 20,873 21,715 5,988
- --------------- (a) During the second quarter of 1996, operating revenues include an $8 million adjustment arising from the reconciliation of estimated passenger revenues. (b) During the third quarter of 1996, the Company recorded a nonrecurring special charge of $65.1 million. (c) During the fourth quarter of 1995, the Company recorded restructuring charges of $10.5 million. See note 13 for more information. F-28 137 APPENDIX I -- INDEX OF CERTAIN DEFINED TERMS The following is an index showing the page in this Prospectus where certain terms are defined.
DEFINED TERM PAGE ------------ ---- 10 3/4% Notes........................ 60 11 1/4% Notes........................ 60 Adjusted Expected Distributions...... 20 Administration Expenses.............. 80 ADs.................................. 53 Aggregate LTV Collateral Amount...... 20 Aircraft............................. 2 Airframe............................. 98 Air Partners......................... 27 AISI................................. 10 Alliance Agreements.................. 60 America West......................... 6 America West Vacations............... 6 Appraisals........................... 29 Appraised Current Market Value....... 20 Appraisers........................... 10 ASM.................................. 6 Assumed Aggregate Aircraft Value..... 10 Assumed Aircraft Value............... 87 Average Life Date.................... 85 Aviation Safety Commission........... 28 AVSA................................. 44 AWA.................................. Cover AWArd Pay............................ 49 Bankruptcy Code...................... 16 Base Rate............................ 77 Basic Agreement...................... Cover Basic Law............................ 32 Basic Rent........................... 98 Basic Term........................... 98 BK................................... 10 Cash Collateral Account.............. 18 CASM................................. 38 Cede................................. 72 Certain Taxes and Fees............... 81 Certificate Account.................. 65 Certificate Owner.................... 72 Certificated Air Carrier............. 98 Certificateholders................... 14 Certificates......................... Cover Class A Certificates................. Cover Class A Trust........................ Cover Class B Certificates................. Cover Class B Trust........................ Cover Class C Certificates................. Cover Class C Trust........................ Cover Class D Certificates................. Cover Class D Trust........................ Cover Class Exemptions..................... 104 Closing Date......................... 2 Code................................. 23 Commission........................... 3
DEFINED TERM PAGE ------------ ---- Company.............................. 6 Continental.......................... 6 Controlling Party.................... 21 Convention........................... 86 Cross-Border Lease................... 99 Cross-Border Lessee.................. 99 Cross-Border Lessor.................. 99 Current Distribution Date............ 19 Definitive Certificates.............. 73 Distribution Date.................... 14 DOT.................................. 45 Downgrade Drawing.................... 18 DTC.................................. 72 DTC Participants..................... 73 Engine............................... 98 Equipment............................ 60 Equipment Notes...................... 2 Exculpated Person.................... 92 ERISA................................ 23 ERISA Plans.......................... 104 Event of Loss........................ 96 Exchange Act......................... 3 Expected Distributions............... 19 FAA.................................. 27 Federal Aviation Act................. 70 Fidelity............................. 60 Final Distributions.................. 22 Final Drawing........................ 77 Final Expected Distribution Date..... 13 Final Legal Distribution Date........ 14 Financial Institution................ 102 Global Certificates.................. 72 GPA.................................. 32 GPA Subs............................. 60 Holdings............................. 6 IAE.................................. 44 IBT.................................. 50 Indenture............................ 13 Indenture Event of Default........... 68 Indenture Trustee.................... 13 Indirect Participants................ 73 Intercreditor Agreement.............. 19 Interest Drawings.................... 17 Interest Period...................... 77 IRS.................................. 101 Lease................................ 2 Lease Default........................ 98 Lease Event of Default............... 68 Lease Payment Dates.................. 98 Lehman............................... 60 LIBOR................................ 77 Liquidity Event of Default........... 77
I-1 138
DEFINED TERM PAGE ------------ ---- Liquidity Expenses................... 80 Liquidity Facility................... 17 Liquidity Obligations................ 17 Liquidity Provider................... Cover Long Settlement...................... 2 LTV Appraisal........................ 21 LTV Collateral Amount................ 21 LTV Ratio............................ 10 Make-Whole Amount.................... 85 MBA.................................. 10 Mesa................................. 6 Minimum Sale Price................... 22 Moody's.............................. 18 Newbridge............................ 56 NMB.................................. 50 NOL.................................. 44 Non-Performing Equipment Notes....... 18 Non-U.S. Certificateholder........... 102 Order................................ 55 Original Lessee...................... 34 Owner Participant.................... 15 Owner Trust.......................... 2 Owner Trust Agreement................ 83 Owner Trustee........................ 2 Pass Through Trust Agreements........ Cover Performing Equipment Notes........... 18 Performing Note Deficiency........... 18 Permitted Sublessee.................. 98 PFCs................................. 52 Plan Asset Regulation................ 104 Plans................................ 23 Pool Balance......................... 66 Pool Factor.......................... 66 Prior Subleases...................... 61 PTC Event of Default................. 14 PTCE................................. 23 Put Termination Agreement............ 60 RASM................................. 40 Rating Agencies...................... 18 Record Date.......................... 14 Refunding Agreement.................. 13 Registration Statement............... 3 Regular Distribution Dates........... 64 Remaining Weighted Average Life...... 85 Renewal Rent......................... 99 Renewal Term......................... 99
DEFINED TERM PAGE ------------ ---- Reorganization Plan.................. 54 Replacement Facility................. 76 Required Amount...................... 17 Review Commission.................... 27 RLA.................................. 55 Rules................................ 73 Scheduled Payments................... 64 Section 1110 Period.................. 18 Section 382 Limitation............... 44 Securities Act....................... 3 Series A Equipment Notes............. 2 Series B Equipment Notes............. 2 Series C Equipment Notes............. 2 Series D Equipment Notes............. 2 Shortfall Amounts.................... 102 SOP 90-7............................. 39 Special Distribution Date............ 65 Special Payment...................... 65 Special Payments Account............. 65 Standard & Poor's.................... 18 Stated Interest Rates................ 17 Subordinated Certificateholders...... 102 Subordinated Certificates............ 102 Subordinated Trusts.................. 102 Subordination Agent.................. 13 Supplemental Rent.................... 99 Term................................. 99 Threshold Rating..................... 24 TPG.................................. 27 TPG Partners......................... 27 TPG Parallel......................... 27 Treasury Yield....................... 85 Triggering Event..................... 15 Trust Company........................ 86 Trust Indenture Estate............... 84 Trust Property....................... 13 Trust Supplement..................... Cover Trustee.............................. Cover Trusts............................... Cover TWU.................................. 50 UDC.................................. 58 U.S. Certificateholders.............. 101 U.S. Persons......................... 101 Underwriting Agreement............... 106 Underwriter.......................... 106 Underwriters Exemption............... 105
I-2 139 APPENDIX II -- AIRCRAFT APPRAISALS AISI Letterhead 19 March 1997 Mr. Declan Treacy GPA Group plc GPA House Shannon, Co. Clare IRELAND Subject: AISI Report No. A7D036BA2 AISA Short Form Sight Unseen Base Value Appraisal Four A320-200 Aircraft Reference: Morgan Stanley Fax Message dated 18 March 1997 Dear Mr. Treacy: As requested, Aircraft Information Services, Inc. (AISI) is pleased to offer GPA Group plc our opinion of the sight unseen half-life base value of your four A320-200 aircraft as identified in Table I of this report. 1. METHODOLOGY AND DEFINITIONS The historical standard term of reference for commercial aircraft value has been "half-life fair market value" of an "average" aircraft. However, "fair market value" could mean a fair value in the given market or a value in a hypothetical "fair" or balanced market, and the two definitions are not equivalent. Recently, the term "base value" has been created to describe the theoretical balanced market condition and to avoid the potentially misleading term "fair market value" which has now become synonymous with the term "current market value" or a "fair" value in the actual current market. AISI value definitions are consistent with those of the International Society of Transport Aircraft Trading (ISTAT) of 01 January 1994; AISI is a member of that organization and employs an ISTAT Certified Senior Aircraft Appraiser. AISI defines a "base value" as that of a transaction between equally willing and informed buyer and seller, neither under compulsion to buy or sell, for a single unit cast transaction with no hidden value or liability, and with supply and demand of the sale item roughly in balance. Base values are typically given for aircraft in "new" condition, "average half-life" condition, or in a specifically described condition unique to a single aircraft at a specific time. An "average" aircraft is an operable airworthy aircraft in average physical condition and with average accumulated flight hours and cycles, with clear title and standard unrestricted certificate of airworthiness, and registered in an authority which does not represent a penalty to aircraft value or liquidity, with no damage history and with inventory configuration and level of modification which is normal for its intended use and age. AISI assumes average condition unless otherwise specified in this report. "Half-life" condition assumes that every component or maintenance service which has a prescribed interval that determines its service life, overhaul interval or interval between maintenance services, is at a condition which is one-half of the total interval. AISI Letterhead footer II-1 140 19 March 1997 AISI File No. A7D036BA2 Page -2- AISI defines a "current market value" or "fair market value" as that value which reflects the real market conditions, whether at, above or below the base value conditions. Definitions of aircraft condition, buyer/seller qualifications and type of transaction remain unchanged from that of base value. Current market value takes into consideration the status of the economy in which the aircraft is used, the status of supply and demand for the particular aircraft type, the value of recent transactions and the opinions of informed buyers and sellers. Current market value assumes that there is no short term time constraint to buy or sell. AISI encourages the use of base values only to consider historical trends, as a basis for long term future value considerations, or to consider how actual market values vary from theoretical base values. Base values are less volatile than current market values and tend to diminish regularly with time. Base values are normally inappropriate to determine near term values. AISI encourages the use of current market values to consider the probable near term value of an aircraft. 2. VALUATION The half-life base valuations are presented below subject to the assumptions, definitions and disclaimers herein. TABLE 1
HALF-LIFE AIRCRAFT/ BASE VALUE EQUIPMENT DATE OF MTOW 1997 TYPE S/N MANUFACTURE (LBS.) ENGINES U.S. DOLLARS --------- --- ----------- ------- -------- ------------ A320-200............. 66 Jul 89 162,000 V2500-A1 $28,600,000 A320-200............. 67 Jul 89 162,000 V2500-A1 $28,600,000 A320-200............. 76 Sep 89 162,000 V2500-A1 $28,820,000 A320-200............. 81 Sep 89 162,000 V2500-A1 $28,820,000
This report is offered as a fair and impartial assessment of subject aircraft based on data supplied by others, with no physical inspection or verification by AISI. AISI has no past, present nor contemplated future interest in subject aircraft. This report is an opinion and is for the sole use of the client/addressee and AISI shall not be liable to any party for damages arising out of reliance or alleged reliance on it, or for any parties action or failure to act as a result of reliance or alleged reliance on this report. Sincerely, AIRCRAFT INFORMATION SERVICES, INC. Bearden Signature Fred E. Bearden President II-2 141 BK Associates Letterhead March 26, 1997 Mr. Declan Treacy GPA Group plc GPA House Shannon, County Clare Ireland Dear Declan: In response to your recent request, BK Associates, Inc. is pleased to provide an opinion on the current base value (BV) of four Airbus A320-231 aircraft, each powered by International Aero Engines V2500-A1 engines (Aircraft). The Aircraft, which are on lease to America West Airlines, are further identified below. Based on our knowledge of the A320-200 aircraft, its capabilities and uses to which it is put worldwide; the current supply and demand for A320s and competitive types; the operation of the appraised Aircraft and our knowledge of the used commercial aircraft market; it is our opinion that the current base value of each of the Aircraft is as shown below.
REGISTRATION SERIAL DATE CURRENT BASE NUMBER NUMBER DELIVERED VALUE - ------------ ------ --------- ------------ N627AW 66 11/89 $27,670,000 N628AW 67 11/89 27,670,000 N629AW 76 11/89 27,670,000 N632AW 81 12/89 28,000,000
According to the International Society of Transport Aircraft Trading's (ISTAT) definition of base value, to which BK Associates subscribes, base value is the Appraiser's opinion of the underlying economic value of an aircraft in an open, unrestricted, stable market environment with a reasonable balance of supply and demand, and assumes full consideration of its "highest and best use". An aircraft's base value is founded in the historical trend of values and in the projection of value trends and presumes an arm's length, cash transaction between willing, able and knowledgeable parties, acting prudently, with an absence of duress and with a reasonable period of time available for marketing. Ultimately, aircraft values depend almost entirely on supply and demand. A shortage of aircraft or an unexpected increase in demand for air transportation tends to increase values of aircraft. If the market is balanced between supply and demand, the long term trend of the base value is determined from historical and projected value trends, adjusted to account for factors that influence the base value. These factors include: - Suitability of available aircraft to the operator's requirements. - Operating cost and purchase price. - Regulatory factors. - Remaining useful life. For a new or relatively new aircraft in a balanced market, the factor that affects base value most is the new aircraft price and the methodology relates the current value and forecast future values to the new price or replacement cost, adjusted to account for the estimated time and cycles used to date on the aircraft. Considering the new price for these aircraft was about $36 million each, allowing for the average utilization to date and allowing for inflation suggests the current base values above. II-3 142 BK Associates, Inc. has no present or contemplated future interest in the Aircraft, nor any interest that would preclude our making a fair and unbiased estimate. This appraisal represents the opinion of BK Associates, Inc. and reflects our best judgment based on the information available to us at the time of preparation. It is not given as a recommendation, or as an inducement, for any financial transaction and further, BK Associates, Inc. assumes no responsibility or legal liability for any action taken or not taken by the addressee, or any other party, with regard to the appraised equipment. By accepting this appraisal, the addressee agrees that BK Associates, Inc. shall bear no such responsibility or liability. This appraisal is prepared for the use of the addressee and shall not be provided to other parties without the express consent of the addressee. Sincerely yours, BK ASSOCIATES, INC. LOGO John F. Keitz President ISTAT Certified Senior Appraiser II-4 143 Morten Beyer Letterhead March 31, 1997 Mr. Declan Treacy GPA Group plc Shannon, County Clare Ireland Dear Mr. Treacy: Morten Beyer and Associates, Inc. (MBA) has been retained by GPA Group plc (GPA) to set forth its opinion regarding the Current Base Value (CBV) of four Airbus A320-200 series aircraft for the purposes of an upcoming transaction to finance the four aircraft. The tail numbers and original delivery dates for the four aircraft to be financed are: N627AW and N628AW delivered in November, 1989 and N629AW and N632AW delivered in December, 1989. In determining the CBV of these aircraft, we did not inspect the aircraft or their historical maintenance documentation. We made the following assumptions regarding the specifications, condition and status of the aircraft. Such assumptions are considered to be standard industry practice when more detailed information is not readily available. 1. The aircraft is in good overall condition. 2. The overhaul status of the airframe, engines, landing gear and other major components is the equivalent of mid-time/mid-life. 3. The aircraft is current as to Airworthiness Directives and Service Bulletins. 4. The modification status of the aircraft is comparable to that most common for an aircraft of its type and vintage. 5. There is no accident or incident damage. 6. The aircraft is in a standard airline configuration. 7. The utilization is comparable to industry averages. 8. The specifications are those that are most common for an aircraft of its type and age. 9. The historical maintenance documentation has been maintained to acceptable international standards. We have also assumed that the aircraft are not encumbered by any attached lease, tax benefit recapture or other extraneous factor that could have an impact on their value. Morten Beyer Letterhead footer II-5 144 We used more detailed information when such information was available. Based on the information set forth in this report, it is our opinion that the CBV of the subject aircraft are as follows:
REGISTRATION BUILD DATE BASE VALUE - ------------ ---------- ----------- N627AW July '89 $30,280,000 N628AW July '89 30,280,000 N629AW Sept '89 30,430,000 N632AW Sept '89 30,430,000
MBA uses the definitions of certain industry terms, such as CBV and Current Market Value (CMV), as promulgated by the International Society of Transport Aircraft Trading (ISTAT), a not-for-profit association of some five hundred members who are generally management personnel employed by banks, airlines, manufacturers, appraisers, leasing companies, brokers, arrangers, etc. ISTAT has developed definitions for many terms used in the industry and has also established Standards for Appraisal Practice for appraisers who wish to be certified by ISTAT as aircraft appraisers. A member who wishes to be certified must meet specified levels of education and experience in the industry and must successfully complete rigorous written examinations. ISTAT defines MV as the most likely trading price that may be generated for an aircraft under market conditions that are perceived to exist at the time in question. MV assumes that the aircraft is valued for its highest best use, that the parties to the hypothetical sales transaction are willing, able, prudent and knowledgeable, and under no unusual pressure for a prompt sale, and that the transaction would be negotiated in an open and unrestricted market on an arm's length basis for cash or equivalent consideration, and given an adequate amount of time for effective exposure to prospective buyers. BV has essentially the same elements as MV, but the market conditions are always assumed to be in a reasonable state of equilibrium. Thus, BV pertains to an idealized aircraft and market combination, but will not necessarily reflect the actual value of the aircraft in question. BV is founded in the historical trend of values and is generally used to analyze historic values or to project future values. GPA has requested that MBA set forth the values in terms of BV for each aircraft. It is noted that MBA currently appraises the CMV to be 15 percent higher than the CBV due to the shortage of aircraft on the market, the long delivery queue for new orders and the A320's superior economics. The A320 was Airbus' first all new design since the launch of the original A300 in 1971. The program was initiated in 1983 and logged almost 400 orders prior to the first delivery in 1988. The A320 is offered with both the CFM56 and the IAE V-2500 engine, with the CFM version having a long head start. More than 530 A320s have been delivered and 250 more are on order. 240 of the orders and numerous options are held by leasing companies, and may be vulnerable to the changing fortunes of this volatile market sector. The A320 has achieved a wide market base on all continents, with a total of 69 operators to date. The A320 has won worldwide acceptance due to its advanced engineering, passenger comfort and fuel efficiency. The A320's principal rivals, the Boeing 737 and MD80, are built on platforms that are more than 30 years old, while the A320's technology is 20 years younger. The cabin is six inches wider than the 737-300, permitting roomier seats and a wider aisle. Fuel consumption per seat is approximately 9.5 percent less than the 737-300 and 17.5 percent less than an MD80. The aircraft, with its V-2500 engines, is measurably quieter than either the 737-300 or MD80 and, thus, has a lower noise footprint and is less likely to be impacted by future tightening of noise restrictions. The A321, a stretched version designed to directly challenge the 757-200 and bridge the gap between the A320 and the A330/340, was launched in 1989. Seating in the A321 was increased to 186 (and more in all-coach configuration) from a nominal 150 in the A320, and the gross weight increased by 19,200 pounds. II-6 145 A truncated version of the A321, the A319, was officially launched in late 1992. Air Canada provided a major boost to the A319 in April, 1994 with an order for 34 aircraft. Airbus is striving for high levels of commonality among its A310 through A340 series aircraft, and hopes to establish an advantage over Boeing by being able to offer the large airlines an avenue for entire fleet refurbishment. It is obvious that the airlines will use some of their large orders to surplus older aircraft. The advent of the A320 family is hastening the retirement of older, far less efficient jets. The A320s currently is service are operating at seat-mile costs as low as half of that for older aircraft. We believe that the A320 will have a long production run and in-service useful life, with strong residual values. The A320 also offers the advantage of being able to carry seven LD-3 cargo containers, a feat not even the 767 can perform. The fuselage is approximately 10 inches wider than that of the 727/737/757 series, offering wider aisles and roomier seats. The A320 vies with the 757 for top honors as the most efficient aircraft in service. Good fuel efficiency, new technology design and low operating parameters all combine to give these aircraft among the lowest seat-mile costs of any aircraft being built or in service. CURRENT MARKET CONDITIONS Generally, the market for used aircraft has shown continuing strong performance in recent times as the shortage of good narrowbody aircraft continues and the need for additional widebody capacity develops. The availability of good used aircraft has been reduced to the lowest levels seen in this decade. During the last five years there have been more than eight hundred aircraft reported as being on the market at one time. The number now available has shrunk dramatically to only 324 according to BACK. By any standard, the availability of good used aircraft has been reduced to a very low level. With some 14,000 jet aircraft in service, the float of less than two percent is extremely low. The availability of narrowbodies has been declining for two years, and within the last year the availability of good used widebodies has also declined significantly. The major focus has been on late model 747-200s and DC-10-30s, leaving only DC-10-10s, L1011s and A300s still begging. The world economy, which is a principal driver of the need for capacity for the carriage of passengers and property, continues to be strong, with expansion in virtually all sectors, although at varying rates for different regions. Airlines are generally reporting stronger earnings which have historically triggered the booms (and excesses) of the past. The major US carriers are reporting higher earnings, but this is in part because they are not ordering new aircraft and expanding. By holding capacity growth to some two percent they are forcing up load factors and yields. This will be changing as loans reach saturation and new orders follow. There has been strong traffic growth in the US, and Europe, the Orient and South America are also reporting strong growth. The recent TWA, ValuJet and Delta incidents again have focused media attention on airline safety, especially as it relates to older aircraft and/or smaller low-fare carriers. Some countries are refusing to register imported aircraft more than 15 years old, and the European Union requires aircraft more than 25 years old to meet Stage III noise standards. Older aircraft continue to have lower overall operating costs, especially for new operators as capital/rental costs more than offset the effects of higher maintenance and fuel expenses inherent in older aircraft. With proper maintenance, the lives of older aircraft are virtually unlimited, but politicians and the media immediately seize on aircraft age or size as a cause whenever an older or smaller aircraft goes down, while dismissing accidents involving newer aircraft. Therefore, there is an ongoing risk that artificial restrictions may be placed on the operation of older aircraft by political fiat, prematurely grounding the entire fleets of small new operators and impairing those of many established large airlines as well. However, in the interim, the II-7 146 major carriers in the US are increasingly planning to retain their remaining Stage II aircraft and refurbish and hushkit them to Stage III standards. The cost of fuel is another factor that can have a dramatic impact on the value and availability of aircraft. Fuel prices have been relatively stable during recent years, but increasing unrest in some of the oil producing regions of the world has the potential to disrupt supplies from these regions, thus impacting the cost and availability of fuel. A large increase in fuel costs would translate into higher airline operating expenses, which could result in an increase in fares which in turn could result in a significant reduction in the demand for lift. Such a scenario would result in a decrease in the demand for and prices of aircraft. Fuel efficient aircraft, such as the A320, would tend to hold their values better than the older, less fuel efficient machines. BACK lists four A320 series aircraft as being available on the market for sale and/or lease, all of them for lease as opposed to being for sale. COVENANTS This report has been prepared for the exclusive use of GPA and shall not be provided to other parties by MBA without the express consent of GPA. MBA certifies that this report has been independently prepared and that it fully and accurately presents MBA's opinion of the MV of the subject aircraft as of the date of this report. MBA further certifies that it does not have, and does not expect to have, any financial or other interest in the subject or similar aircraft. This report represents the opinion of MBA regarding the subject aircraft and is intended to be advisory only, in nature. Therefore, MBA assumes no responsibility or legal liability for any actions taken, or not taken, by GPA or any other party with regard to the subject aircraft. By accepting this report, all parties agree that MBA shall bear no such responsibility or legal liability. Sincerely, LOGO Morten S. Beyer President ISTAT Certified Senior Appraiser II-8 147 APPENDIX III -- EQUIPMENT NOTES PRINCIPAL PAYMENT SCHEDULE SERIES A
MANUFACTURER'S SERIAL NUMBER REGULAR ------------------------------------------------------------ DISTRIBUTION DATES 66 67 76 81 ------------------ ------------ ------------ ------------ ------------ ..................... $ $ $ $ ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... ..................... .....................
III-1 148 SERIES B
MANUFACTURER'S SERIAL NUMBER REGULAR ---------------------------------------------------------------- DISTRIBUTION DATES 66 67 76 81 ------------------ ------------- ------------- ------------- ------------- ................. $ $ $ $ ................. ................. ................. ................. ................. ................. ................. ................. ................. .................
III-2 149 SERIES C
MANUFACTURER'S SERIAL NUMBER REGULAR ---------------------------------------------------------------- DISTRIBUTION DATES 66 67 76 81 ------------------ ------------- ------------- ------------- ------------- ................. $ $ $ $ ................. ................. ................. ................. ................. ................. ................. ................. ................. .................
III-3 150 SERIES D
MANUFACTURER'S SERIAL NUMBER REGULAR -------------------------------------------------------- DISTRIBUTION DATES 66 67 76 81 ------------------ ----------- ----------- ----------- ----------- ....................... $ $ $ $ ....................... ....................... ....................... ....................... ....................... ....................... ....................... ....................... ....................... .......................
III-4 151 [AMERICA WEST LOGO] 152 PART II INFORMATION NOT REQUIRED TO BE IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION Estimated expenses in connection with the issuance and distribution of the securities, other than underwriting commissions*, are as follows: SEC Registration Fee........................................ $ 28,788 NASD Filing Fee............................................. 10,000 Printing and Engraving Expenses............................. 200,000 Accounting Fees and Expense................................. 125,000 Legal Fees and Expenses..................................... 750,000 Trustee Fees and Expenses................................... 15,000 Blue Sky Fees and Expenses.................................. 10,000 Rating Agency Fees.......................................... 62,000 Miscellaneous Expenses...................................... 15,000 ---------- Total..................................................... $1,215,788 ==========
- --------------- * Provided for on the cover page of the Prospectus. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law ("DGCL") authorizes, inter alia, a corporation generally to indemnify any person ("indemnitee") who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation, in a similar position with another corporation or entity, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. With respect to actions or suits by or in the right of the corporation; however, an indemnitee who acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation is generally limited to attorneys' fees and other expenses, and no indemnification shall be made if such person is adjudged liable to the corporation unless and only to the extent that a court of competent jurisdiction determines that indemnification is appropriate. Section 145 further provides that any indemnification shall be made by the corporation only as authorized in each specific case upon a determination by the (i) stockholders, (ii) board of directors by a majority vote of a quorum of disinterested directors so directs, that indemnification of the indemnitee is proper because he has met the applicable standard of conduct. Section 145 provides that indemnification pursuant to its provisions is not exclusive of other rights of indemnification to which a person may be entitled under any by-law agreement, vote of stockholders or disinterested directors or otherwise. Section 802 of AWA's By-laws provides, in substance, that directors, officers, employees and agents shall be indemnified to the fullest extent permitted by Section 145 of the DGCL. Article 12.0 of AWA's Restated Certificate of Incorporation limits the liability of directors of AWA to AWA or its stockholders (in their capacity as directors but not in their capacity as officers) to the fullest extent permitted by the DGCL. Specifically, directors of AWA will not be personally liable for monetary damages for breach of a director's fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to AWA or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a II-1 153 knowing violation of law, (iii) for unlawful payments of dividends or unlawful stock repurchase or redemptions as provided in section 174 of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit. The Restated Certificate of Incorporation also provides that if the DGCL is amended after the approval of the Restated Certificate of Incorporation to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of AWA will be eliminated or limited to the full extent permitted by the DGCL, as so amended. AWA has entered into indemnification agreements with each of its directors providing for indemnification to the fullest extent permitted by the laws of the State of Delaware. These agreements provide for specific procedures to better assure the directors' rights to indemnification, including procedures for directors to submit claims, for determination of directors entitled to indemnification (including the allocation of the burden of proof and selection of a reviewing party) and for enforcement of directors' indemnification rights. The Underwriting Agreement included herewith as Exhibit 1.1 provides indemnification to the extent set forth therein. AWA has entered into an agreement with GPA Group plc pursuant to which, among other things, GPA has agreed to indemnify each of AWA's directors, each of its officers who shall sign this Registration Statement, and each person, if any, who controls AWA within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, against certain liabilities arising under applicable securities laws with respect to certain information in the Prospectus. AWA maintains directors' and officers' liability insurance. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE. (a) Exhibits:
EXHIBIT NUMBER - --------------- 1.1* Underwriting Agreement 4.1* Form of America West Airlines Pass Through Certificates, Series 1997-1A (included in Exhibit 4.6) 4.2* Form of America West Airlines Pass Through Certificates, Series 1997-1B (included in Exhibit 4.7) 4.3* Form of America West Airlines Pass Through Certificates, Series 1997-1C (included in Exhibit 4.8) 4.4* Form of America West Airlines Pass Through Certificates, Series 1997-1D (included in Exhibit 4.9) 4.5* Pass Through Trust Agreement, dated as of , 1997 between America West Airlines, Inc. and Fleet National Bank, as Trustee 4.6* Trust Supplement No. 1997-1A, dated as of , 1997 between America West Airlines, Inc. and Fleet National Bank, as Trustee 4.7* Trust Supplement No. 1997-1B, dated as of , 1997 between America West Airlines, Inc. and Fleet National Bank, as Trustee 4.8* Trust Supplement No. 1997-1C, dated as of , 1997 between America West Airlines, Inc. and Fleet National Bank, as Trustee 4.9* Trust Supplement No. 1997-1D, dated as of , 1997 between America West Airlines, Inc. and Fleet National Bank, as Trustee 4.10* Irrevocable Revolving Credit Agreement Class A Certificates, dated as of , 1997 between Fleet National Bank, as Subordination Agent, as agent and trustee for the America West Airlines Pass Through Trust 1997-1A, as Borrower, and Kredietbank N.V., acting through its New York Branch, as Liquidity Provider
II-2 154
EXHIBIT NUMBER - --------------- 4.11* Irrevocable Revolving Credit Agreement Class B Certificates, dated as of , 1997 between Fleet National Bank, as Subordination Agent, as agent and trustee for the America West Airlines Pass Through Trust 1997-1B, as Borrower, and Kredietbank N.V., acting through its New York Branch, as Liquidity Provider 4.12* Irrevocable Revolving Credit Agreement Class C Certificates, dated as of , 1997 between Fleet National Bank, as Subordination Agent, as agent and trustee for the America West Airlines Pass Through Trust 1997-1C, as Borrower, and Kredietbank N.V., acting through its New York Branch, as Liquidity Provider 4.13* Intercreditor Agreement, dated as of , 1997 among Fleet National Bank, as Trustee under the America West Airlines Pass Through Trust 1997-1A, America West Airlines Pass Through Trust 1997-1B, America West Airlines Pass Through Trust 1997-1C, America West Airlines Pass Through Trust 1997-1D Kredietbank N.V., acting through its New York Branch, as Class A Liquidity Provider, Class B Liquidity Provider and Class C Liquidity Provider, and Fleet National Bank, as Subordination Agent 4.14** Form of Refunding Agreement [GPA 1989 BN-8], dated as of , 1997, among America West Airlines, Inc., as Lessee, GPA Leasing USA Sub I, Inc., as Original Head Lessee, GPA Group plc, as Parent Guarantor, Wilmington Trust Company, as Owner Trustee, Fleet National Bank, as Pass Through Trustee under each of the Pass Through Trust Agreements, the Owner Participant, Fleet National Bank, as Subordination Agent, and The Chase Manhattan Bank, as Indenture Trustee 4.15* Form of Refunding Agreement [GPA 1989 BN-11], dated as of , 1997, among America West Airlines, Inc., as Lessee, GPA Leasing USA Sub I, Inc., as Original Head Lessee, GPA Group plc, as Parent Guarantor, Wilmington Trust Company, as Owner Trustee, Fleet National Bank, as Pass Through Trustee under each of the Pass Through Trust Agreements, the Owner Participant, Fleet National Bank, as Subordination Agent, and The Chase Manhattan Bank, as Indenture Trustee 4.16** Form of Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-8], dated as of December 18, 1989, Amended and Restated as of , 1997, between Wilmington Trust Company and America West Airlines, Inc. 4.17* Form of Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-11], dated as of December 19, 1989, Amended and Restated as of , 1997, between Wilmington Trust Company and America West Airlines, Inc. 4.18** Form of First Amended and Restated Trust Indenture and Security Agreement [GPA 1989 BN-8], dated as of , 1997 between Wilmington Trust Company, as Owner Trustee, and The Chase Manhattan Bank, as Indenture Trustee 4.19* Form of First Amended and Restated Trust Indenture and Security Agreement [GPA 1989 BN-11], dated as of , 1997 between Wilmington Trust Company, as Owner Trustee, and The Chase Manhattan Bank, as Indenture Trustee 4.20* Form of Series A Equipment Note, dated , 1997 issued by Wilmington Trust Company, as Owner Trustee, payable to the Pass Through Trustee (included in each of Exhibits 4.18 and 4.19) 4.21* Form of Series B Equipment Note, dated , 1997 issued by Wilmington Trust Company, as Owner Trustee, payable to the Pass Through Trustee (included in each of Exhibits 4.18 and 4.19) 4.22* Form of Series C Equipment Note, dated , 1997 issued by Wilmington Trust Company, as Owner Trustee, payable to the Pass Through Trustee (included in each of Exhibits 4.18 and 4.19) 4.23* Form of Series D Equipment Note, dated , 1997 issued by Wilmington Trust Company, as Owner Trustee, payable to the Pass Through Trustee (included in each of Exhibits 4.18 and 4.19) 5.1* Opinion of Andrews & Kurth L.L.P., counsel for America West Airlines, Inc., relating to legality of the Certificates
II-3 155
EXHIBIT NUMBER - --------------- 8.1* Opinion of Andrews & Kurth L.L.P., counsel for America West Airlines, Inc., regarding tax matters relating to the Certificates 8.2* Opinion of Shipman & Goodwin LLP, counsel to Fleet National Bank, regarding tax matters relating to the Certificates 12.1* Computation of Ratio of Earnings to Fixed Charges 23.1 Consent of KPMG Peat Marwick LLP(1) 23.2* Consent of Andrews & Kurth L.L.P. (included as part of Exhibits 5.1 and 8.1) 23.3* Consent of Shipman & Goodwin LLP (included as part of Exhibit 8.2) 23.4 Consent of Aircraft Information Services, Inc.(1) 23.5 Consent of BK Associates, Inc.(1) 23.6 Consent of Morten Beyer and Associates(1) 24.1* Power of Attorney(1) 25.1* Form T-1 Statement of Eligibility of Fleet National Bank
- --------------- * Filed herewith. ** Filed herewith. With respect to such Exhibits, separate agreements have been entered into with respect to each Aircraft. Except for differences in designations, dollar amounts, interest rates, percentages, final distribution dates, aircraft registration numbers, manufacturer's serial numbers for aircraft and engines and the like, as applicable, there are no material details in which any such agreement not filed herewith differ from the corresponding Exhibit for the forms of such documents. (1) Included in AWA's Registration Statement on Form S-3 (File No. 333-27351) filed with the Commission on May 16, 1997. (b) FINANCIAL STATEMENT SCHEDULE The following financial statement schedule is filed as part of this Registration Statement, but not included in the Prospectus.
SCHEDULE PAGE -------- ---- Independent Auditors' Report on Schedule and Consent........ S-1 Schedule II -- Valuation and Qualifying Accounts............ S-2
All other schedules for which provision is made in Regulation S-X of the Commission are not required under the related instructions or are inapplicable or the required information is included in the financial statements or notes thereto and, therefore, have been omitted. ITEM 17. UNDERTAKINGS (a) AWA hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of AWA's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of AWA pursuant to the foregoing provisions, or otherwise, AWA has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, AWA will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of II-4 156 competent jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. (c) AWA hereby undertakes that for purposes of determining any liability under the Securities Act of 1933, (i) the information omitted from the form of prospectus filed as part of this registrations statement in reliance upon Rule 430A and contained in a form of prospectus filed by AWA pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registrations statement as of the time it was declared effective and (2) each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-5 157 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Phoenix, State of Arizona, on , 1997. AMERICA WEST AIRLINES, INC. By /s/ WILLIAM A. FRANKE ----------------------------------- William A. Franke, Chairman of the Board Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1 to Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ WILLIAM A. FRANKE Chairman of the Board June 4, 1997 - ----------------------------------------------------- William A. Franke * President, Chief Executive June 4, 1997 - ----------------------------------------------------- Officer and Director (Principal Richard R. Goodmanson Executive Officer) * Senior Vice President and Chief June 4, 1997 - ----------------------------------------------------- Financial Officer, (Principal W. Douglas Parker Financial Officer) * Vice President and Controller June 4, 1997 - ----------------------------------------------------- (Principal Accounting Officer) Michael R. Carreon * Director June 4, 1997 - ----------------------------------------------------- Julia Chang Bloch * Director June 4, 1997 - ----------------------------------------------------- Stephen F. Bollenbach * Director June 4, 1997 - ----------------------------------------------------- Frederick W. Bradley, Jr. * Director June 4, 1997 - ----------------------------------------------------- James G. Coulter * Director June 4, 1997 - ----------------------------------------------------- John F. Fraser * Director June 4, 1997 - ----------------------------------------------------- John L. Goolsby * Director June 4, 1997 - ----------------------------------------------------- Richard C. Kraemer
II-6 158
SIGNATURE TITLE DATE --------- ----- ---- * Director June 4, 1997 - ----------------------------------------------------- John R. Power, Jr. * Director June 4, 1997 - ----------------------------------------------------- Larry L. Risley * Director June 4, 1997 - ----------------------------------------------------- Frank B. Ryan * Director June 4, 1997 - ----------------------------------------------------- Richard P. Schifter * Director June 4, 1997 - ----------------------------------------------------- John F. Tierney * Director June 4, 1997 - ----------------------------------------------------- Raymond S. Troubh *By: /s/ WILLIAM A. FRANKE - ----------------------------------------------------- William A. Franke, Attorney-in-fact
II-7 159 INDEPENDENT AUDITORS' REPORT ON SCHEDULE AND CONSENT The Board of Directors and Stockholder America West Airlines, Inc.: The audits referred to in our report dated February 28, 1997, included the related financial statement schedule for the years ended December 31, 1996 and 1995, the period August 26, 1994 through December 31, 1994, and the period January 1, 1994 through August 25, 1994 included herein. The financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. We consent to the use of our reports included herein and included in the December 31, 1996 annual report on Form 10-K incorporated herein by reference and to the reference to our Firm under the headings "Selected Financial and Operating Data" and "Experts" in the Prospectus. The audit report on the financial statements of America West Airlines, Inc. referred to above contains an explanatory paragraph that states that as discussed in Note 13 to the financial statements, on August 25, 1994, America West Airlines, Inc. emerged from bankruptcy. The financial statements of the Reorganized Company reflect the impact of adjustments to reflect the fair value of assets and liabilities under fresh start reporting. As a result, the financial statements of the Reorganized Company are presented on a different basis of accounting than those of the Predecessor Company and, therefore, are not comparable in all respects. /s/ KPMG Peat Marwick LLP Phoenix, Arizona May 15, 1997 S-1 160 AMERICA WEST AIRLINES, INC. SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995, THE PERIOD AUGUST 26, 1994 THROUGH DECEMBER 31, 1994, AND THE PERIOD JANUARY 1, 1994 THROUGH AUGUST 25, 1994 (IN THOUSANDS)
BALANCE AT BALANCE BEGINNING AT END DESCRIPTION OF PERIOD ADDITIONS DEDUCTIONS OF PERIOD ----------- ---------- --------- ---------- --------- Allowance for doubtful receivables: Year ended December 31, 1996.................... $2,515 $2,950 $2,374 $3,091 ====== ====== ====== ====== Year ended December 31, 1995.................... $3,531 $2,600 $3,616 $2,515 ====== ====== ====== ====== Period August 26, 1994 to December 31, 1994..... $2,833 $1,074 $ 376 $3,531 ====== ====== ====== ====== Period January 1, 1994 to August 25, 1994....... $3,030 $4,742 $4,939 $2,833 ====== ====== ====== ====== Reserve for obsolescence: Year ended December 31, 1996.................... $2,115 $1,523 $1,925 $1,713 ====== ====== ====== ====== Year ended December 31, 1995.................... $ 483 $1,664 $ 32 $2,115 ====== ====== ====== ====== Period August 26, 1994 to December 31, 1994..... $ -- $ 483 $ -- $ 483 ====== ====== ====== ====== Period January 1, 1994 to August 25, 1994....... $7,231 $ 794 $8,025(a) $ -- ====== ====== ====== ======
- --------------- (a) Includes fresh start adjustment of approximately $7.9 million. S-2 161 EXHIBIT INDEX
EXHIBIT NUMBER - --------------- 1.1* Underwriting Agreement 4.1* Form of America West Airlines Pass Through Certificates, Series 1997-1A (included in Exhibit 4.6) 4.2* Form of America West Airlines Pass Through Certificates, Series 1997-1B (included in Exhibit 4.7) 4.3* Form of America West Airlines Pass Through Certificates, Series 1997-1C (included in Exhibit 4.8) 4.4* Form of America West Airlines Pass Through Certificates, Series 1997-1D (included in Exhibit 4.9) 4.5* Pass Through Trust Agreement, dated as of , 1997 between America West Airlines, Inc. and Fleet National Bank, as Trustee 4.6* Trust Supplement No. 1997-1A, dated as of , 1997 between America West Airlines, Inc. and Fleet National Bank, as Trustee 4.7* Trust Supplement No. 1997-1B, dated as of , 1997 between America West Airlines, Inc. and Fleet National Bank, as Trustee 4.8* Trust Supplement No. 1997-1C, dated as of , 1997 between America West Airlines, Inc. and Fleet National Bank, as Trustee 4.9* Trust Supplement No. 1997-1D, dated as of , 1997 between America West Airlines, Inc. and Fleet National Bank, as Trustee 4.10* Irrevocable Revolving Credit Agreement Class A Certificates, dated as of , 1997 between Fleet National Bank, as Subordination Agent, as agent and trustee for the America West Airlines Pass Through Trust 1997-1A, as Borrower, and Kredietbank N.V., acting through its New York Branch, as Liquidity Provider 4.11* Irrevocable Revolving Credit Agreement Class B Certificates, dated as of , 1997 between Fleet National Bank, as Subordination Agent, as agent and trustee for the America West Airlines Pass Through Trust 1997-1B, as Borrower, and Kredietbank N.V., acting through its New York Branch, as Liquidity Provider 4.12* Irrevocable Revolving Credit Agreement Class C Certificates, dated as of , 1997 between Fleet National Bank, as Subordination Agent, as agent and trustee for the America West Airlines Pass Through Trust 1997-1C, as Borrower, and Kredietbank N.V., acting through its New York Branch, as Liquidity Provider 4.13* Intercreditor Agreement, dated as of , 1997 among Fleet National Bank, as Trustee under the America West Airlines Pass Through Trust 1997-1A, America West Airlines Pass Through Trust 1997-1B, America West Airlines Pass Through Trust 1997-1C, America West Airlines Pass Through Trust 1997-1D Kredietbank N.V., acting through its New York Branch, as Class A Liquidity Provider, Class B Liquidity Provider and Class C Liquidity Provider, and Fleet National Bank, as Subordination Agent 4.14** Form of Refunding Agreement [GPA 1989 BN-8], dated as of , 1997, among America West Airlines, Inc., as Lessee, GPA Leasing USA Sub I, Inc., as Original Head Lessee, GPA Group plc, as Parent Guarantor, Wilmington Trust Company, as Owner Trustee, Fleet National Bank, as Pass Through Trustee under each of the Pass Through Trust Agreements, the Owner Participant, Fleet National Bank, as Subordination Agent, and The Chase Manhattan Bank, as Indenture Trustee 4.15* Form of Refunding Agreement [GPA 1989 BN-11], dated as of , 1997, among America West Airlines, Inc., as Lessee, GPA Leasing USA Sub I, Inc., as Original Head Lessee, GPA Group plc, as Parent Guarantor, Wilmington Trust Company, as Owner Trustee, Fleet National Bank, as Pass Through Trustee under each of the Pass Through Trust Agreements, the Owner Participant, Fleet National Bank, as Subordination Agent, and The Chase Manhattan Bank, as Indenture Trustee
162
EXHIBIT NUMBER - --------------- 4.16** Form of Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-8], dated as of December 18, 1989, Amended and Restated as of , 1997, between Wilmington Trust Company and America West Airlines, Inc. 4.17* Form of Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-11], dated as of December 19, 1989, Amended and Restated as of , 1997, between Wilmington Trust Company and America West Airlines, Inc. 4.18** Form of First Amended and Restated Trust Indenture and Security Agreement [GPA 1989 BN-8], dated as of , 1997 between Wilmington Trust Company, as Owner Trustee, and The Chase Manhattan Bank, as Indenture Trustee 4.19* Form of First Amended and Restated Trust Indenture and Security Agreement [GPA 1989 BN-11], dated as of , 1997 between Wilmington Trust Company, as Owner Trustee, and The Chase Manhattan Bank, as Indenture Trustee 4.20* Form of Series A Equipment Note, dated , 1997 issued by Wilmington Trust Company, as Owner Trustee, payable to the Pass Through Trustee (included in each of Exhibits 4.18 and 4.19) 4.21* Form of Series B Equipment Note, dated , 1997 issued by Wilmington Trust Company, as Owner Trustee, payable to the Pass Through Trustee (included in each of Exhibits 4.18 and 4.19) 4.22* Form of Series C Equipment Note, dated , 1997 issued by Wilmington Trust Company, as Owner Trustee, payable to the Pass Through Trustee (included in each of Exhibits 4.18 and 4.19) 4.23* Form of Series D Equipment Note, dated , 1997 issued by Wilmington Trust Company, as Owner Trustee, payable to the Pass Through Trustee (included in each of Exhibits 4.18 and 4.19) 5.1* Opinion of Andrews & Kurth L.L.P., counsel for America West Airlines, Inc., relating to legality of the Certificates 8.1* Opinion of Andrews & Kurth L.L.P., counsel for America West Airlines, Inc., regarding tax matters relating to the Certificates 8.2* Opinion of Shipman & Goodwin LLP, counsel to Fleet National Bank, regarding tax matters relating to the Certificates 12.1* Computation of Ratio of Earnings to Fixed Charges 23.1 Consent of KPMG Peat Marwick LLP(1) 23.2* Consent of Andrews & Kurth L.L.P. (included as part of Exhibits 5.1 and 8.1) 23.3* Consent of Shipman & Goodwin LLP (included as part of Exhibit 8.2) 23.4 Consent of Aircraft Information Services, Inc.(1) 23.5 Consent of BK Associates, Inc.(1) 23.6 Consent of Morten Beyer and Associates(1) 24.1* Power of Attorney(1) 25.1* Form T-1 Statement of Eligibility of Fleet National Bank
- --------------- * Filed herewith. ** Filed herewith. With respect to such Exhibits, separate agreements have been entered into with respect to each Aircraft. Except for differences in designations, dollar amounts, interest rates, percentages, final distribution dates, aircraft registration numbers, manufacturer's serial numbers for aircraft and engines and the like, as applicable, there are no material details in which any such agreement not filed herewith differ from the corresponding Exhibit for the forms of such documents. (1) Included in AWA's Registration Statement on Form S-3 (File No. 333-27351) filed with the Commission on May 16, 1997. EX-1.1 2 UNDERWRITING AGREEMENT 1 Exhibit 1.1 AMERICA WEST AIRLINES, INC. 1997-1 PASS THROUGH TRUSTS $_______,000 Pass Through Certificates, Series 1997-1A, 1997-1B, 1997-1C and 1997-1D UNDERWRITING AGREEMENT May __, 1997 Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 Ladies and Gentlemen: 1. Introductory. It is proposed that Fleet National Bank, as trustee under each of the Trusts (as defined below) (each, a "Trustee"), issue and sell to Morgan Stanley & Co. Incorporated, as underwriter (the "Underwriter"), its pass through certificates in the aggregate principal amounts set forth on Schedule I hereto and with the interest rates and final distribution dates set forth on Schedule II hereto (the "Offered Certificates") on the terms and conditions stated herein. The Offered Certificates will be issued pursuant to a pass through trust agreement, dated as of June __, 1997 (the "Basic Agreement"), and four separate supplements thereto, dated as of June __, 1997 (each, a "Trust Supplement" and together with the Basic Agreement, collectively, the "Pass Through Trust Agreements") between America West Airlines, Inc., a Delaware corporation (the "Company"), and the Trustee, relating to the creation and administration of America West Airlines Pass Through Trust Series 1997-1A (the "Class A Trust"), America West Airlines Pass Through Trust Series 1997-1B (the "Class B Trust"), America West Airlines Pass Through Trust Series 1997-1C (the "Class C Trust") and America West Airlines Pass Through Trust Series 1997-1D (the "Class D Trust" and, together with the Class A Trust, the Class B Trust and the Class C Trust, the "Trusts"). Certain amounts of interest payable on the Offered Certificates to be issued by the Class A Trust, the Class B Trust and the Class C Trust will be entitled to the benefits of a separate liquidity facility for each such Trust. Kredietbank N.V., acting through its New York branch (the "Liquidity Provider"), will enter into three irrevocable revolving credit agreements (each, a "Liquidity Facility"), to be dated as of June __, 1997, for the benefit of the holders of the Offered Certificates issued by the Class A Trust, the Class B Trust and the Class C Trust, 2 respectively. The Liquidity Provider and the holders of the Offered Certificates will be entitled to the benefits of an Intercreditor Agreement to be dated as of June __, 1997 (the "Intercreditor Agreement") among the Trusts, Fleet National Bank, as subordination agent (the "Subordination Agent"), and the Liquidity Provider. The Leases (as defined in the Pass Through Trust Agreements) provide that the aggregate amounts unconditionally payable by the Company under the Leases will be at least sufficient to pay in full when due all scheduled amounts required to be paid on the Equipment Notes, although the Equipment Notes (as defined in the Pass Through Trust Agreements) are not obligations of the Company or guaranteed by the Company. Capitalized terms used but not defined herein have the meanings assigned to them in the Pass Through Trust Agreements, or, if not defined therein, the meanings specified in each of the four Indentures referred to in such Pass Through Trust Agreements or in each of the four Leases referred to in such Indentures. The Company understands that the Underwriter proposes to make an offering of the Offered Certificates on the terms, subject to the conditions and in the manner set forth in the Prospectus (as defined below) and Section 5 hereof. The Company has prepared and filed with the Securities and Exchange Commission (the "Commission") in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Act"), a registration statement on Form S-3 under the Act (the "registration statement"), including a prospectus subject to completion relating to the Offered Certificates. The term "Registration Statement" as used in this Agreement means the registration statement (including all financial schedules and exhibits), as amended at the time it becomes effective, or, if the registration statement becomes effective prior to the execution of this Agreement, as supplemented or amended prior to the execution of this Agreement; provided, however, that if it is contemplated, at the time this Agreement is executed, that a post-effective amendment to the registration statement will be filed and must be declared effective before the offering of the Offered Certificates may commence, then the term "Registration Statement" as used in this Agreement means the registration statement as amended by said post-effective amendment and any additional post-effective amendment that is subsequently filed with the Commission. The term "Prospectus" as used in this Agreement means the prospectus in the form included in the Registration Statement, as such prospectus may subsequently be amended or supplemented, including, if the prospectus included in the Registration Statement omits information in reliance on Rule 430A under the Act and such information is included in a prospectus filed with the Commission pursuant to Rule 424(b) under the Act, the prospectus in the form included in the Registration Statement as supplemented by the addition of the Rule 430A information contained in the prospectus filed with the Commission pursuant to Rule 424(b). The term "Preliminary Prospectus" as used in this Agreement means the prospectus subject to completion in the form included in the registration statement at the time of the initial filing of the registration statement with the Commission, and as such prospectus shall have been amended from time to time prior to the date of the Prospectus. Any reference herein to the registration statement, the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Form S-3 under the Act, as of the date of the registration statement, the 2 3 Registration Statement, such Preliminary Prospectus or the Prospectus, as the case may be, and any reference to any amendment or supplement to the registration statement, the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include any documents filed after such date under the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Exchange Act") and deemed incorporated by reference pursuant to Form S-3 under the Act. As used herein, the term "Incorporated Documents" means the documents which at the time are incorporated by reference in the registration statement, the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto. 2. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, the Underwriter and GPA (as hereinafter defined) on and as of the date hereof and on and as of the Closing Date (as defined in Section 4 hereof) that: (a) The Company meets the requirements for use of Form S-3 under the Act. The registration statement in the form in which it became or becomes effective and also in such form as it may be when any post-effective amendment thereto shall become effective complied and will comply in all material respects with the provisions of the Act and did not and will not at any such time contain an untrue statement of a material fact or omit to state a material fact with respect to the America West Information (as defined in Annex I hereto) required to be stated therein or necessary to make the statements therein not misleading. The Prospectus when filed with the Commission under Rule 424(b) under the Act complied and will comply in all material respects with the provisions of the Act and on the date hereof, at the time it is furnished to the Underwriter for its use and on the Closing Date did not and will not at any such time contain an untrue statement of a material fact or omit to state a material fact with respect to the America West Information necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties made in this paragraph (a) shall not apply to any statements or omissions made in reliance upon and in conformity with the Underwriter Information (as defined in Section 8(a) hereof) nor to any statements or omissions in that part of the Registration Statement that shall constitute the Statement of Eligibility under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), on Form T-1. (b) The Incorporated Documents heretofore filed were filed in a timely manner and, when they were filed (or, if any amendment with respect to any such document was filed, when such amendment was filed), complied in all material respects with the requirements of the Exchange Act and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and any further Incorporated Documents will, when so filed, be filed in a timely manner and will comply in all material respects with the requirements of the Exchange Act and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. 3 4 (c) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, with power and authority (corporate and other) to own, lease and operate its property and to conduct its business as described in the Prospectus and to enter into and perform its obligations under this Agreement and the other Operative Documents to which it is or will be a party; and the Company is duly qualified to do business as a foreign corporation in good standing in all other jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification, except where the failure to so qualify would not have a material adverse effect on the condition (financial or otherwise), or the earnings, business affairs, business prospects or properties of the Company or on the ability of the Company to perform its obligations under this Agreement and the other Operative Documents to which it is or will be a party or on the consummation of the transactions contemplated herein or therein (a "Material Adverse Effect"). (d) The Company has no subsidiaries. (e) The authorized, issued and outstanding capital stock of the Company is as set forth in the Prospectus under "Capitalization" (except for subsequent issuances, if any, pursuant to reservations, agreements, employee benefit plans or the exercise of the warrants referred to in the Prospectus). All of the issued and outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and non-assessable. (f) Except as described in the Prospectus, the Company is not in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which it is a party or by which it may be bound or to which any of its properties may be subject, except for such defaults that would not have a Material Adverse Effect. The execution, delivery and performance of this Agreement and the other Operative Documents to which the Company is or will be a party and the consummation of the transactions contemplated herein and therein have been duly authorized by all necessary corporate action of the Company, do not require any stockholder approval, or approval or consent of any trustee or holder of any material indebtedness or material obligations of the Company, except such as have been duly obtained and are in full force and effect, and will not result in any breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to any indenture, loan agreement, contract or other instrument to which the Company is a party or by which the Company may be bound or to which any of the property or assets of the Company is subject, the failure of which to obtain or which breach, default, lien, charge or encumbrance, individually or in the aggregate, would have a Material Adverse Effect, nor will any such execution, delivery or performance result in any violation of the provisions of the certificate of incorporation or by-laws of the Company, or any statute or any rule, regulation or order of any governmental agency or body or any court having jurisdiction over the Company. 4 5 (g) No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required to be obtained or made by the Company for the valid authorization, execution and delivery by the Company of this Agreement and the other Operative Documents to which the Company is or will be a party and for the consummation by the Company of the transactions contemplated herein and therein, except such as may be required under (i) the securities or Blue Sky laws of the various states, (ii) the Sections of Title 49 of the United States Code relating to aviation, as amended (the "Aviation Act"), and filings or recordings with the Federal Aviation Administration (the "FAA"), and (iii) the Uniform Commercial Code as is in effect in the State of Arizona and filings thereunder, which filings listed in the preceding clauses (ii) and (iii) shall have been made, or duly presented for filing, on or prior to the Closing Date (it being understood that no representation is made as to what actions, if any, must be taken by any Person other than the Company to consummate such transactions). (h) The Company has all necessary consents, authorizations, approvals, orders, certificates and permits of and from, and has made all declarations and filings with, all Federal, state, local and other governmental authorities, all self-regulatory organizations and all courts and other tribunals, to own, lease, license and use its properties and assets and to conduct its business in the manner described in the Prospectus, except to the extent that the failure to so obtain, declare or file would not have a Material Adverse Effect. (i) Except as disclosed in the Prospectus, there is no action, suit or proceeding before or by any governmental agency or body or court, domestic or foreign, now pending or, to the best knowledge of the Company, threatened against the Company or any of its properties that could reasonably be expected to result in a Material Adverse Effect; all pending legal or governmental proceedings to which the Company is a party or which affect any of its properties that are not described in the Prospectus including ordinary routine litigation incidental to its business, are not, singly or in the aggregate, reasonably expected to have a Material Adverse Effect. (j) The Company has not taken any corporate action or, to the best knowledge of the Company, have any other steps been taken or legal proceedings been started or threatened against it (i) as a result of which it could become bankrupt, (ii) for its winding-up, dissolution or reorganization or (iii) for the appointment of a liquidator, receiver, administrator, administrative receiver, examiner or similar officer of it or of any or all its assets or revenues. (k) This Agreement and the other Operative Documents to which the Company is a party have been duly executed and delivered by the Company and the other Operative Documents to which the Company will be a party will be duly executed and delivered by the Company on or prior to the Closing Date. (l) The Operative Documents (other than this Agreement) to which the Company is or will be a party will constitute, when duly executed and delivered by the Company, assuming that such Operative Documents have been duly authorized, 5 6 executed and delivered by, and constitute the legal, valid and binding obligations of, each other party thereto, the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as enforcement thereof may be limited by (i) bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium, or other similar laws now or hereinafter in effect relating to creditors' rights generally and as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), or (ii) with respect to indemnification and contribution provisions, applicable law. (m) The financial statements included in the Prospectus, together with the related notes thereto, present fairly the financial position of the Company at the dates indicated and the results of operations and cash flows of the Company for the periods specified. Such financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved, except as otherwise stated in the Prospectus. (n) Since the respective dates as of which information is given in the Prospectus, except as otherwise stated therein, there has been no material adverse change in the condition (financial or otherwise), or in the earnings, business affairs, business prospects or properties of the Company, whether or not arising in the ordinary course of business (a "Material Adverse Change"). Except as disclosed in the Prospectus, the Company has no material (i) contingent obligations, (ii) forward or long-term commitments or (iii) unrealized or anticipated losses from any unfavorable commitments. (o) The Company is a "citizen of the United States" within the meaning of Section 40102(a)(15) of Title 49 of the United States Code, as amended, holding an air carrier operating certificate issued by the Secretary of Transportation pursuant to Chapter 447 of Title 49 of the United States Code, as amended, for aircraft capable of carrying 10 or more individuals or 6,000 pounds or more cargo. (p) When executed, authenticated, issued and delivered in the manner provided for in the Pass Through Trust Agreements and this Agreement and sold and paid for as provided in this Agreement, the Offered Certificates will be legally and validly issued and will be entitled to the benefits of the related Pass Through Trust Agreements. (q) Except as disclosed in the Prospectus, the Company has good and sufficient title for the use made and proposed to be made of all of its properties, whether real or personal, in each case free from liens, encumbrances and defects except where the failure to have such title would not have a Material Adverse Effect; and except as disclosed in the Prospectus, the Company holds any leased real or personal property under valid and enforceable leases with no exceptions that would have a Material Adverse Effect. (r) The statements in the Prospectus describing various provisions of the Leases provide accurate summaries of such provisions in all material respects. 6 7 (s) Except as disclosed in the Prospectus, the Company is not in violation of any Federal, state or local law relating to discrimination in the hiring, promotion or pay of employees nor any applicable wage or hour laws that, singly or in the aggregate, could have a Material Adverse Effect. There is (i) no significant unfair labor practice complaint pending against the Company or, to the best knowledge of the Company, threatened against the Company, before the National Labor Relations Board, the National Mediation Board or any state or local labor relations or mediation board, and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is so pending against the Company or, to the best knowledge of the Company, threatened against the Company, and (ii) no labor dispute in which the Company is involved nor, to the best knowledge of the Company, is any labor dispute imminent, other than routine disciplinary and grievance matters, except as disclosed in the Prospectus. The Company is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the regulations and published interpretations thereunder, including, but not limited to Sections 4975 and 4980B of the Internal Revenue Code of 1986, as amended (the "Code"). There are no "pension plans" established or maintained by the Company or "multi-employer pension plans" to which the Company is a contributor that are intended to be qualified under Section 401(a) of the Code. (t) Except as disclosed in the Prospectus, the Company is not in violation of any Federal, State or local laws and regulations relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata), including, without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of toxic or hazardous substances, materials or wastes, or petroleum and petroleum products ("Materials of Environmental Concern"), or otherwise relating to the protection of human health and safety, or the storage, disposal, transport or handling of Materials of Environmental Concern (collectively, "Environmental Laws"), which violation includes, but is not limited to, noncompliance with any permits or other governmental authorizations, excluding any violations which individually or in the aggregate would not have a Material Adverse Effect; the Company has not received any communication (written or oral), whether from a governmental authority or otherwise, alleging any such violation or noncompliance, and there are no circumstances, either past, present or that are reasonably foreseeable, that may lead to such violation in the future; there is no pending or threatened claim, action, investigation or notice (written or oral) by any person or entity alleging potential liability for investigatory, cleanup, or governmental responses costs, or natural resources or property damages, or personal injuries, attorney's fees or penalties relating to (i) the presence, or release into the environment, of any Material of Environmental Concern at any location owned or operated by the Company, now or in the past, or (ii) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law (collectively, "Environmental Claims"); and there are no past or present actions, activities, circumstances, conditions, events or incidents, that could form the basis of any Environmental Claim against the Company or against any person or entity whose liability for any Environmental Claim the Company has retained or 7 8 assumed either contractually or by operation of law. In the ordinary course of its business, the Company conducts a periodic review of the effect of Environmental Laws on the business, operations and properties of the Company, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation, any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license or approval, any related constraints on operating activities and any potential liabilities to third parties); on the basis of such review, the Company has reasonably concluded that such associated costs and liabilities could not singly or in the aggregate, have a Material Adverse Effect. (u) All tax returns required to be filed by the Company have been timely filed and such returns are true, complete and correct in all material respects. All taxes due or claimed to be due from the Company that are due and payable have been paid, other than those (i) being contested in good faith and for which an adequate reserve or accrual has been established in accordance with GAAP or (ii) those currently payable without penalty or interest for which an adequate reserve or accrual has been established or extensions duly paid. Except as described in the Prospectus, the Company does not know of (A) any actual or proposed material additional tax assessments or (B) any probable basis for the imposition of any material additional tax assessments for any fiscal period against the Company. (v) KPMG Peat Marwick, the firm that examined and issued an auditors' report with respect to the financial statements of the Company included in the Prospectus, are independent public accountants within the meaning of the Securities Act and the regulations thereunder. (w) Neither BK Associates, Inc., Aircraft Information Services, Inc. nor Morton Beyer and Associates (collectively, the "Appraisers") is an affiliate of the Company or, to the best of the Company's knowledge, has a substantial interest, direct or indirect, in the Company. To the best of the Company's knowledge, none of the officers and directors of any of such Appraisers are connected with the Company or any of its affiliates as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. (x) To the best of the Company's knowledge, no event has occurred and is continuing which constitutes a Lease Event of Default or would constitute a Lease Event of Default under any Lease but for the requirement that notice be given or time lapse or both. (y) To the best of the Company's knowledge, no event has occurred and is continuing which constitutes an Event of Loss (as defined in each Lease) or would constitute an Event of Loss under any Lease with the lapse of time. (z) The Company is and will be the "issuer" within the meaning of the Securities Act with respect to the offering and sale of the Offered Certificates. 8 9 (aa) The Company is not an "investment company" or an entity "controlled" by an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"). (bb) As of the Closing Date, the Pass Through Trust Agreements will have been duly qualified under the Trust Indenture Act, and the rules and regulations promulgated thereunder, and comply as to form in all material respects with the requirements of the Trust Indenture Act. (cc) The Company has not and is not presently doing business with the government of Cuba or with any person or affiliate located in Cuba. (dd) All of the Company's representations and warranties to be contained in Section 8 of each Refunding Agreement, when made, shall be incorporated by reference in this Agreement as if set forth herein, and shall be true and correct on and as of the date they are made by the Company pursuant to each Refunding Agreement and on and as of the Closing Date. 3. Representations and Warranties of GPA. Each of GPA Group plc ("GPA Group") and GPA Leasing USA Sub I, Inc. ("GPA Sub I" and, collectively with GPA Group, "GPA") represents and warrants to, and agrees with, the Underwriter and the Company on and as of the date hereof and on and as of the Closing Date that: (a) The registration statement in the form in which it became or becomes effective and also in such form as it may be when any post-effective amendment thereto shall become effective did not and will not at any such time contain any untrue statement of a material fact or omit to state any material fact with respect to the GPA Information (as defined in Annex I hereto) required to be stated therein or necessary in order to make the statements therein not misleading. The Prospectus on the date hereof, at the time it is furnished to the Underwriter for its use and on the Closing Date, did not and will not at any such time contain an untrue statement of a material fact or omit to state a material fact with respect to the GPA Information necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties made in this paragraph (a) shall not apply to any statements or omissions made in reliance upon and in conformity with the Underwriter Information nor to any statements or omissions in that part of the Registration Statement that shall constitute the Statement of Eligibility under the Trust Indenture Act on Form T-1. (b) GPA Group is a corporation duly organized and validly existing under the laws of Ireland, with power and authority (corporate and other) to own, lease and operate its properties and to conduct its business as presently conducted and to enter into and perform its obligations under this Agreement and the other Operative Documents to which it is or will be a party. (c) GPA Sub I is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Connecticut, with power and authority 9 10 (corporate and other) to own, lease and operate its properties and to conduct its business as presently conducted and to enter into and perform its obligations under this Agreement and the other Operative Documents to which it is or will be a party. (d) Except as described in the Form 20-F most recently filed by GPA Group with the Commission (the "Form 20-F"), neither GPA Group nor GPA Sub I is in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which it is a party or by which it may be bound or to which any of its properties may be subject, except for such defaults that would not have a material adverse effect on the condition (financial or otherwise), or the earnings, business affairs, business prospects or properties of GPA Group and its subsidiaries taken as a whole, or on the ability of GPA Group or GPA Sub I to perform their respective obligations under this Agreement and the other Operative Documents to which GPA Group or GPA Sub I, as the case may be, is or will be a party or on the consummation by GPA of the transactions contemplated herein or therein (a "GPA Material Adverse Effect"). The execution, delivery and performance of this Agreement and the other Operative Documents to which GPA Group or GPA Sub I is or will be a party and the consummation by GPA of the transactions contemplated herein and therein have been duly authorized by all necessary corporate action of GPA Group and GPA Sub I, as the case may be, do not require any stockholder approval, or approval or consent of any trustee or holder of any material indebtedness or material obligations of GPA Group or GPA Sub I, except such as have been duly obtained and are in full force and effect, and will not result in any breach of any of the terms, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of GPA Group or GPA Sub I pursuant to any indenture, loan agreement, contract or other instrument to which GPA Group or GPA Sub I is a party or by which GPA Group or GPA Sub I may be bound or to which any of the property or assets of GPA Group or GPA Sub I is subject, the failure of which to obtain or which breach, default, lien, charge or encumbrance, individually or in the aggregate, would have a GPA Material Adverse Effect, nor will any such execution, delivery or performance result in any violation by GPA of the provisions of the memorandum, articles of association, certificate of incorporation or by-laws, as the case may be, of GPA Group or GPA Sub I or any statute, or any rule, regulation or order of any governmental agency or body or any court having jurisdiction over GPA Group or GPA Sub I. (e) No consent, approval, authorization, or order of, or filing with, any governmental agency or body or any court is required to be obtained or made by GPA for the valid authorization, execution and delivery by GPA Group or GPA Sub I of this Agreement and the Operative Documents to which GPA Group or GPA Sub I is or will be a party and for the consummation by GPA of the transactions contemplated herein and therein, except such as may be required under (i) the Sections of the Aviation Act and filings or recordings with the FAA and (ii) the Uniform Commercial Code as is in effect in the States of Arizona and Connecticut and similar statutes as in effect in the country of Ireland and filings thereunder, which filings listed in the 10 11 preceding clauses (i) and (ii) shall have been made, or duly presented for filing on or prior to the Closing Date. (f) Except as disclosed in the Form 20-F, there is no action, suit or proceeding before or by any governmental agency or body or court, domestic or foreign, now pending or, to the best knowledge of GPA Group or GPA Sub I, threatened against GPA Group or GPA Sub I or any of their respective properties that could reasonably be expected to result in a GPA Material Adverse Effect. (g) On or prior to the Closing Date, the issuance of the Equipment Notes to be issued under each Indenture will be duly authorized by the related Owner Trustee, and when duly executed and delivered by the related Owner Trustee, and duly authenticated by the related Indenture Trustee in accordance with the terms of such Indenture, will be duly issued under such Indenture and will constitute the valid and binding obligations of such Owner Trustee, and the holders thereof will be entitled to the benefits of such Indenture, except as enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and except as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law). The offer and sale of the Equipment Notes will be exempt from the registration requirements of the Act and it will not be necessary to qualify any of the Indentures under the Trust Indenture Act in respect of any such offer or sale. (h) Neither GPA Group nor GPA Sub I has taken any corporate action or, to the best knowledge of GPA Group and GPA Sub I, have any other steps been taken or legal proceedings been started or threatened against it (i) as a result of which it could become bankrupt, (ii) for its winding-up, dissolution or reorganization or (iii) for the appointment of a liquidator, receiver, administrator, administrative receiver, examiner or similar officer of it or of any or all its assets or revenues. (i) This Agreement and the other Operative Documents to which each of GPA Group and GPA Sub I is a party have been duly executed and delivered by each of GPA Group and GPA Sub I, and the other Operative Documents to which GPA Group and GPA Sub I will be a party will be duly executed and delivered by each of GPA Group and GPA Sub I on or prior to the Closing Date. (j) The statements in the Prospectus describing various provisions of the Pass Through Trust Agreements, the Offered Certificates, the Intercreditor Agreement, the Liquidity Facilities, the Equipment Notes and the Indentures provide accurate summaries of such provisions in all material respects. (k) The Operative Documents (other than this Agreement) to which each of GPA Group or GPA Sub I is or will be a party will constitute, when duly executed and delivered by each of GPA Group or GPA Sub I, as the case may be, assuming that such Operative Documents have been duly authorized, executed and delivered by, and 11 12 constitute the legal, valid and binding obligations of, each other party thereto, the legal, valid and binding obligations of each of GPA Group or GPA Sub I, as the case may be, enforceable against each of GPA Group or GPA Sub I, as the case may be, in accordance with their terms, except as enforcement thereof may be limited by (i) bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws now or hereinafter in effect relating to creditors' rights generally and as enforcement thereof is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law), or (ii) with respect to indemnification and contribution provisions, applicable law. (l) To the best of GPA's knowledge, no event has occurred and is continuing which constitutes a Lease Event of Default or would constitute a Lease Event of Default under any Lease but for the requirement that notice be given or time lapse or both. (m) To the best of GPA's knowledge, no event has occurred and is continuing which constitutes an Event of Loss (as defined in each Lease) or would constitute an Event of Loss under any Lease with the lapse of time. (n) Neither GPA Group, GPA Sub I nor any of the Trusts is an "investment company" or an entity "controlled" by an "investment company", as such terms are defined in the Investment Company Act; and none of the Trusts, after giving effect to the offering and sale of the Offered Certificates and the application of the proceeds thereof as described in the Prospectus, will be an "investment company" as defined in the Investment Company Act. (o) All of GPA Group's and GPA Sub I's representations and warranties to be contained in Section 9 of each Refunding Agreement, when made, shall be incorporated by reference in this Agreement as if set forth herein, and shall be true and correct on and as of the date they are made by each of GPA Group and GPA Sub I pursuant to each Refunding Agreement and on and as of the Closing Date. 4. Purchase, Sale and Delivery of Offered Certificates. (a) Subject to the terms and conditions set forth herein and in reliance upon the representations and warranties herein contained, the Company agrees to cause the Trustee to sell to the Underwriter, and the Underwriter agrees to purchase from each Trustee, at a purchase price of 100% of the principal amount thereof, the aggregate principal amount of Offered Certificates of each Trust set forth in Schedule I hereto. (b) The Company is advised by the Underwriter that the Underwriter proposes to make a public offering of the Offered Certificates as soon after this Agreement has been entered into as in the Underwriter's judgment is advisable. The Company is further advised by the Underwriter that the Offered Certificates are to be offered to the public initially at 100% of their principal amount -- the public offering price -- plus accrued interest, if any, and to certain dealers selected by the Underwriter at 12 13 concessions not in excess of the concessions set forth in the Prospectus, and that the Underwriter may allow, and such dealers may reallow, concessions not in excess of the concessions set forth in the Prospectus to certain other dealers. (c) As compensation to the Underwriter for its commitments and obligations hereunder in respect of the Offered Certificates, including its undertakings to distribute the Offered Certificates, GPA Sub I will pay to the Underwriter with respect to the Offered Certificates of each Trust purchased by it as set forth in Schedule I hereto of the total amount of commissions payable in respect of the Offered Certificates of each such Trust as set forth in Schedule II hereto; provided that if GPA Sub I fails to pay such amounts when due, GPA Group will pay such amounts. Such payment shall be made simultaneously with the payment by the Underwriter to the Trustee of the purchase price of the Offered Certificates as specified in Section 4(a) hereof. Payment of such compensation shall be made by Federal funds check or other immediately available funds. (d) Delivery of and payment for the Offered Certificates shall be made at the offices of Milbank, Tweed, Hadley & McCloy, 1 Chase Manhattan Plaza, New York, New York 10005 at 10:00 A.M. on June __, 1997, the Underwriter, GPA and the Company, collectively, having determined that it is not feasible to close at an earlier date, or such other date, time and place as may be agreed upon by the Underwriter and the Company (such date and time of delivery and payment for the Offered Certificates being herein called the "Closing Date"). Delivery of the Offered Certificates shall be made through the facilities of The Depository Trust Company against payment by the Underwriter of the purchase price thereof to or upon the order of the Trustee by wire transfer. The Offered Certificates shall be registered in the name of Cede & Co. or in such other names, and in such denominations as the Underwriter may request in writing at least two full business days in advance of the Closing Date. (e) The Company agrees to have the Offered Certificates available for inspection, checking and packaging by the Underwriter in New York, New York not later than 1:00 P.M. on the business day prior to the Closing Date. 5. Certain Agreements of the Company. The Company agrees with the Underwriter that: (a) The Company will advise the Underwriter promptly of any proposal to amend or supplement the Registration Statement or the Prospectus and will not effect such amendment or supplementation without the consent of the Underwriter, which consent will not be unreasonably withheld. If, at any time during the period when a prospectus relating to the Offered Certificates is required to be delivered by the Underwriter or a dealer under the Act any event occurs as a result of which in the reasonable opinion of counsel to the Underwriter or counsel to the Company the Registration Statement or the Prospectus as then amended or supplemented would not comply with applicable law or would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, the Company 13 14 promptly will prepare, at the expense of GPA Sub I (or, alternatively, at the expense of GPA Group), an amendment or supplement which, in the reasonable opinion of counsel to the Underwriter or counsel to the Company, will comply with such law or will correct such statement or omission, will promptly file such amendment or supplement with the Commission, and will furnish, at the expense of GPA Sub I (or, alternatively, at the expense of GPA Group), to the Underwriter and to the dealers (whose names and addresses the Underwriter will furnish to the Company), upon request, copies of the Prospectus as so amended or supplemented. Neither the consent of the Underwriter to, nor the Underwriter's delivery to offerees or investors of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 7. (b) At the expense of GPA Sub I (or, alternatively, at the expense of GPA Group), the Company will furnish to the Underwriter one signed and as many conformed copies of each Registration Statement (as originally filed) and of all amendments thereto, whether filed before or after such Registration Statement became effective, as many copies of all exhibits and documents filed therewith or incorporated by reference therein and one signed and as many conformed copies of all consents and certificates of experts as the Underwriter may reasonably request. (c) At the expense of GPA Sub I (or, alternatively, at the expense of GPA Group), the Company will furnish to the Underwriter copies of the Preliminary Prospectus, the Prospectus and all amendments and supplements to such documents, in each case as soon as available and in such quantities as the Underwriter reasonably requests. The Company will file the Prospectus pursuant to Rule 424(b) under the Act within the time required under such Rule and the Act. (d) The Company, at the expense of GPA Sub I (or, alternatively, at the expense of GPA Group), will take such actions as may be reasonably requested by the Underwriter to arrange for the qualification of the Offered Certificates for sale under the applicable securities or Blue Sky laws of such jurisdictions in the United States as the Underwriter reasonably designates and will continue such qualifications in effect so long as required for the resale of the Offered Certificates by the Underwriter; provided that the Company will not be required to (i) qualify as a foreign corporation or as a dealer in securities, (ii) file a general consent to service of process or (iii) subject itself to taxation in any such state. (e) The Company will as soon as practicable, but not later than 18 months after the effective date of the Registration Statement, make generally available to its security holders and to the Underwriter an earnings statement of the Company and any subsidiaries conforming with the requirements of Section 11(a) of the Act (including, at the option of the Company, Rule 158 under the Act), covering a period of at least 12 months beginning on the first day of the first fiscal quarter of the Company commencing after the later of (i) the effective date of the Registration Statement, (ii) the effective date of the most recent post-effective amendment to the Registration Statement to become effective prior to the date of such acceptance and (iii) the date of the Company's most recent Annual Report on Form 10-K filed with the Commission. 14 15 (f) During the period of five years hereafter, the Company will promptly furnish to the Underwriter copies of all of its annual reports, quarterly reports and current reports on Forms 10-K, 10-Q and 8-K, or such other forms as may be designated by the Commission, and any definitive proxy statement of the Company, in each case, filed with the Commission under the Exchange Act or mailed to stockholders. (g) So long as any of the Offered Certificates are outstanding, the Company will furnish to the Underwriter, by first-class mail as soon as practicable, (i) all documents distributed by the Company to any holders of Offered Certificates, or filed with the Commission pursuant to the Exchange Act, or any rule or regulation of the Commission thereunder, (ii) any order of the Commission under the Act or the Exchange Act received by the Company applicable to the Trusts or to the Company as originator of the Trusts, or pursuant to a "no-action" letter obtained from the staff of the Commission by the Company and affecting the Trusts or the Company as originator of the Trusts and (iii) from time to time, such other information concerning the Company or, to the extent possessed by the Company or the Trusts as the Underwriter may reasonably request. (h) The Company will, during the period when a prospectus relating to the Offered Certificates is required to be delivered by the Underwriter or a dealer under the Act or the Exchange Act, file all documents required to be filed with the Commission pursuant to Section 13, 14, or 15(d) of the Exchange Act within the required time periods. The Underwriter will notify the Company when such period shall have expired. (i) The Company will notify the Underwriter promptly after the Company receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus, of the suspension of the qualification of the Offered Certificates for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or the Prospectus or for additional information and, in the event of the issuance of any stop order or order preventing or suspending the use of any Preliminary Prospectus or the Prospectus or suspending any such qualification, at the expense of GPA Sub I (or, alternatively, at the expense of GPA Group), promptly use reasonable efforts to obtain its withdrawal. (j) Between the date of this Agreement and the Closing Date, the Company will not, without the prior written consent of the Underwriter, offer, sell, or enter into any agreement to sell, any public debt securities registered under the Act (other than the Offered Certificates) or any debt securities which may be resold in a transaction exempt from the registration requirements of the Act in reliance on Rule 144A thereunder and which are marketed through the use of a disclosure document containing substantially the same information as a prospectus for similar debt securities registered under the Act. 15 16 (k) In connection with the offering, until the Underwriter shall have notified the Company of the completion of the resale of the Offered Certificates, neither the Company nor any of its affiliates has bid for or purchased or will bid for or purchase, either alone or with one or more other persons, for any account in which it or any of its affiliates has a beneficial interest any Offered Certificates; and neither it nor any of its affiliates will make bids or purchases for the purpose of creating actual, or apparent, active trading in, or of raising the price of, the Offered Certificates. (l) To the extent, if any, that the ratings provided with respect to the Offered Certificates by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Rating Services ("Standard & Poor's" and, together with Moody's, the "Rating Agencies") are conditional upon the furnishing of documents or the taking of any other actions by the Company, the Company will, at the expense of GPA Sub I (or, alternatively, at the expense of GPA Group), furnish such documents and take any such other actions in each case to the extent reasonably practicable. 6. Certain Agreements of GPA. GPA agrees with the Underwriter that: (a) GPA Sub I shall pay (or cause to be paid), or if GPA Sub I fails to pay, GPA Group shall pay, the following (without duplication and subject to any other agreement in writing with the Underwriter): (i) the preparation, printing, distribution and filing of the registration statement (including financial statements and exhibits), as originally filed and amended, the Preliminary Prospectus, the Prospectus, and any amendments thereof or supplements thereto, (ii) the preparation, printing and distribution of this Agreement, the Pass Through Trust Agreements, the Offered Certificates, the other Operative Documents and any Blue Sky Memorandum or Legal Investment Survey by the Underwriter's counsel and the reasonable fees and disbursements of Underwriter's counsel in connection with such memorandum or survey, (iii) the delivery of the Offered Certificates to the Underwriter, (iv) the reasonable fees and disbursements of the Company's and GPA's counsel and the Company's accountants, (v) the expenses of qualifying the Offered Certificates under Blue Sky or state securities laws, including filing fees and the reasonable fees and disbursements of counsel for the Underwriter in connection therewith, (vi) the fees and expenses of the Owner Trustees, the Indenture Trustees, the Subordination Agent and the Trustees and the reasonable fees and disbursements of their respective counsel, (vii) any fees charged by the Rating Agencies for rating the Offered Certificates (including annual surveillance fees related to the Offered Certificates as long as they are outstanding), (viii) the reasonable fees and disbursements of counsel for the Underwriter generally incurred in connection with the consummation of the transactions contemplated by this Agreement and the Operative Documents, (ix) any fees of the National Association of Securities Dealers, Inc. in connection with their review of the Underwriter's compensation; (xi) the costs and charges of DTC and its nominee in connection with the Offered Certificates, including the book-entry ownership system for the Offered Certificates, (xi) all reasonable travel, lodging and other expenses of the Underwriter and the Company's officers and employees and any other expenses in connection with attending or hosting meetings with prospective purchasers of Offered Certificates, (xii) all fees and expenses relating to appraisals of 16 17 each of the Aircraft, and (xiv) all expenses specified in Section 21 of each Refunding Agreement. If this Agreement is terminated by the Underwriter in accordance with the provisions of Section 10, GPA shall reimburse the Underwriter for all their reasonable out-of-pocket expenses. (b) To the extent, if any, that the ratings provided with respect to the Offered Certificates by any Rating Agency are conditional upon the furnishing of documents or the taking of any other actions by GPA, GPA will furnish such documents and take any such other actions in each case to the extent reasonably practicable. 7. Conditions of the Obligations of the Underwriter. The obligations of the Underwriter hereunder shall be subject to (i) the condition that all representations and warranties and other statements of the Company and GPA set forth or incorporated by reference herein and made in certificates furnished pursuant hereto, and of each party to the Operative Documents, made in such documents, are, at and as of the Closing Date, true and correct, (ii) the condition that the Company and GPA shall have performed in all material respects all of their respective obligations hereunder theretofore to be performed, (iii) the condition that each of the Indenture Documents related to each of the Owner Trusts constitutes the legal, valid and binding agreements of the parties thereto, (iv) the condition that no Lease Event of Default under any Lease or event or condition which with the passage of time or the giving of notice or both would become a Lease Event of Default under any Lease shall have occurred, and (v) the condition that none of the Foreign Financing Documents have been repudiated by any party thereto or otherwise have ceased to be in full force and effect, and to the following additional conditions precedent: (a) Subsequent to the date of this Agreement and on or prior to the Closing Date, (i) no stop order suspending the effectiveness of either Registration Statement shall have been issued under the Act and no proceedings therefor shall have been instituted or threatened by the Commission. (ii) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any of the Company's securities by the Rating Agencies or any other "nationally recognized statistical rating organization", as such term is defined for purposes of Rule 436(g)(2) under the Act; and (iii) (A) the Company shall not have sustained, since the date of the interim financial statements included in the Prospectus, any material loss or interference with its business from any court or governmental action, order or decree, other than as set forth or contemplated in the Prospectus and (B) since such date there shall not have occurred any change, or any development involving a prospective change, in or affecting the condition (financial or 17 18 otherwise), or the earnings, business affairs, business prospects or properties of the Company that, individually or in the aggregate, other than as set forth or contemplated in the Prospectus, the effect of which, in any such case described in clause (A) or clause (B), is material and adverse and that makes it, in the judgment of the Underwriter, impracticable or inadvisable to market the Offered Certificates on the terms and in the manner contemplated in the Prospectus. (iv) since the date of the Prospectus there shall not have occurred any change or development which would reasonably be expected to result in a prospective change in or affecting the condition (financial or otherwise), or the earnings, business affairs, business prospects or properties of GPA and its subsidiaries taken as a whole, that, individually or in the aggregate, other than as set forth or contemplated in the Form 20-F, the effect of which is material and adverse and that makes it, in the judgment of the Underwriter, impracticable or inadvisable to market the Offered Certificates on the terms and in the manner contemplated in the Prospectus. (b) The Underwriter shall have received a letter, dated the date of this Agreement, from KPMG Peat Marwick LLP in form and substance reasonably satisfactory to the Underwriter. (c) On the Closing Date, the Underwriter shall have received: (1) The favorable opinions, dated as of the Closing Date, of Andrews & Kurth L.L.P., Latham & Watkins, Lewis and Roca, and Baker & Hostetler, counsel for the Company, in form and substance reasonably satisfactory to the Underwriter. (2) The favorable opinion, dated as of the Closing Date, of Stephen L. Johnson, Senior Vice President - Legal Affairs, of the Company, in form and substance reasonably satisfactory to the Underwriter. (3) The favorable opinion, dated as of the Closing Date, of Paul, Hastings, Janofsky & Walker LLP, counsel for GPA Group and GPA Sub I, in form and substance reasonably satisfactory to the Underwriter. (4) The favorable opinion, dated as of the Closing Date, of McCann FitzGerald, Irish counsel for GPA Group, in form and substance reasonably satisfactory to the Underwriter. (5) The favorable opinion, dated as of the Closing Date, of White & Case, counsel for DFO Partnership, as Owner Participant, in form and substance reasonably satisfactory to the Underwriter. 18 19 (6) The favorable opinion, dated as of the Closing Date of the general counsel or assistant general counsel for DFO Partnership, as Owner Participant, in form and substance reasonably satisfactory to the Underwriter. (7) The favorable opinion, dated as of the Closing Date, of Freshfields, counsel to GPA, regarding the Foreign Financing Documents in form and substance reasonably satisfactory to the Underwriter. (8) The favorable opinion, dated as of the Closing Date, of Kelley, Drye & Warren, counsel for The Chase Manhattan Bank, as Indenture Trustee, in form and substance reasonably satisfactory to the Underwriter. (9) The favorable opinions, dated as of the Closing Date, of Morris, James, Hitchens & Williams, counsel for Wilmington Trust Company, as Owner Trustee, in form and substance reasonably satisfactory to the Underwriter. (10) The favorable opinion, dated as of the Closing Date, of Shipman & Goodwin LLP, counsel for Fleet National Bank, as Pass Through Trustee under each Trust, in form and substance reasonably satisfactory to the Underwriter. (11) The favorable opinion, dated as of the Closing Date, of Shipman & Goodwin LLP, counsel for Fleet National Bank, as Subordination Agent, in form and substance reasonably satisfactory to the Underwriter. (12) The favorable opinion, dated as of the Closing Date, of White & Case, counsel for Kredietbank N.V., acting through its New York Branch, as Liquidity Provider, in form and substance reasonably satisfactory to the Underwriter. (13) The favorable opinion, dated as of the Closing Date, of Wilfried Kupers, Senior Legal Advisor for Kredietbank N.V., acting through its New York branch, as Liquidity Provider, in form and substance reasonably satisfactory to the Underwriter. (14) The favorable opinion, dated as of the Closing Date, of Daugherty, Fowler & Peregrin, special FAA counsel, in form and substance reasonably satisfactory to the Underwriter. (15) The favorable opinion, dated as of the Closing Date, of Milbank, Tweed, Hadley & McCloy, special counsel to the Underwriter, with respect to Section 1110 of the Bankruptcy Code, in form and substance reasonably satisfactory to the Underwriter. (16) The favorable opinion, dated as of the Closing Date, of Milbank, Tweed, Hadley & McCloy, special counsel to the Underwriter, with respect to 19 20 the validity of the Offered Certificates, the Prospectus, and other related matters as the Underwriter may require, and the Company shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters. (d) Each of the Appraisers shall have furnished to the Underwriter a letter from such Appraiser, addressed to the Company and dated the Closing Date, confirming that such Appraiser and each of its directors and officers (i) is not an affiliate of the Company or any of its affiliates, (ii) does not have any substantial interest, direct or indirect, in the Company or any of its affiliates and (iii) is not connected with the Company or any of its affiliates as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. (e) The Underwriter shall have received a certificate, dated the Closing Date, of the President or any Vice President and a principal financial or accounting officer of the Company in which such officers shall state that, to the best of their knowledge after reasonable investigation, the representations and warranties of the Company in this Agreement are true and correct on and as of the Closing Date as if made on the Closing Date, that the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date, and that, subsequent to the dates of the Company's most recent interim financial statements there has been no Material Adverse Change, except as set forth in or contemplated by the Prospectus. (f) The Underwriter shall have received a certificate, dated the Closing Date, of any authorized officer of each of GPA Group and GPA Sub I in which such officers shall state that, to the best of their knowledge after reasonable investigation, the representations and warranties of each of GPA Group and GPA Sub I in this Agreement are true and correct on and as of the Closing Date as if made on the Closing Date, and that each of GPA Group and GPA Sub I has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date. (g) The Underwriter shall have received a letter, dated the Closing Date, of KPMG Peat Marwick LLP which meets the requirements of subsection (b) of this Section 7. (h) At the Closing Date, each of the Operative Documents shall have been duly executed and delivered by each of the parties thereto; the representations and warranties of the Company contained in each of the Operative Documents to which it is a party shall be true and correct as of the Closing Date (except to the extent that they relate solely to an earlier date in which case they shall be true and correct as of such earlier date) and the Underwriter shall have received a certificate of a Vice President of the Company, dated as of the Closing Date, to such effect. GPA agrees to furnish to the Underwriter, promptly after the Closing Date, a copy of each opinion required to be delivered under the applicable Operative Document addressed to the 20 21 Underwriter and of such other documents furnished in connection with the fulfillment of the conditions precedent therein as the Underwriter or special counsel to the Underwriter may reasonably request. (i) Each of the Company and GPA shall have furnished or caused to be furnished to the Underwriter prior to or at the Closing Date, in form and substance satisfactory to the Underwriter and special counsel to the Underwriter, such other information, documents, certificates and opinions as the Underwriter, special counsel to the Underwriter, or the Rating Agencies may reasonably request. (j) On the Closing Date, the Class A Certificates shall be rated [A2] by Moody's and [AA-] by Standard & Poor's, the Class B Certificates shall be rated [Baa2] by Moody's and [A-] by Standard & Poor's, the Class C Certificates shall be rated [Ba1] by Moody's and [BBB-] by Standard & Poor's and the Class D Certificates shall be rated [Ba3] by Moody's and [BB] by Standard & Poor's. (k) On or prior to the Closing Date, the conditions precedent set forth in Section 3 of each Refunding Agreement shall have been fulfilled to the satisfaction of the Underwriter. The Company will furnish the Underwriter with such conformed copies of such agreements, opinions, certificates, letters and documents as the Underwriter may reasonably request. The Underwriter may waive compliance with any conditions to its obligations hereunder. 8. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless the Underwriter, and each Person, if any, who controls the Underwriter within the meaning of either Section 15 of the Act, or Section 20 of the Exchange Act, or is under common control with the Underwriter, from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by the Underwriter or any such controlling or affiliated person in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the America West Information included in the Registration Statement (as amended if any amendments thereto shall have been prepared), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or caused by any untrue statement or alleged untrue statement of a material fact contained in the America West Information included in the Preliminary Prospectus or the Prospectus (as amended or supplemented, if any amendments or supplements thereto shall have been prepared), or caused by any omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company shall not be liable in any such case to the extent that any such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information furnished by the Underwriter in writing in a letter delivered on the Closing Date to the Company and GPA 21 22 expressly for use therein (the "Underwriter Information"); provided, further, that the Company shall not be liable in any such case to the extent that any such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon the GPA Information or the Statement of Eligibility under the Trust Indenture Act on Form T-1 filed as part of the Registration Statement; provided, further, that with respect to any untrue statement or omission or alleged untrue statement or omission in any Prospectus such indemnity with respect to such Prospectus shall not inure to the benefit of the Underwriter (or any person controlling or under common control with the Underwriter) from whom the Person asserting any such loss, claim, damage or liability purchased the Offered Certificates which are the subject thereof if such untrue statement or omission or alleged untrue statement or omission was remedied or eliminated in a subsequent Prospectus and if the Underwriter failed to deliver a copy of such subsequent Prospectus to such Person prior to or together with written confirmation of the sale of Offered Certificates to such Person, unless such failure to deliver the Prospectus was a result of noncompliance by the Company with the delivery requirements set forth in Section 5 hereof. (b) The GPA Group and GPA Sub I, jointly and severally, agree to indemnify and hold harmless, the Underwriter, and each Person, if any, who controls the Underwriter within the meaning of either Section 15 of the Act, or Section 20 of the Exchange Act, or is under common control with the Underwriter, from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by the Underwriter or any such controlling or affiliated person in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the GPA Information included in the Registration Statement (as amended if any amendments thereto shall have been prepared), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or caused by any untrue statement or alleged untrue statement of a material fact contained in the GPA Information included in the Preliminary Prospectus or the Prospectus (as amended or supplemented if any amendments or supplements thereto shall have been prepared), or caused by any omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that GPA shall not be liable in any such case to the extent that any such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with the Underwriter Information; provided, further, that GPA shall not be liable in any such case to the extent that any such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon the America West Information; provided, further, that with respect to any untrue statement or omission or alleged untrue statement or omission in any Prospectus such indemnity with respect to such Prospectus shall not inure to the benefit of the Underwriter (or any person controlling or under common control with the Underwriter) from whom the Person asserting any such loss, claim, damage or liability purchased the Offered Certificates which are the subject thereof if such untrue statement or omission or alleged untrue statement or omission was remedied or eliminated in a subsequent Prospectus and if the Underwriter failed to deliver a copy of such subsequent Prospectus to such Person prior to or together with written confirmation of the sale of Offered Certificates to such Person, unless such failure to deliver the Prospectus was a 22 23 result of noncompliance by the Company with the delivery requirements set forth in Section 5 hereof. (c) The Underwriter agrees to indemnify and hold harmless the Company, the GPA Group and GPA Sub I, each of their directors, each of their officers who signed the Registration Statement and each Person, if any, who controls the Company, the GPA Group or GPA Sub I within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, or is under common control with the Company, the GPA Group or GPA Sub I, to the same extent as the foregoing indemnities from the Company, the GPA Group and GPA Sub I to the Underwriter, but only with reference to the Underwriter Information. (d) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to paragraphs (a), (b) or (c) above, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties and that all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by the Underwriter, in the case of parties indemnified pursuant to paragraphs (a) or (b) above, and by the Company, the GPA Group or GPA Sub I, as the case may be, in the case of parties indemnified pursuant to paragraph (c) above; provided, however, that if the indemnified parties consist of the Company, the GPA Group or GPA Sub I, each such indemnified party shall have the right to select its own counsel in the circumstances described in clauses (i) and (ii) above. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment to the extent provided herein. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (e) To the extent the indemnification provided for in paragraph (a) or (c) of this Section 8 is unavailable to an indemnified party referred to in either such paragraph or 23 24 insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under the applicable paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by (A) the Company on the one hand, and (B) the Underwriter on the other hand, from the offering of the Offered Certificates or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of (A) the Company and (B) the Underwriter, in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company in connection with the offering of the Offered Certificates shall be deemed to be in the same proportion as the net proceeds from the offering of the Offered Certificates (after deducting the aggregate underwriting commissions received by the Underwriter but before deducting other fees and expenses) received by the Trustees in respect thereof, as set forth in the Prospectus, bears to the aggregate public offering price of such Offered Certificates. The relative benefits received by the Underwriter in connection with the offering of the Offered Certificates shall be deemed to be in the same proportion as the aggregate underwriting commissions received by the Underwriter in respect thereof, as set forth in the Prospectus, bears to the aggregate public offering price of the Offered Certificates. The relative fault of the Company or the Underwriter shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by (a) the Company or (b) the Underwriter, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. For purposes of the preceding sentence, the Company shall be deemed to have supplied the America West Information and the Underwriter shall be deemed to have supplied the Underwriter Information. (f) To the extent the indemnification provided for in paragraph (b) or (c) of this Section 8 is unavailable to an indemnified party referred to in either such paragraph or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each indemnifying party under the applicable paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by (A) GPA on the one hand, and (B) the Underwriter collectively on the other hand, from the offering of the Offered Certificates or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of (A) GPA and (B) the Underwriter, in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by GPA in connection with the offering of the Offered Certificates shall be deemed to be in the same proportion as the net proceeds from the offering of the Offered Certificates (after deducting the aggregate underwriting commissions received by the Underwriter but before deducting other fees and expenses) received by the Trustees in respect thereof, as set forth in the Prospectus, bears to the aggregate public offering price of such Offered Certificates. The 24 25 relative benefits received by the Underwriter in connection with the offering of the Offered Certificates shall be deemed to be in the same proportion as the aggregate underwriting commissions received by the Underwriter in respect thereof, as set forth in the Prospectus, bears to the aggregate public offering price of the Offered Certificates. The relative fault of GPA or the Underwriter shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by (a) GPA or (b) the Underwriter, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. For purposes of the preceding sentence, GPA shall be deemed to have supplied the GPA Information and the Underwriter shall be deemed to have supplied the Underwriter Information. (g) The Company, GPA and the Underwriter agree that it would not be just or equitable if contribution pursuant to this Section 8 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraphs (e) and (f) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in paragraphs (e) and (f) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, the Underwriter shall not be required to contribute any amount in excess of the amount by which the total price at which the Offered Certificates underwritten by the Underwriter and distributed to the public were offered to investors exceeds the amount of any damages that the Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (h) The indemnity and contribution provisions contained in this Section 8 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Underwriter or any person controlling the Underwriter or by or on behalf of or the Company, the GPA Group or GPA Sub I, their respective officers or directors or any person controlling the Company, the GPA Group or GPA Sub I and (iii) acceptance of and payment for any of the Offered Certificates. The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. 9. Survival of Certain Agreements, Etc. and Certain Reimbursement Obligations. The respective agreements, covenants, representations, warranties and other statements of the Company or GPA or of their respective officers and of the Underwriter set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of the Underwriter, GPA or the Company or any of their respective representatives, officers or directors or any controlling person and will survive delivery of and payment for the Offered Certificates. If for any reason the purchase of the Offered Certificates by the Underwriter is not consummated, GPA shall be responsible for all of the expenses to be paid or reimbursed pursuant to Section 6, and the obligations of GPA and the Company and the Underwriter 25 26 pursuant to Section 8 shall remain in effect. If the purchase of the Offered Certificates by the Underwriter is not consummated for any reason other than solely because of the occurrence of the termination of the Agreement pursuant to Section 10, GPA shall reimburse the Underwriter for all out-of-pocket expenses (including reasonable fees and disbursements of counsel) reasonably incurred by it in connection with the offering of such Offered Certificates and comply with its obligations under Section 6. 10. Termination. This Agreement shall be subject to termination by notice given by the Underwriter to the Company, if (a) after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any securities of the Company shall have been suspended on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either Federal or New York State authorities, or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in the judgment of the Underwriter, is material and adverse and (b) in the case of any of the events specified in clause (a), such event singly or together with any other such event makes it, in the judgment of the Underwriter, impracticable or inadvisable to market the Offered Certificates on the terms and in the manner contemplated in the Prospectus. 11. Notices. All communications hereunder will be in writing and will be mailed, delivered or sent by facsimile transmission and confirmed (a) if to the Underwriter, Morgan Stanley & Co. Incorporated, at 1585 Broadway, New York, New York 10036, Attention: Equipment Finance Group, facsimile number 212-761-0786; (b) if to the Company, at 4000 East Sky Harbor Boulevard, Phoenix, Arizona 85034, Attention: Senior Vice President-Legal Affairs, facsimile number 602-693-5904; (c) if to GPA Group, GPA Group plc, 4th Floor, GPA House, Shannon, Co. Clare, Ireland, Attention: Company Secretary, facsimile number 353-61-360503; and (d) if to GPA Sub I, GPA Leasing USA Sub I, Inc., at 83 Wooster Heights Road, Danbury, Connecticut 06810, Attention: President, facsimile number 203-830-4764. 12. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the controlling persons referred to in Section 8, and no other person will have any right or obligation hereunder. 13. Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. 14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 26 27 15. Submission to Jurisdiction; Appointment of Agent for Service; Obligation Currency. Any suit, action or proceeding against any party to this Agreement arising out of or relating to this Agreement, any transaction contemplated hereby or any judgment entered by any court in respect thereof may be brought in any New York State court located in the County of New York or Federal court sitting in the Second Circuit, and each such party hereby submits to the nonexclusive jurisdiction of such courts for the purpose of any such suit, action or proceeding. To the extent that service of process by mail is permitted by applicable law, each party hereto irrevocably consents to the service of process in any such suit, action or proceeding in such courts by the mailing of such process by registered or certified mail, postage prepaid, at its address for notices provided for above. Each party to this Agreement irrevocably agrees not to assert any objection which it may ever have to the laying of venue of any such suit, action or proceeding in any New York State court located in the County of New York or Federal court sitting in the Second Circuit, or any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. To the fullest extent permitted by applicable law, each party to this Agreement waives any right it may have to a trial by jury in respect of any litigation directly or indirectly arising out of, under or in connection with this Agreement. The Company irrevocably designates and appoints Latham & Watkins, 885 Third Avenue, Suite 100, New York, NY 10022, Attention: Robert A. Greenspon and GPA Group and GPA Sub I each irrevocably designates and appoints Paul, Hastings, Janofsky & Walker LLP, 399 Park Avenue, New York, New York 10022, Attention: John P. Howitt and Leigh Ryan, (collectively, the "Process Agents"), as the authorized agents of the Company, GPA Group and GPA Sub I, respectively, upon whom process may be served in any such suit, action or proceeding, it being understood that the designation and appointment of the Process Agents as such authorized agent shall become effective immediately without any further action on the part of the Company, GPA Group or GPA Sub I. Each of the Company, GPA Group and GPA Sub I represents to the Underwriter that it has notified its Process Agent of such designation and appointment and that such Process Agent has accepted the same in writing. Each of the Company, GPA Group and GPA Sub I hereby irrevocably authorizes and directs its Process Agent to accept such service. Each of the Company, GPA Group and GPA Sub I further agrees that service of process upon its Process Agent and written notice of said service to the Company, GPA Group or GPA Sub I, as the case may be, mailed by first class mail or delivered to such Process Agent, shall be deemed in every respect effective service of process upon the Company, GPA Group or GPA Sub I, as the case may be, in any such suit, action or proceeding. Nothing herein shall affect the right of the Underwriter or any person controlling the Underwriter to serve process in any other manner permitted by law. Each of the Company, GPA Group and GPA Sub I agrees that a final action in any such suit or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other lawful manner. If the Company, GPA Group or GPA Sub I, as the case may be, has or may hereafter acquire immunity from jurisdiction or legal process or from attachment in aid of execution or from execution with respect to itself or its property, the Company, GPA Group or GPA Sub I, as the case may be, hereby irrevocably waives to the fullest extent permitted under applicable law such immunity in respect of its obligations hereunder in any action, suit or proceeding which may be instituted in any New York State court located in the County of New York or Federal court sitting in the Second Circuit by the Underwriter or by any persons controlling the Underwriter within the meaning of Section 15 of the Securities Act or any director, officer, employee or agent of the Underwriter. This 27 28 waiver is intended to be effective upon the execution of this Agreement without any further act by the Company, GPA Group or GPA Sub I, as the case may be, before any such court, and the introduction of a true copy of this Agreement into evidence in any such court shall, to the fullest extent permitted by applicable law, be conclusive and final evidence of such waiver. The obligation of the parties hereto to make payments hereunder is in U.S. dollars (the "Obligation Currency") and such obligation shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than the Obligation Currency or any other realization in such other currency, whether as proceeds of set-off, security, guarantee, distributions, or otherwise, except to the extent to which such tender, recovery or realization shall result in the effective receipt by the party which is to receive such payment of the full amount of the Obligation Currency expressed to be payable hereunder. _____________________________ 28 29 If the foregoing is in accordance with the Underwriter's understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument will become a binding agreement among the Underwriter, the Company, GPA Group and GPA Sub I in accordance with its terms. Very truly yours, AMERICA WEST AIRLINES, INC. By: -------------------------- Name: Title: GPA GROUP PLC By: -------------------------- Name: Title: GPA LEASING USA SUB I, INC. By: -------------------------- Name: Title: Accepted as of the date first above written: Morgan Stanley & Co. Incorporated By: ----------------------------- Name: Title: 30 SCHEDULE I
Principal Amount of Principal Amount of Principal Amount of Principal Amount of Pass Through Pass Through Pass Through Pass Through Certificates of the Certificates of the Certificates of the Certificates of the Class A Trust Class B Trust Class C Trust Class D Trust ------------------- ------------------- ------------------- ------------------- Morgan Stanley & Co. $ $ $ $ Incorporated
1 31 SCHEDULE II
Pass Through Aggregate Certificate Principal Interest Final Expected Designation Amount Rate Distribution Date Commissions* Commissions** ------------ --------- -------- ----------------- ----------- ----------- 1997-1A $ % % $ 1997-1B 1997-1C 1997-1D Total $ =
- ----------------------- * Expressed as a percentage of Aggregate Principal Amount. ** Expressed in dollars. 32 ANNEX 1 For purposes of the Underwriting Agreement, "America West Information" shall consist of the following information in the Registration Statement and the Prospectus: (a) The information on the cover page of the Registration Statement. (b) The information contained in the last two paragraphs on page 2 of the Prospectus. (c) The information under the headings "Available Information and Reports to Certificateholders," "Incorporation of Certain Documents by Reference" and "Forward Looking Information". (d) The information under the headings "Prospectus Summary--The Company," "--Strategy," "--The Offering--Equipment Notes--(e) Section 1110 Protection," "--Federal Income Tax Consequences,""--ERISA Considerations" and "--Summary Financial and Operating Data". (e) The information under the headings "Risk Factors--Company Related Risks" and "--Industry Related Risks." (f) The information under the headings "Risk Factors-Factors Relating to the Certificates and the Offering--Repossession," "--Maintenance," "--Insurance" and "--Absence of a Public Market for the Certificates." (g) The information under the headings "Ratio of Earnings to Fixed Charges," "Capitalization," "Selected Financial and Operating Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business," "Management" and "Certain Transactions." (h) The information contained in fifth, sixth and seventh paragraphs under the heading "Description of the Equipment Notes--Remedies." (i) The information under the heading "Description of the Equipment Notes--Modification of Indentures and Leases" and "--Indemnification," but only to the extent such information thereunder concerns the Leases and not the Indentures. (j) The information under the heading "Description of the Equipment Notes--The Leases." (k) The information under the headings "Certain U.S. Federal Income Tax Consequences," "ERISA Considerations," "Underwriting" (excluding the sixth paragraph thereof relating to indemnification and reimbursement of the Underwriter) and "Legal Matters." (l) The information under the first two paragraphs under the heading "Experts." (m) The information under the headings "Index to Financial Statements," including the condensed financial statements of the Company, the financial statements of the Company and the "Independent Auditors' Report" that follow such index. (n) All annual, quarterly and other reports, exhibits and other documents incorporated by reference in the Registration Statement and the Prospectus. (o) The information included in Part II of the Registration Statement, excluding the information under "Item 14. Other Expenses of Issuance and Distribution". For purposes of the Underwriting Agreement, "GPA Information" shall consist of all of the information in the Registration Statement and the Prospectus other than the America West Information. EX-4.5 3 PASS THROUGH TRUST AGMT W/FLEET NATIONAL BANK 1 Exhibit 4.5 AMERICA WEST AIRLINES, INC. and FLEET NATIONAL BANK, as Trustee PASS THROUGH TRUST AGREEMENT Dated as of June __, 1997 2 Reconciliation and tie between Pass Through Trust Agreement dated as of June __, 1997 and the Trust Indenture Act of 1939. This reconciliation does not constitute part of the Pass Through Trust Agreement.
Trust Indenture Act Pass Through Trust of 1939 Section Agreement Section ------------------- ------------------ 310(a)(1) 7.07 (a)(2) 7.07 312(a) 3.09; 8.01; 8.02 313(a) 7.06; 8.03 314(a) 8.04(a) - (c) (a)(4) 8.04(d) (c)(1) 1.02 (c)(2) 1.02 (d)(1) 7.12; 11.01 (d)(2) 7.12; 11.01 (d)(3) 2.01 (e) 1.02 315(b) 7.01 316(a)(last sentence) 1.04(d) (a)(1)(A) 6.04 (a)(1)(B) 6.05 (b) 6.06 (c) 1.04(d) 317(a)(1) 6.03 (b) 7.12 318(a) 12.08
3 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.02. Compliance Certificates and Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 1.03. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 1.04. Acts of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE II ORIGINAL ISSUANCE OF CERTIFICATES; ACQUISITION OF EQUIPMENT NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 2.01. Amount Unlimited; Issuable in Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 2.02. Acquisition of Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 2.03. Acceptance by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 2.04. Limitation of Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ARTICLE III THE CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 3.01. Form, Denomination and Execution of Certificates . . . . . . . . . . . . . . . . . . . . . . 20 Section 3.02. Authentication of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 3.03. Temporary Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 3.04. Registration of Transfer and Exchange of Certificates . . . . . . . . . . . . . . . . . . . . 22 Section 3.05. Mutilated, Destroyed, Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . . . 23 Section 3.06. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 3.07. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 3.08. Limitation of Liability for Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 3.09. Book-Entry and Definitive Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 4.01. Certificate Account and Special Payments Account . . . . . . . . . . . . . . . . . . . . . . 26 Section 4.02. Distributions from Certificate Account and Special Payments Account . . . . . . . . . . . . . 27 Section 4.03. Statements to Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 4.04. Investment of Special Payment Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4
Page ---- ARTICLE V THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 5.01. Maintenance of Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 5.02. Consolidation, Merger, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 ARTICLE VI DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 6.02. Incidents of Sale of Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit . . . . . . . . . . . . . 33 Section 6.04. Control by Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 6.05. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 6.06. Right of Certificateholders to Receive Payments Not To Be Impaired . . . . . . . . . . . . . 35 Section 6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions . . . . . . . . . . . . 35 Section 6.08. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 6.09. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE VII THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 7.01. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 7.02. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 7.03. Not Responsible for Recitals or Issuance of Certificates . . . . . . . . . . . . . . . . . . 38 Section 7.04. May Hold Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 7.05. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 7.06. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 7.07. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 7.08. Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . 41 Section 7.09. Acceptance of Appointment by Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 7.10. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . 44 Section 7.11. Maintenance of Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Section 7.12. Money for Certificate Payments to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . 46 Section 7.13. Registration of Equipment Notes in Trustee's Name . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.14. Representations and Warranties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 7.15. Withholding Taxes; Information Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Section 7.16. Trustee's Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 7.17. Preferential Collection of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ii 5
Page ---- ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 8.02. Preservation of Information; Communications to Certificateholders . . . . . . . . . . . . . . 48 Section 8.03. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 8.04. Reports by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 ARTICLE IX SUPPLEMENTAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 9.01. Supplemental Agreements Without Consent of Certificateholders . . . . . . . . . . . . . . . . 50 Section 9.02. Supplemental Agreements with Consent of Certificateholders . . . . . . . . . . . . . . . . . 51 Section 9.03. Documents Affecting Immunity or Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 9.04. Execution of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 9.05. Effect of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 9.06. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 9.07. Reference in Certificates to Supplemental Agreements . . . . . . . . . . . . . . . . . . . . 53 ARTICLE X AMENDMENTS TO INDENTURE AND NOTE DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 10.01. Amendments and Supplements to Indenture and Other Note Documents . . . . . . . . . . . . . . 53 ARTICLE XI TERMINATION OF TRUSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 11.01. Termination of the Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 ARTICLE XII MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 12.01. Limitation on Rights of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 12.02. Liabilities of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 12.03. Certificates Nonassessable and Fully Paid . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 12.04. Registration of Equipment Notes in Name of Subordination Agent . . . . . . . . . . . . . . . 56 Section 12.05. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 12.06. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
iii 6
Page ---- Section 12.07. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 12.08. Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 12.09. Effect of Headings and Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 12.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 12.11. Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 12.12. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 12.13. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 12.14. Communication by Certificateholders with Other Certificateholders . . . . . . . . . . . . . 58
Exhibit A - Form of Certificate iv 7 This PASS THROUGH TRUST AGREEMENT, dated as of June __ 1997, between America West Airlines, Inc., a Delaware corporation (the "Company"), and Fleet National Bank, a national banking association, as Trustee, is made with respect to the formation from time to time of separate America West Airlines Pass Through Trusts, and the issuance from time to time of separate series of Pass Through Certificates representing fractional undivided interests in the respective Trusts. W I T N E S S E T H: WHEREAS, from time to time the Company and the Trustee may enter into a Trust Supplement (this and certain other defined terms used herein are defined in Section 1.01) pursuant to which the Trustee shall declare the creation of a separate Trust for the benefit of the Holders of the series of Certificates to be issued in respect of such Trust, and the initial Holders of the Certificates of such series, as the grantors of such Trust, by their respective acceptances of the Certificates of such series, shall join in the creation of such Trust with the Trustee; WHEREAS, all Certificates to be issued in respect of each separate Trust will be issued as a separate series pursuant to this Agreement, will evidence fractional undivided interests in such Trust and will have no rights, benefits or interests in respect of any other separate Trust or the property held therein, subject, however, to the provisions of any Intercreditor Agreement to which one or more Trusts may be a party; WHEREAS, from time to time, pursuant to the terms and conditions of this Agreement with respect to each separate Trust formed hereunder, the Trustee on behalf of such Trust shall purchase one or more issues of Equipment Notes having the same interest rate as, and final maturity dates not later than the final Regular Distribution Date of, the series of Certificates issued in respect of such Trust and shall hold such Equipment Notes in trust for the benefit of the Certificateholders of such Trust; WHEREAS, to facilitate the sale of Equipment Notes to, and the purchase of Equipment Notes by, the Trustee on behalf of each Trust created from time to time pursuant to this Agreement, the Company as the "issuer", as such term is defined in and solely for purposes of the Securities Act of 1933, as amended (the "Securities Act"), of the Certificates to be issued in respect of each Trust and as the "obligor", as such term is defined in and solely for purposes of the Trust Indenture Act of 1939, as amended, has duly authorized the execution and delivery of this Basic Agreement and each Trust Supplement with respect to all such Certificates and is undertaking to perform certain administrative and ministerial duties hereunder and is also undertaking to pay the fees and expenses of the Trustee; WHEREAS, this Basic Agreement, as supplemented from time to time, is subject to the provisions of the Trust Indenture 8 2 Act of 1939, as amended, and shall to the extent applicable, be governed by such provisions; NOW THEREFORE, in consideration of the mutual agreements herein contained, and of other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. For all purposes of this Basic Agreement, except as otherwise expressly provided herein or in a Trust Supplement or unless the context otherwise requires: (1) the terms used herein that are defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular, (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) all references in this Basic Agreement to designated "Articles", "Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of this Basic Agreement; (4) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Basic Agreement as a whole and not to any particular Article, Section or other subdivision; (5) the term "this Agreement" (as distinguished from "this Basic Agreement") refers, unless the context otherwise requires, to this Basic Agreement as supplemented by the Trust Supplement creating a particular Trust and establishing the series of Certificates issued or to be issued in respect thereof, with reference to such Trust and such series of Certificates, as this Basic Agreement as so supplemented may be further supplemented with respect to such Trust and such series of Certificates; and (6) all references in this Agreement to a "series" of Certificates shall be construed to mean a series of Certificates issued under the related Trust Supplement; and all references in this Basic Agreement or in any Trust Supplement, Intercreditor Agreement, Liquidity Facility, Refunding Agreement, or Note Document to a "class" of Certificates shall be construed to refer to any series of Certificates that have been or will be issued concurrently with, or are intended to be considered concurrently with, one or more other series of Certificates, each established 9 3 under separate Trust Supplements to purchase related classes of Equipment Notes issued by one or more Owner Trustees that are subject to the same Intercreditor Agreement. Act: With respect to any Certificateholder, has the meaning specified in Section 1.04. Affiliate: With respect to any specified Person, means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing. Aircraft: Means one or more aircraft, including engines therefor, owned by or leased to the Company and securing one or more Equipment Notes. Authorized Agent: With respect to the Certificates of any series, means any Paying Agent or Registrar for the Certificates of such series. Avoidable Tax: Has the meaning specified in Section 7.08(e). Basic Agreement: Means this Pass Through Trust Agreement, as the same may from time to time be supplemented, amended or modified, but does not include any Trust Supplement. Book-Entry Certificates: With respect to the Certificates of any series, means Certificates of such series which are issued in book-entry form, ownership and transfers of which shall be made through book entries by a Clearing Agency as described in Section 3.09. Business Day: With respect to the Certificates of any series and unless specified otherwise in any Trust Supplement, means any day other than a Saturday, a Sunday or a day on which commercial banks are required or authorized to close in New York, New York or Hartford, Connecticut. Certificate: Means any one of the Certificates, substantially in the form of Exhibit A hereto, and any such Certificates issued in exchange therefor or replacement thereof pursuant to this Agreement. Certificate Account: With respect to the Certificates of any series, means the account or accounts created and maintained for such series pursuant to Section 4.01(a) and the related Trust Supplement. 10 4 Certificateholder or Holder: With respect to the Certificates of any series, means the Person in whose name a Certificate of such series is registered in the Register for Certificates of such series. Certificate Owner: With respect to the Certificates of any series, means, for purposes of Section 3.09, the Person who owns a Book-Entry Certificate of such series. Clearing Agency: Means an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. Clearing Agency Participant: Means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects, directly or indirectly, book-entry transfers and pledges of securities deposited with the Clearing Agency. Company: Means America West Airlines, Inc., a Delaware corporation, or its successor in interest pursuant to Section 5.02, or any other obligor (within the meaning of the Trust Indenture Act) with respect to any series of Certificates. Controlling Party: Means the Person entitled to act as such pursuant to the terms of any Intercreditor Agreement. Corporate Trust Office: With respect to the Trustee, the Subordination Agent or any Indenture Trustee, means the office of such trustee in the city at which at any particular time its corporate trust business shall be principally administered. Cut-off Date: With respect to the Certificates of any series, means the date designated as such in the Trust Supplement establishing such series. Definitive Certificates: With respect to the Certificate of any series, has the meaning specified in Section 3.09. Direction: Has the meaning specified in Section 1.04(c). Distribution Date: Means any Regular Distribution Date or Special Distribution Date as the context requires. Equipment Note: With respect to the Certificates of any series, means the equipment notes or other promissory notes, loan certificates or other evidence of obligation issued under the related Indenture. 11 5 ERISA: Means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor federal statute. Escrow Account: With respect to the Certificates of any series, has the meaning specified in Section 2.02(b). Escrowed Funds: With respect to any Trust, has the meaning specified in Section 2.02(b). Event of Default: Means, in respect of any Trust, the occurrence of an Indenture Default under any Indenture pursuant to which Equipment Notes held by such Trust were issued. Final Legal Distribution Date: With respect to the Certificates of any series, means the date designated as such in the Trust Supplement establishing such series. Fractional Undivided Interest: Means the fractional undivided interest in a Trust that is evidenced by a Certificate relating to such Trust. Indenture: With respect to any Trust, means each of the one or more separate trust indentures and security agreements, loan agreements and mortgages and/or other agreements relating to indebtedness and security interests with respect thereto described in, or on a schedule attached to, this Agreement which relates to an issue of Equipment Notes to be held in such Trust and an indenture, loan agreement and mortgage or other agreement having substantially the same terms and conditions as such trust indenture and security agreement, loan agreement and mortgage or other agreement relating to indebtedness and security interests with respect thereto and which relates to Substitute Aircraft; as each such agreement may be amended or supplemented in accordance with its respective terms; and Indentures means all of such agreements. Indenture Default: With respect to any Indenture, means any Indenture Event of Default (as such term is defined in such Indenture). Indenture Trustee: With respect to any Equipment Note or the Indenture applicable thereto, means the bank or trust company designated as loan or indenture trustee under such Indenture; and any successor to such Indenture Trustee as such trustee; and Indenture Trustees means all of the Indenture Trustees under the Indentures. Initial Regular Distribution Date: With respect to the Certificates of any series, means the first Regular Distribution Date on which a Scheduled Payment is to be made. 12 6 Intercreditor Agreement: Means any agreement by and among one or more Trusts, one or more Liquidity Providers and a Subordination Agent providing for the distribution of payments made in respect of Equipment Notes held by such Trusts. Issuance Date: With respect to the Certificates of any series, means the date of the issuance of such Certificates. Lease: Means any lease between an Owner Trustee, as the lessor, and the Company, as the lessee, referred to in the related Indenture, as each such lease may be amended or supplemented in accordance with its respective terms; and Leases means all such Leases. Liquidity Facility: With respect to the Certificates of any Series, means any revolving credit agreement or similar facility relating to the Certificates of such series between a Liquidity Provider and a Subordination Agent, as amended, replaced, supplemented or otherwise modified from time to time in accordance with its terms and the terms of any Intercreditor Agreement. Liquidity Provider: With respect to the Certificates of any Series, means a bank or other financial institution that agrees to provide a Liquidity Facility for the benefit of the holders of Certificates of such series. Note Documents: With respect to any Equipment Note, means the related Indenture, Refunding Agreement, guarantees of such Equipment Note, if any and if the related Aircraft is leased to the Company, the related Lease and the related Owner Trustee's Purchase Agreement. Officer's Certificate: Means a certificate signed, (a) in the case of the Company, by (i) the Chairman or Vice Chairman of the Board of Directors, the President or any Executive Vice President or Senior Vice President of the Company, signing alone or (ii) any Vice President of the Company signing together with the Secretary, the Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company, or (b) in the case of the Trustee or an Owner Trustee or an Indenture Trustee, a Responsible Officer of the Trustee or such Owner Trustee or such Indenture Trustee, as the case may be. Opinion of Counsel: Means a written opinion of legal counsel who (a) in the case of counsel for the Company, may be (i) a senior attorney in rank of the officers of the Company a principal duty of which is furnishing advice as to legal matters, (ii) Andrews & Kurth L.L.P., (iii) Latham & Watkins, or (iv) such other counsel designated by the Company and reasonably acceptable to the Trustee and (b) in the case of any Owner Trustee or any Indenture Trustee, may be such counsel as may be designated by 13 7 any of them whether or not such counsel is an employee of any of them, and who shall be reasonably acceptable to the Trustee. Other Agreements: Has the meaning specified in Section 6.01(b). Outstanding: With respect to Certificates of any series, means, as of the date of determination, all Certificates of such series theretofore authenticated and delivered under this Agreement, except (i) Certificates of such series theretofore canceled by the Registrar or delivered to the Trustee or the Registrar for cancellation; (ii) All of the Certificates of such series if money in the full amount required to make the final distribution with respect to such series pursuant to Section 11.01 hereof has been theretofore deposited with the Trustee in trust for the Holders of the Certificates of such series as provided in Section 4.01 pending distribution of such money to such Certificateholders pursuant to such final distribution payment; and (iii) Certificates of such series in exchange for or in lieu of which other Certificates of such series have been authenticated and delivered pursuant to this Agreement. Owner Participant: With respect to any Equipment Note, means the "Owner Participant", if any, as referred to in the Indenture pursuant to which such Equipment Note is issued and any permitted successor or assign of such Owner Participant; and Owner Participants at any time of determination means all of the Owner Participants thus referred to in the Indentures. Owner Trustee: With respect to any Equipment Note, means the "Owner Trustee", if any, as referred to in the Indenture pursuant to which such Equipment Note is issued, not in its individual capacity but solely as trustee; and Owner Trustees means all of the Owner Trustees party to any of the respective Indentures. Owner Trustee's Purchase Agreement: With respect to the Certificates of any series, if the related Aircraft is leased to the Company, has the meaning specified for the term Purchase Agreement in the related Lease. Paying Agent: With respect to the Certificates of any series, means the paying agent maintained and appointed for the Certificates of such series pursuant to Section 7.11. Permitted Investments: Means obligations of the United States of America or agencies or instrumentalities thereof for 14 8 the payment of which the full faith and credit of the United States of America is pledged, maturing in not more than 60 days or such lesser time as is necessary for payment of any Special Payments on a Special Distribution Date. Person: Means any person, including any individual corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization, or government or any agency or political subdivision thereof. Pool Balance: Means, with respect to the Certificates of any series, as of any date, (i) the original aggregate face amount of the Certificates of such series less (ii) the aggregate amount of all payments made in respect of such Certificates other than payments made in respect of interest or premium thereon or reimbursement of any costs or expenses incurred in connection therewith. The Pool Balance of any series of Certificates as of any Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property held in the related Trust and the distribution thereof to be made on such Distribution Date. Pool Factor: Means, with respect to any series of Certificates as of any date, the quotient (rounded to the seventh decimal place) computed by dividing (i) the Pool Balance of such series as at such date by (ii) the original aggregate face amount of the Certificates of such series. The Pool Factor as of any Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property and the distribution thereof to be made on such Distribution Date. Postponed Notes: With respect to any Trust or the related series of Certificates, means the Equipment Notes to be held in such Trust as to which a Postponement Notice shall have been delivered pursuant to Section 2.02(b). Postponement Notice: With respect to any Trust or the related series of Certificates, means an Officer's Certificate of the Company signed by an officer of the Company (1) requesting that the Trustee temporarily postpone purchase of the related Equipment Notes to a date later than the Issuance Date of such series of Certificates, (2) identifying the amount of the purchase price of each such Equipment Note and the aggregate purchase price for all such Equipment Notes, (3) setting forth the reasons for such postponement and (4) with respect to each such Equipment Note, either (a) setting or resetting a new Transfer Date (which shall be on or prior to the applicable Cut-off Date) for payment by the Trustee of such purchase price and issuance of the related Equipment Note, or (b) indicating that such new Transfer Date (which shall be on or prior to the applicable Cut-off Date) will be set by subsequent written notice not less than one Business Day prior to such new Transfer Date. 15 9 PTC Event of Default: With respect to the Certificates of any series, has the meaning specified in the Trust Supplement establishing each series. Record Date: With respect to any Trust or the related series of Certificates, means (i) for Scheduled Payments to be distributed on any Regular Distribution Date, other than the final distribution, with respect to such series, the 15th day (whether or not a Business Day) preceding such Regular Distribution Date, and (ii) for Special Payments to be distributed on any Special Distribution Date, other than the final distribution, with respect to such series, the 15th day (whether or not a Business Day) preceding such Special Distribution Date. Refunding Agreement: With respect to the Certificates of any series, means any note purchase, refunding, participation or similar agreement providing for, among other things, the purchase of Equipment Notes by the Trustee on behalf of the relevant Trust, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms; and Refunding Agreements means all such agreements. Register and Registrar: With respect to the Certificates of any series, mean the register maintained and the registrar appointed for such series pursuant to Sections 3.04 and 7.11. Regular Distribution Date: With respect to distributions of Scheduled Payments in respect of any series of Certificates, means each date designated as such in this Agreement, until payment of all the Scheduled Payments to be made under the Equipment Notes held in such Trust has been made. Request: Means a request by the Company setting forth the subject matter of the request accompanied by an Officer's Certificate and an Opinion of Counsel as provided in Section 1.02 of this Basic Agreement. Responsible Officer: With respect to any Trustee, any Indenture Trustee and any Owner Trustee, means any officer in the corporate trust division or department of the Trustee, Indenture Trustee or Owner Trustee or any other officer customarily performing functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of and familiarity with a particular subject. Scheduled Payment: With respect to any Equipment Note, means any payment of principal and interest on such Equipment Note or any payment of interest on the Certificates of any series with funds drawn under the Liquidity Facility for such series (other than any such payment which is not in fact received by the 16 10 Trustee or any Subordination Agent within five days of the date on which such payment is scheduled to be made) due from the obligor thereon which payment represents the installment of principal at the stated maturity of such installment of principal on such Equipment Note, the payment of regularly scheduled interest accrued on the unpaid principal amount of such Equipment Note, or both; provided that any payment of principal, premium, if any, or interest resulting from the redemption or purchase of any Equipment Note shall not constitute a Scheduled Payment. SEC: Means the Securities and Exchange Commission, as from time to time constituted or created under the Securities Exchange Act of 1934, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties on such date. Special Distribution Date: With respect to the Certificates of any series, means the date specified as such in the related Trust Supplement. Special Payment: Means (i) any payment (other than a Scheduled Payment) in respect of, or any proceeds of, any Equipment Note or Trust Indenture Estate (as defined in each Indenture) or (ii) the amounts required to be distributed pursuant to the last paragraph of Section 2.02(b) or (iii) the amounts required to be distributed pursuant to the penultimate paragraph of Section 2.02(b). Special Payments Account: With respect to the Certificates of any series, means the account or accounts created and maintained for such series pursuant to Section 4.01(b) and the related Trust Supplement. Specified Investments: With respect to any Trust, means, unless otherwise specified in the related Trust Supplement, (i) direct obligations of the United States or any agency thereof the obligations of which bear the full faith and credit of the United States, (ii) obligations fully guaranteed by the United States, or (iii) certificates of deposit issued by any commercial bank incorporated under the laws of the United States or one of the States thereof (but not exceeding $10,000,000 in principal amount or deposits at any given time for any one bank) having a combined capital surplus and undivided income of at least $750,000,000; (iv) repurchase agreements (but not exceeding $10,000,000 in principal amount or deposits at any given time for any one bank) with any financial institution having combined capital surplus and undivided income of at least $750,000,000 and fully collateralized by an obligation of the type described in clauses (i) through (iii) as collateral pursuant to which an entity referred to in clause (iii) above or another financial institution having a net worth of at least $750,000,000 and having a rating of "B" or better from Thomson BankWatch, Inc. is 17 11 obligated to repurchase any such obligation not later than ninety (90) days after the purchase of any such obligation and (v) money market funds which invest solely in obligations described in clause (i) or (ii); provided further that if all of the above investments are unavailable, the entire amounts to be invested may be used to purchase Federal Funds from an entity described in clause (iii) above; and provided further that no investment shall be eligible as a "Specified Investment" unless the final maturity or date of return of such investment is on or before the Special Distribution Date next following the Cut-off Date, if any, for such Trust by more than 20 days. Subordination Agent: Shall have the meaning specified therefor in any Intercreditor Agreement. Substitute Aircraft: With respect to any Trust, means any Aircraft of a type specified in this Agreement and, at the election of the Company, substituted prior to the applicable Cut-off Date, if any, pursuant to the terms of this Agreement. Transfer Date: Has the meaning assigned to that term in a related Refunding Agreement or any of the terms "Delivery Date", "Funding Date" or "Closing Date" in a related Refunding Agreement. Triggering Event: Shall have the meaning specified therefor in any Intercreditor Agreement. Trust: With respect to the Certificates of any series, means the trust created pursuant to the Basic Agreement and the related Trust Supplement for the benefit of the Holders of the Certificates of such series. Trust Indenture Act: Except as otherwise provided in Section 9.06, means the Trust Indenture Act of 1939 as in force at the date as of which this Basic Agreement was executed. Trust Property: With respect to any Trust means (i) the Equipment Notes held as the property of such Trust, all monies at any time paid thereon and all monies due and to become due thereunder, (ii) the rights of such Trust under any Intercreditor Agreement, including all monies receivable in respect of such rights, (iii) all monies receivable under any Liquidity Facility for such Trust and (iv) funds from time to time deposited in the related Escrow Account, the related Certificate Account and the related Special Payments Account and any proceeds from the sale by the Trustee pursuant to Article VI hereof of any such Equipment Note. Trust Supplement: Means an agreement supplemental hereto pursuant to which (i) a separate Trust is created for the benefit of the Holders of the Certificates of a series, (ii) the issuance of the Certificates of such series representing 18 12 fractional undivided interests in such Trust is authorized and (iii) the terms of the Certificates of such series are established. Trustee: Means the institution executing this Basic Agreement as Trustee, or its successor in interest, and any successor trustee appointed as provided herein. Trustee's Lien: Has the meaning specified in Section 7.16. Underwriter: With respect to the Certificates of any series, has the meaning specified as such in the Trust Supplement establishing such series. Section 1.02. Compliance Certificates and Opinions. Upon any application or request by the Company, any Owner Trustee or any Indenture Trustee to the Trustee to take any action under any provision of this Basic Agreement or, in respect of the Certificates of any series, this Agreement, the Company, such Owner Trustee or such Indenture Trustee, as the case may be, shall furnish to the Trustee an Officers' Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Basic Agreement or this Agreement relating to the proposed action have been complied with and 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 request as to which the furnishing of such documents is specifically required by any provision of this Basic Agreement or this Agreement relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or,opinion with respect to compliance with a condition or covenant provided for in this Basic Agreement or, in respect of the Certificates of any series, this Agreement (other than a certificate provided pursuant to Section 8.04(d)) or any Trust Supplement shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions in this Basic Agreement or this Agreement relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as 19 13 to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 1.03. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters and any such Person may certify or give an opinion as to such matters in one or several documents. Any Opinion of Counsel stated to be based on the opinion of other counsel shall be accompanied by a copy of such other opinion. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Basic Agreement or, in respect of the Certificates of any series, this Agreement, they may, but need not, be consolidated and form one instrument. Section 1.04. Acts of Certificateholders. (a) Any direction, consent, waiver or other action provided by this Agreement in respect of the Certificates of any series to be given or taken by Certificateholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Certificateholders in person or by an agent or proxy duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required pursuant to this Agreement, to the Company or any Indenture Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Certificateholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of such Trust Supplement and conclusive in favor of the Trustee, the Company and the related Indenture Trustee, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or 20 14 administer oaths that the Person executing such instrument acknowledged to him the execution thereof or by an affidavit of a witness to such execution sworn to before any such notary or such other officer and where such execution is by an officer of a corporation or association or a member of a partnership, on behalf of such corporation, association or partnership, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other reasonable manner which the Trustee deems sufficient. (c) In determining whether the Certificateholders of the requisite Fractional Undivided Interests of Certificates of any series Outstanding have given any direction, consent or waiver (a "Direction"), under this Agreement, Certificates owned by the Company, any related Owner Trustee, any related Owner Participant or any Affiliate of any such Person shall be disregarded and deemed not to be Outstanding for purposes of any such determination. In determining whether the Trustee shall be protected in relying upon any such Direction, only Certificates which a Responsible Officer of the Trustee knows to be so owned shall be so disregarded. Notwithstanding the foregoing, (i) if any, such Person owns 100% of the Certificates of any series Outstanding, such Certificates shall not be so disregarded as aforesaid, and (ii) if any amount of Certificates of such series so owned by any such Person have been pledged in good faith, such Certificates shall not be disregarded as aforesaid if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Company, any related Owner Trustee, any related Owner Participant or any Affiliate of any such Person. (d) The Company may at its option by delivery of an Officer's Certificate to the Trustee set a record date to determine the Certificateholders in respect of the Certificates of any series, entitled to give any consent, request, demand, authorization, direction, notice, waiver or other Act. Notwithstanding Section 316(c) of the Trust Indenture Act, such record date shall be the record date specified in such Officer's Certificate which shall be a date not more than 30 days prior to the first solicitation of Certificateholders in connection therewith. If such a record date is fixed, such consent, request, demand, authorization, direction, notice, waiver or other Act may be given before or after such record date, but only the Certificateholders of record of the applicable series at the close of business on such record date shall be deemed to be Certificateholders for the purposes of determining whether Certificateholders of the requisite proportion of Outstanding Certificates of such series have authorized or agreed or consented to such consent, request, demand, authorization, direction, notice, waiver or other Act, and for that purpose the Outstanding Certificates of such series shall be computed as of 21 15 such record date; provided that no such consent, request, demand, authorization, direction, notice, waiver or other Act by the Certificateholders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Basic Agreement not later than one year after the record date. (e) Any direction, consent, waiver or other action by the Certificateholder of any Certificate shall bind the Certificateholder of every Certificate issued upon the transfer thereof or in exchange therefor or in lieu thereof, whether or not notation of such action is made upon such Certificate. (f) Except as otherwise provided in Section 1.04(c), Certificates of any series owned by or pledged to any Person shall have an equal and proportionate benefit under the provisions of this Agreement, without preference, priority, or distinction as among all of the Certificates of such series. ARTICLE II ORIGINAL ISSUANCE OF CERTIFICATES; ACQUISITION OF EQUIPMENT NOTES Section 2.01. Amount Unlimited; Issuable in Series. (a) The aggregate principal amount of Certificates of each series which may be authenticated and delivered under this Basic Agreement is limited to an amount equal to the aggregate principal amount of the Equipment Notes held in the related Trust. The Certificates may be issued from time to time in one or more series and shall be designated generally as the "Pass Through Certificates", with such further designations added or incorporated in such title for the Certificates of each series as specified in the related Trust Supplement. Each Certificate shall bear upon its face the designation so selected for the series to which it belongs. All Certificates of the same series shall be substantially identical except that the Certificates of a series may differ as to denomination and as may otherwise be provided in the Trust Supplement establishing the Certificates of such series. Each series of Certificates issued pursuant to this Agreement will evidence fractional undivided interests in the related Trust and, except as may be contained in any Intercreditor Agreement, will have no rights, benefits or interests in respect of any other Trust or the Trust Property held therein. All Certificates of the same series shall be in all respects equally and ratably entitled to the benefits of this Agreement without preference, priority or distinction on account of the actual time or times of authentication and delivery, all in accordance with the terms and provisions of this Agreement. (b) The following matters shall be established with respect to the Certificates of each series issued hereunder by a 22 16 Trust Supplement executed and delivered by and among the Company and the Trustee: (1) the formation of the Trust as to which the Certificates of such series represent fractional undivided interests and its designation (which designation shall distinguish such Trust from each other Trust created under this Basic Agreement and a Trust Supplement); (2) the specific title of the Certificates of such series (which title shall distinguish the Certificates of such series from each other series of Certificates created under this Basic Agreement and a Trust Supplement); (3) any limit upon the aggregate principal amount of the Certificates of such series which may be authenticated and delivered (which limit shall not pertain to Certificates authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of other Certificates of the series pursuant to Sections 3.03, 3.04 and 3.05; (4) the Cut-off Date with respect to the Certificates of such series; (5) the Regular Distribution Dates applicable to the Certificates of such series; (6) the Final Legal Distribution Date with respect to the Certificates of such series; (7) the Special Distribution Dates applicable to the Certificates of such series; (8) if other than as provided in Section 7.11(b), the Registrar or the Paying Agent for the Certificates of such series, including any Co-Registrar or additional Paying Agent; (9) if other than as provided in Section 3.01, the denominations in which the Certificates of such series shall be issuable; (10) if other than United States dollars, the currency or currencies (including currency units) in which the Certificates of such series shall be denominated; (11) the specific form of the Certificates of such series (including the interest rate applicable thereto (or, in the case of any Certificates denominated in a currency other than United States dollars and if other than as provided in Section 3.09, whether and the circumstances under which beneficial owners of interests in such Certificates in permanent global form may exchange such 23 17 interests for Certificates of such series and of like tenor of any authorized form and denomination); (12) a description of the Equipment Notes to be acquired and held in the related Trust and of the related Equipment and Note Documents; (13) provisions with respect to the terms for which the definitions set forth in Article I hereof or the terms of Section 11.01 hereof permit or require further specification in the related Trust Supplement; (14) any restrictions (including legends) in respect of ERISA; (15) whether such series will be subject to an Intercreditor Agreement and, if so, the specific designation of such Intercreditor Agreement and whether such series may be purchased in accordance with Section 6.01(b) hereof; and (16) any other terms of the Certificates of such series (which terms shall not be inconsistent with the provisions of the Trust Indenture Act), including any terms which may be required or advisable under United States laws or regulations or advisable in connection with the marketing of Certificates of the series. (c) At any time and from time to time after the execution and delivery of this Basic Agreement and a Trust Supplement forming a Trust and establishing the terms of Certificates of a series, Certificates of such series shall be executed, authenticated and delivered by the Trustee to the Person or Persons specified by the Company upon request of the Company and upon satisfaction of any conditions precedent set forth in such Trust Supplement or in any other document to which a Trustee is a party relating to the issuance of the Certificates of such series. Section 2.02. Acquisition of Equipment Notes. (a) Unless otherwise specified in the related Trust Supplement, on or prior to the Issuance Date of the Certificates of a series, the Trustee shall execute and deliver the related Refunding Agreements in the form delivered to the Trustee by the Company. The Trustee shall issue and sell such Certificates, in authorized denominations and in such Fractional Undivided Interests, so as to result in the receipt of consideration in an amount equal to the aggregate purchase price of such Equipment Notes and, concurrently therewith, the Trustee shall purchase, pursuant to the terms and conditions of the Refunding Agreements, the Equipment Notes at a purchase price equal to the amount of such consideration so received. Except as provided in Sections 3.03, 3.04 and 3.05 hereof, the Trustee shall not 24 18 execute, authenticate or deliver Certificates of such series in excess of the aggregate amount specified in this paragraph. The provisions of this Subsection (a) are subject to the provisions of Subsection (b) below. (b) If on or prior to the Issuance Date with respect to a series of Certificates the Company shall deliver to the Trustee a Postponement Notice relating to one or more Postponed Notes, the Trustee shall postpone the purchase of such Postponed Notes and shall deposit into an escrow account (as to such Trust, the "Escrow Account") to be maintained as a part of the related Trust an amount equal to the purchase price of such Postponed Notes (the "Escrowed Funds"). The Escrowed Funds so deposited shall be invested by the Trustee at the written direction and risk of, and for the benefit of, the Company in Specified Investments (i) maturing no later than any scheduled Transfer Date relating to such series of Certificates or (ii) if no such Transfer Date has been scheduled, maturing on the next Business Day, or (iii) if the Company has given notice to the Trustee that any Postponed Notes will not be issued, with respect to the portion of the Escrowed Funds relating to such Postponed Notes, maturing on the next applicable Special Distribution Date, if such investments are reasonably available for purchase. The Trustee shall make withdrawals from the Escrow Account only as provided in this Agreement. Upon request of the Company on one or more occasions and the satisfaction of the closing conditions specified in the applicable Refunding Agreements on or prior to the related Cut-off Date, the Trustee shall purchase the applicable Postponed Notes with the Escrowed Funds withdrawn from the Escrow Account. The purchase price shall equal the principal amount of such Postponed Notes. The Trustee shall hold all Specified Investments until the maturity thereof and will not sell or otherwise transfer Specified Investments. If Specified Investments held in an Escrow Account mature prior to any applicable Transfer Date, any proceeds received on the maturity of such Specified Investments (other than any earnings thereon) shall be reinvested by the Trustee at the written direction and risk of, and for the benefit of, the Company in Specified Investments maturing as provided in the preceding paragraph. Any earnings on Specified Investments received from time to time by the Trustee shall be promptly distributed to the Company. The Company shall pay to the Trustee for deposit to the relevant Escrow Account an amount equal to any losses on such Specified Investments as incurred. On the Initial Regular Distribution Date in respect of the Certificates of any series, the Company will pay (in immediately available funds) to the Trustee an amount equal to the interest that would have accrued on any Postponed Notes, if any, purchased after the Issuance Date if such Postponed Notes had been purchased on the Issuance Date, 25 19 from the Issuance Date to, but not including, the date of the purchase of such Postponed Notes by the Trustee. If, in respect of the Certificates of any series, the Company notifies the Trustee prior to the Cut-off Date that any Postponed Notes will not be issued on or prior to the Cut-off Date for any reason, on the next Special Distribution Date for such Certificates occurring more than 20 days following the date of such notice (i) the Company shall pay to the Trustee for deposit in the related Special Payments Account, in immediately available funds, an amount equal to the interest that would have accrued on the Postponed Notes designated in such notice at a rate equal to the interest rate applicable to such Certificates from the Issuance Date to, but not including, such Special Distribution Date and (ii) the Trustee shall transfer an amount equal to that amount of Escrowed Funds that would have been used to purchase the Postponed Notes designated in such notice and the amount paid by the Company pursuant to the immediately preceding clause (i) to the related Special Payments Account for distribution as a Special Payment in accordance with the provisions hereof. If, on such Cut-off Date, an amount equal to less than all of the Escrowed Funds (other than Escrowed Funds referred to in the immediately preceding paragraph) has been used to purchase Postponed Notes, on the next such Special Distribution Date occurring more than 20 days following such Cut-off Date (i) the Company shall pay to the Trustee for deposit in such Special Payments Account, in immediately available funds, an amount equal to the interest that would have accrued on such Postponed Notes contemplated to be purchased with such unused Escrowed Funds (other than Escrowed Funds referred to in the immediately preceding paragraph) but not so purchased at a rate equal to the interest rate applicable to such Certificates from the Issuance Date to, but not including, such Special Distribution Date and (ii) the Trustee shall transfer such unused Escrowed Funds and the amount paid by the Company pursuant to the immediately preceding clause (i) to such Special Payments Account for distribution as a Special Payment in accordance with the provisions hereof. Section 2.03. Acceptance by Trustee. The Trustee, upon the execution and delivery of a Trust Supplement creating a Trust and establishing a series of Certificates, shall acknowledge its acceptance of all right, title, and interest in and to the Equipment Notes to be acquired pursuant to Section 2.02 hereof and the related Refunding Agreements and shall declare that the Trustee holds and will hold such right, title, and interest, together with all other property constituting the Trust Property of such Trust, for the benefit of all then present and future Certificateholders of such series, upon the trusts herein and in such Trust Supplement set forth. By its payment for and acceptance of each Certificate of such series issued to 26 20 it under this Agreement, each initial Certificateholder of such series as grantor of such Trust shall thereby join in the creation and declaration of such Trust. Section 2.04. Limitation of Powers. Each Trust shall be constituted solely for the purpose of making the investment in the Equipment Notes provided for in the related Trust Supplement, and, except as set forth herein or in this Agreement, the Trustee shall not be authorized or empowered to acquire any other investments or engage in any other activities and, in particular, the Trustee shall not be authorized or empowered to do anything that would cause such Trust to fail to qualify as a "grantor trust" for federal income tax purposes (including as subject to this restriction, acquiring the Aircraft (as defined in the respective related Indentures) by bidding such Equipment Notes or otherwise, or taking any action with respect to any such Aircraft once acquired). ARTICLE III THE CERTIFICATES Section 3.01. Form, Denomination and Execution of Certificates. The Certificates of each series shall be issued in fully registered form without coupons and shall be substantially in the form attached hereto as Exhibit A, with such omissions, variations and insertions as are permitted by this Agreement, and may have such letters, numbers or other marks of identification and such legends or endorsements printed, lithographed or engraved thereon, as may be required to comply with the rules of any securities exchange on which such Certificates may be listed or to conform to any usage in respect thereof, or as may, consistently herewith, be prescribed by the Trustee or by the officer executing such Certificates, such determination by said officer to be evidenced by his signing the Certificates. Any portion of the text of any Certificate may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Certificate. Except as provided in Section 3.09, the definitive Certificates of such series shall be printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any securities exchange on which the Certificates may be listed, all as determined by the officer executing such Certificates, as evidenced by his execution of such Certificates. Except as otherwise provided in the related Trust Supplement, the Certificates of each series shall be issued in denominations of $1,000 and integral multiples thereof, except that one Certificate of each series may be issued in a different denomination. 27 21 The Certificates of such series shall be executed on behalf of the Trustee by manual or facsimile signature of a Responsible Officer of the Trustee. Certificates of any series bearing the manual or facsimile signature of an individual who was, at the time when such signature was affixed, authorized to sign on behalf of the Trustee shall be valid and binding obligations of the Trustee, notwithstanding that such individual has ceased to be so authorized prior to the authentication and delivery of such Certificates or did not hold such office at the date of such Certificates. No Certificate of any series shall be entitled to any benefit under this Agreement, or be valid for any purpose unless there appears on such Certificate a certificate of authentication substantially in the form set forth in Exhibit A hereto executed by the Trustee by manual signature, and such certificate of authentication upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. All Certificates of any series shall be dated on the date of their authentication. Section 3.02. Authentication of Certificates. The Trustee shall duly authenticate and deliver Certificates of each series in authorized denominations equalling in the aggregate the aggregate principal amount of the Equipment Notes to be purchased by the Trustee pursuant to the related Refunding Agreements, and evidencing the entire ownership of the related Trust. Section 3.03. Temporary Certificates. Pending the preparation of definitive Certificates of any series, the Trustee may execute, authenticate and deliver temporary Certificates of such series which are printed, lithographed, typewritten, or otherwise produced, in any denomination, containing substantially the same terms and provisions as set forth in Exhibit A hereto, except for such appropriate insertions, omissions, substitutions and other variations relating to their temporary nature as the officer executing such temporary Certificates may determine, as evidenced by its execution of such temporary Certificates. If temporary Certificates of any series are issued, the Company will cause definitive Certificates of such series to be prepared without unreasonable delay. After the preparation of definitive Certificates of such series, the temporary Certificates shall be exchangeable for definitive Certificates upon surrender of such temporary Certificates at the Corporate Trust Office of the Trustee, or at the office or agency of the Trustee maintained in accordance with Section 7.11, without charge to the holder. Upon surrender for cancellation of any one or more temporary Certificates, the Trustee shall execute, authenticate and deliver in exchange therefor definitive Certificates of like series, in authorized denominations and of a like aggregate Fractional Undivided Interest. Until so exchanged, such temporary Certificates shall in all respects be 28 22 entitled to the same benefits under this Agreement as definitive Certificates. Section 3.04. Registration of Transfer and Exchange of Certificates. The Trustee shall cause to be kept at the office or agency to be maintained by it in accordance with the provisions of Section 7.11 a register (the "Register") for each series of Certificates in which, subject to such reasonable regulations as it may prescribe, the Trustee shall provide for the registration of Certificates of such series and of transfers and exchanges of such Certificates as herein provided. The Trustee shall initially be the registrar (the "Registrar") for the purpose of registering Certificates of each series and transfers and exchanges of such Certificates as herein provided. If a Person other than the Trustee is appointed by the Company as the Registrar, the Company will give the Trustee prompt written notice of the appointment of such Registrar and of the location, and any change in the location, of the Register, and the Trustee shall have the right to inspect the Register at all reasonable times and to obtain copies thereof, and the Trustee shall have the right to conclusively rely upon an officers' certificate executed on behalf of the Registrar as to the names and addresses of the Certificateholders and the principal amounts and numbers of such Certificates. Upon surrender for registration of transfer of any Certificate at the Corporate Trust Office or such other office or agency, the Trustee shall execute, authenticate and deliver, in the name of the designated transferee or transferees, one or more new Certificates of like series, in authorized denominations of a like aggregate Fractional Undivided Interest. At the option of a Certificateholder, Certificates may be exchanged for other Certificates of like series, in authorized denominations and of a like aggregate Fractional Undivided Interest, upon surrender of the Certificates to be exchanged at any such office or agency. Whenever any Certificates are so surrendered for exchange, the Trustee shall execute, authenticate and deliver the Certificates that the Certificateholder making the exchange is entitled to receive. All Certificates issued upon any registration of transfer or exchange of Certificates shall be valid obligations of the Trust, evidencing the same interest therein, and entitled to the same benefits under this Agreement, as the Certificates surrendered upon such registration of transfer or exchange. Every Certificate presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Trustee and the Registrar duly executed by the Certificateholder thereof or its attorney duly authorized in writing. 29 23 No service charge shall be made to a Certificateholder for any registration of transfer or exchange of Certificates, but the Trustee shall require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Certificates. All Certificates surrendered for registration of transfer and exchange shall be canceled and subsequently destroyed by the Trustee. Section 3.05. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated Certificate is surrendered to the Registrar, or the Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate, and (b) there is delivered to the Registrar and the Trustee such security, indemnity or bond, as may be required by them to save each of them harmless, then, in the absence of notice to the Registrar or the Trustee that such Certificate has been acquired by a bona fide purchaser, the Trustee shall execute, authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate or Certificates of like series, in authorized denominations and of like Fractional Undivided Interest. In connection with the issuance of any new Certificate under this Section 3.05, the Trustee shall require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee and the Registrar) connected therewith. Any duplicate Certificate issued pursuant to this Section 3.05 shall constitute conclusive evidence of the appropriate Fractional Undivided Interest in the related Trust, as if originally issued, whether or not the lost stolen or destroyed Certificate shall be found at any time. Section 3.06. Persons Deemed Owners. Prior to due presentation of a Certificate for registration of transfer, the Trustee, the Registrar, and any Paying Agent of the Trustee may treat the person in whose name any Certificate is registered as the owner of such Certificate for the purpose of receiving distributions pursuant to Section 4.02 and for all other purposes whatsoever, and neither the Trustee, the Registrar, nor any Paying Agent of the Trustee shall be affected by any notice to the contrary. Section 3.07. Cancellation. All Certificates surrendered for payment or transfer or exchange shall, if surrendered to any Person party hereto other than the Registrar, be delivered to the Registrar for cancellation. No Certificates shall be authenticated in lieu of or in exchange for any Certificates canceled as provided in this Section, except as expressly permitted by this Agreement. All canceled Certificates held by the Registrar shall be destroyed and a certification of their destruction delivered to the Trustee. 30 24 Section 3.08. Limitation of Liability for Payments. All payments or distributions made to Certificateholders of any series under the related Trust Supplement shall be made only from the Trust Property of the related Trust and only to the extent that the Trustee shall have sufficient income or proceeds from such Trust Property to make such payments in accordance with the terms of Article IV of this Agreement. Each Certificateholder, by its acceptance of a Certificate, agrees that it will look solely to the income and proceeds from the Trust Property of the related Trust to the extent available for distribution to such Certificateholder as provided in this Agreement. Section 3.09. Book-Entry and Definitive Certificates. (a) The Certificates of any series may be issued in the form of one or more typewritten Certificates representing the Book-Entry Certificates of such series, to be delivered to The Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the Company. In such case, the Certificates of such series delivered to The Depository Trust Company shall initially be registered on the Register in the name of CEDE & Co., the nominee of the initial Clearing Agency, and no Certificate Owner will receive a definitive certificate representing such Certificate Owner's interest in the Certificates of such series, except as provided above and in Subsection (c) below. As to the Certificates of any series, unless and until definitive, fully registered Certificates (the "Definitive Certificates") have been issued pursuant to Subsection (c) below: (i) the provisions of this Section 3.09 shall be in full force and effect; (ii) the Company, the Paying Agent, the Registrar and the Trustee may deal with the Clearing Agency and the Clearing Agency Participants for all purposes (including the making of distributions on the Certificates and the distribution of statements pursuant to Section 4.03) as the authorized representatives of the Certificate Owners; (iii) to the extent that the provisions of this Section 3.09 conflict with any other provisions of this Agreement (other than the provisions of any Trust Supplement amending this Section 3.09 as permitted by this Basic Agreement), the provisions of this Section 3.09 shall control; (iv) the rights of Certificate Owners shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Certificate Owners and the Clearing Agency Participants; and until Definitive Certificates are issued pursuant to Subsection (c) below, the Clearing Agency will make book-entry transfers among the Clearing Agency 31 25 Participants and receive and transmit distributions of principal and interest and premium, if any, on the Certificates to such Clearing Agency Participants; and (v) whenever this Agreement requires or permits actions to be taken based upon instructions or directions of Certificateholders of such series holding Certificates of such series evidencing a specified percentage of the Fractional Undivided Interests in the related Trust, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from Certificate Owners and/or Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in Certificates of such series and has delivered such instructions to the Trustee. The Trustee shall have no obligation to determine whether the Clearing Agency has in fact received any such instructions. (b) Whenever notice or other communication to the Certificateholders of such series is required under this Agreement, unless and until Definitive Certificates shall have been issued pursuant to Subsection (c) below, the Trustee shall give all such notices and communications specified herein to be given to Certificateholders of such series to the Clearing Agency. (c) If with respect to the Certificates of any series (i) the Company advises the Trustee in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities and the Trustee or the Company is unable to locate a qualified successor, (ii) the Company at its option, advises the Trustee in writing that it elects to terminate the book-entry system through the Clearing Agency or (iii) after the occurrence of an Event of Default with respect to the related Trust, Certificate Owners of Book-Entry Certificates of such series evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the related Trust, by Act of said Certificate Owners delivered to the Company and the Trustee, advise the Company, the Trustee and the Clearing Agency through the Clearing Agency Participants in writing that the continuation of a book-entry system through the Clearing Agency Participants is no longer in the best interests of the Certificate Owners of such series, then the Trustee shall notify all Certificate Owners of such series, through the Clearing Agency, of the occurrence of any such event and of the availability of Definitive Certificates. Upon surrender to the Trustee of all the Certificates of such series held by the Clearing Agency, accompanied by registration instructions from the Clearing Agency Participants for registration of Definitive Certificates in the names of Certificate Owners of such series, the Trustee shall issue and deliver the Definitive Certificates of such series in accordance with the instructions of the Clearing Agency. Neither 32 26 the Company, the Registrar, the Paying Agent nor the Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such registration instructions. Upon the issuance of Definitive Certificates of such series, the Trustee shall recognize the Person in whose name the Definitive Certificates are registered in the Register as Certificateholders hereunder. Neither the Company nor the Trustee shall be liable if the Trustee or the Company is unable to locate a qualified successor Clearing Agency. (d) The provisions of this Section 3.09 may be made inapplicable to any series or may be amended with respect to any series in the related Trust Supplement. ARTICLE IV DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS Section 4.01. Certificate Account and Special Payments Account. (a) The Trustee shall establish and maintain on behalf of the Certificateholders of each series a Certificate Account as one or more non-interest-bearing accounts. The Trustee shall hold the Certificate Account in trust for the benefit of the Certificateholders of such series, and shall make or permit withdrawals therefrom only as provided in this Agreement. On each day when a Scheduled Payment is made to the Trustee, the Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of such Scheduled Payment into the Certificate Account. (b) The Trustee shall establish and maintain on behalf of the Certificateholders of each series a Special Payments Account as one or more accounts, which shall be non-interest bearing except as provided in Section 4.04. The Trustee shall hold the Special Payments Account in trust for the benefit of the Certificateholders of such series, and shall make or permit withdrawals therefrom only as provided in this Agreement. On each day when one or more Special Payments are made to the Trustee, the Trustee, upon receipt thereof, shall immediately deposit the aggregate amount of such Special Payments into the Special Payments Account. (c) The Trustee shall present to the Indenture Trustee to which an Equipment Note relates such Equipment Note on the date of its stated final maturity or, in the case of any Equipment Note which is to be redeemed in whole pursuant to the relevant Indenture, on the applicable redemption date under such Indenture. 33 27 Section 4.02. Distributions from Certificate Account and Special Payments Account. (a) On each Regular Distribution Date with respect to a series of Certificates or as soon thereafter as the Trustee has confirmed receipt of the payment of the Scheduled Payments due on the Equipment Notes held in the related Trust on such date, the Trustee shall distribute out of the applicable Certificate Account the entire amount deposited therein pursuant to Section 4.01(a). There shall be so distributed to each Certificateholder of record of such series on the Record Date with respect to such Regular Distribution Date (other than as provided in Section 11.01 concerning the final distribution), by check mailed to such Certificateholder at the address appearing in the Register, such Certificateholder's pro rata share (based on the aggregate Fractional Undivided Interest in the related Trust held by such Certificateholder) of the aggregate amount in the applicable Certificate Account. (b) On each Special Distribution Date with respect to any Special Payment with respect to a series of Certificates or as soon thereafter as the Trustee has confirmed receipt of the Special Payments due on the Equipment Notes held in the related Trust or realized upon the sale of such Equipment Notes, the Trustee shall distribute out of the applicable Special Payments Account the entire amount of such Special Payment deposited therein pursuant to Section 4.01(b). There shall be so distributed to each Certificateholder of record of such series on the Record Date with respect to such Special Distribution Date (other than as provided in Section 11.01 concerning the final distribution), by check mailed to such Certificateholder at the address appearing in the Register, such Certificateholder's pro rata share (based on the aggregate Fractional Undivided Interest in the related Trust held by such Certificateholder) of the aggregate amount in the applicable Special Payments Account on account of such Special Payment. (c) The Trustee shall at the expense of the Company, cause notice of each Special Payment with respect to a series of Certificates to be mailed to each Certificateholder of such series at his address as it appears in the Register. In the event of redemption or purchase of Equipment Notes held in the related Trust, such notice shall be mailed not less than 20 days prior to the date any such Special Payment is scheduled to be distributed. In the case of any other Special Payments, such notice shall be mailed as soon as practicable after the Trustee has confirmed that it has received funds for such Special Payment. Notices mailed by the Trustee shall set forth: (i) the scheduled Special Distribution Date and the Record Date therefor (except as otherwise provided in Section 11.01), 34 28 (ii) the amount of the Special Payment for each $1,000 face amount Certificate (taking into account any payment to be made by the Company pursuant to Section 2.02(b)) and the amount thereof constituting principal premium, if any, and interest, (iii) the reason for the Special Payment, and (iv) if the Special Distribution Date is the same date as a Regular Distribution Date for the Certificates of such series, the total amount to be received on such date for each $1,000 face amount Certificate. If the amount of premium, if any, payable upon the redemption or purchase of an Equipment Note has not been calculated at the date that the Trustee mails notice of a Special Payment, it shall be sufficient if the notice sets forth the other amounts to be distributed and states that any premium received will also be distributed. If any redemption of the Equipment Notes held in any Trust is canceled, the Trustee, as soon as possible after learning thereof, shall cause notice thereof to be mailed to each Certificateholder of the related series at its address as it appears on the Register. Section 4.03. Statements to Certificateholders. (a) On each Regular Distribution Date and Special Distribution Date with respect to a series of Certificates, the Trustee will include with each distribution to Certificateholders of the related series a statement, giving effect to such distribution to be made on such Regular Distribution Date or Special Distribution Date, as the case may be, setting forth the following information (per $1,000 face amount Certificate as to (i) and (ii) below): (i) The amount of such distribution allocable to principal and the amount allocable to premium, if any; (ii) The amount of such distribution allocable to interest; and (iii) The Pool Balance and the Pool Factor of the related Trust. With respect to the Certificates registered in the name of the Clearing Agency, on the Record Date prior to each Distribution Date, the Trustee will request from the Clearing Agency a securities position listing setting forth the names of all the Clearing Agency Participants reflected on the Clearing Agency's books as holding interests in the Certificates on such Record Date. On each Distribution Date, the applicable Trustee 35 29 will mail to each such Clearing Agency Participant the statement described above and will make available additional copies as requested by such Clearing Agency Participant for forwarding to holders of interests in the Certificates. On each Distribution Date, the applicable Trustee will mail to each Underwriter the statement described above. (b) Within a reasonable period of time after the end of each calendar year but not later than the latest date permitted by law, the Trustee shall furnish to each Person who at any time during such calendar year was a Certificateholder of record a statement containing the sum of the amounts determined pursuant to clauses (a)(i) and (a)(ii) with respect to the related Trust for such calendar year or, in the event such Person was a Certificateholder of record during a portion of such calendar year, for the applicable portion of such year, and such other items as are readily available to the Trustee and which a Certificateholder shall reasonably request as necessary for the purpose of such Certificateholder's preparation of its Federal income tax returns. With respect to Certificates registered in the name of the Clearing Agency, such report and such other items shall be prepared on the basis of information supplied to the Trustees by the Clearing Agency Participants and shall be delivered by the Trustee to such Clearing Agency Participants to be available for forwarding by such Clearing Agency Participants to holders of interests in Certificates. Section 4.04. Investment of Special Payment Moneys. Any money received by the Trustee pursuant to Section 4.01(b) representing a Special Payment which is not to be promptly distributed shall, to the extent practicable, be invested in Permitted Investments by the Trustee as directed in writing by the Company pending distribution of such Special Payment pursuant to Section 4.02. Any investment made pursuant to this Section 4.04 shall be in such Permitted Investments having maturities not later than the date that such moneys are required to be used to make the payment required under Section 4.02 on the applicable Special Distribution Date and the Trustee shall hold any such Permitted Investments until maturity. The Trustee shall have no liability with respect to any investment made pursuant to this Section 4.04, other than by reason of the willful misconduct or negligence of the Trustee. All income and earnings from such investments shall be distributed on such Special Distribution Date as part of such Special Payment. ARTICLE V THE COMPANY Section 5.01. Maintenance of Corporate Existence. The Company, at its own cost and expense, will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises, except as 36 30 otherwise specifically permitted in Section 5.02; provided, however, that the Company shall not be required to preserve any right or franchise if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company. Section 5.02. Consolidation, Merger, Etc. The Company shall not consolidate with or merge into any other corporation or convey, transfer or lease substantially all of its assets as an entirety to any Person unless: (a) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety shall be a "citizen of the United States" (as defined in Section 40102(a)(15) of Title 49 of the United States Code) holding a carrier operating certificate issued by the Secretary of Transportation pursuant to Chapter 447 of Title 49, United States Code, for aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of cargo and with respect to which there is in force an air carrier operating certificate issued pursuant to Part 121 of the regulations under the sections of Title 49, United States Code, relating to aviation; (b) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety shall execute and deliver to the Trustee applicable to the Certificates of each series a duly authorized, valid, binding and enforceable agreement in form and substance reasonably satisfactory to the Trustee containing an assumption by such successor corporation or Person of the due and punctual performance and observance of each covenant and condition of the Note Documents to which the Company is a party and of this Agreement applicable to the Certificates of each series to be performed or observed by the Company; (c) immediately after giving effect to such transaction, no Event of Default applicable to the Certificates of each series or event which is, or after notice or passage of time, or both, would be, such an Event of Default shall have occurred and be continuing; and (d) the Company shall have delivered to the Trustee an Officers' Certificate of the Company and an Opinion of Counsel of the Company (which may be the Company's General Counsel) reasonably satisfactory to the Trustee, each stating that such consolidation, merger, conveyance, transfer or lease and the assumption agreement mentioned in clause (b) above comply with this Section 5.02 and that all 37 31 conditions precedent herein provided for relating to such transaction have been complied with. Upon any consolidation or merger, or any conveyance, transfer or lease of substantially all of the assets of the Company as an entirety in accordance with this Section 5.02, the successor corporation or Person formed by such consolidation or into which the Company 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 Company under this Agreement applicable to the Certificates of each series with the same effect as if such successor corporation or Person had been named as the Company herein. No such conveyance, transfer or lease of substantially all of the assets of the Company as an entirety shall have the effect of releasing the Company or any successor corporation or Person which shall theretofore have become such in the manner prescribed in this Section 5.02 from its liability in respect of any Note Document and of this Agreement applicable to the Certificates of such series to which it is a party. ARTICLE VI DEFAULT Section 6.01. Events of Default. (a) Exercise of Remedies: Upon the occurrence and during the continuation of any Indenture Default under any Indenture, the Trustee may, to the extent it is the Controlling Party at such time, direct the exercise of remedies as provided in any Intercreditor Agreement. (b) Purchase Rights of Certificateholders: By acceptance of its Certificate, each Certificateholder agrees that at any time after the occurrence and during the continuation of a Triggering Event, each Certificateholder of Certificates of a series will have certain rights, the exercise of which will be specified in the applicable Trust Supplement, to purchase the class of Certificates with immediate seniority to the Certificates held by the purchasing Certificateholder. The purchase price with respect to the Certificates of any series shall be equal to the Pool Balance of the Certificates of such series, together with accrued and unpaid interest thereon to the date of such purchase, without premium, but including any other amounts then due and payable to the Certificateholders under this Agreement, any Intercreditor Agreement or any other Note Document or on or in respect of the Certificates of such series; provided, however, that no such purchase of Certificates of such series shall be effective unless the purchaser shall certify to the Trustee that contemporaneously with such purchase, such purchaser is purchasing, pursuant to the terms of this Agreement and the other Agreements, if any, relating to Certificates of multiple series that are subject to the same Intercreditor Agreement (such other Agreements as defined in the Trust Supplements establishing 38 32 such series, the "Other Agreements"), the Certificates of each such series that is senior to the Certificates held by such purchaser. Each payment of the purchase price of the Certificates of any series shall be made to an account or accounts designated by the Trustee and each such purchase shall be subject to the terms of this Section. Each Certificateholder of any series agrees by its acceptance of Certificates of such series that it will, upon payment from any such Certificateholders of Certificates with a lower seniority of the purchase price specified herein, forthwith sell, assign, transfer and convey to the purchaser thereof (without recourse, representation or warranty of any kind except for its own acts), all of the right, title, interest and obligation of such Certificateholder in this Agreement, any Intercreditor Agreement, the Liquidity Facility, the Note Documents and all Certificates of such series held by such Certificateholder (excluding all right, title and interest under any of the foregoing to the extent such right, title or interest is with respect to an obligation not then due and payable as respects any action or inaction or state of affairs occurring prior to such sale) and the purchaser shall assume all of such Certificateholder's obligations under this Agreement, any Intercreditor Agreement, the Liquidity Facility and the Note Documents. The Certificates of such series will be deemed to be purchased on the date payment of the purchase price is made notwithstanding the failure of the Certificateholders to deliver any Certificates of such series and, upon such a purchase, (i) the only rights of the Certificateholders will be to deliver the Certificates to the purchaser and receive the purchase price for such Certificates of such series and (ii) if the purchaser shall so request, such Certificateholder will comply with all of the provisions of Section 3.04 hereof to enable new Certificates of such series to be issued to the purchaser in such denominations as it shall request. All charges and expenses in connection with the issuance of any such new Certificates shall be borne by the purchaser thereof. (c) No Action Contrary to the Company's Rights under a Related Lease. Notwithstanding any of the provisions of this Agreement to the contrary, each Trustee agrees and each Certificateholder of any series agrees by its acceptance of such Certificate for the benefit of the Company that it will not take any action contrary to the Company's rights under any related Lease, including the right of the Company to possession and use the quiet enjoyment of the Aircraft subject to such related Lease, except in accordance with the provisions of the related Lease. Section 6.02. Incidents of Sale of Equipment Notes. Upon any sale of all or any part of the Equipment Notes made either under the power of sale given under this Agreement or otherwise for the enforcement of this Agreement, the following shall be applicable: 39 33 (1) Certificateholders and Trustee May Purchase Equipment Notes. Any Certificateholder, the Trustee in its individual or any other capacity or any other Person may bid for and purchase any of the Equipment Notes, and upon compliance with the terms of sale, may hold, retain, possess and dispose of such Equipment Notes in their own absolute right without further accountability. (2) Receipt of Trustee Shall Discharge Purchaser. The receipt of the Trustee or of the officer making such sale shall be a sufficient discharge to any purchaser for his purchase money, and, after paying such purchase money and receiving such receipt, such purchaser or its personal representative or assigns shall not be obliged to see to the application of such purchase money, or be in any way answerable for any loss, misapplication or non-application thereof. (3) Application of Moneys Received upon Sale. Any moneys collected by the Trustee upon any sale made either under the power of sale given by this Agreement or otherwise for the enforcement of this Agreement shall, after payment of fees and expenses of the Trustee as provided in Section 7.06, be applied as provided in Section 4.02. Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee May Bring Suit. If there shall be a failure to make payment when due and payable of the principal of, premium, if any, or interest on any Equipment Note, or if there shall be any failure to pay any other amount under any Indenture when due and payable, then the Trustee, in its own name, and as trustee of an express trust, as holder of such Equipment Notes, to the extent permitted by and in accordance with the terms of any Intercreditor Agreement and any Note Documents (subject to the rights of the applicable Owner Trustee or Owner Participant to cure any such failure in accordance with the applicable Indenture), shall be entitled and empowered to institute any suits, actions or proceedings at law, in equity or otherwise, for the collection of the sums so due and unpaid on such Equipment Notes or under such Indenture and may prosecute any such claim or proceeding to judgment or final decree with respect to the whole amount of any such sums so due and unpaid. Section 6.04. Control by Certificateholders. Subject to Section 6.03 and any Intercreditor Agreement, the Certificateholders holding Certificates of a series evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the related Trust shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee with respect to such Trust or pursuant to the terms of any Intercreditor Agreement, or exercising any trust or power conferred on the Trustee under this Agreement or any Intercreditor Agreement, including any right of 40 34 the Trustee as Controlling Party under any Intercreditor Agreement or as holder of the Equipment Notes, provided that (1) such Direction shall not in the opinion of the Trustee be in conflict with any rule of law or with this Agreement and would not involve the Trustee in personal liability or expense, (2) the Trustee shall not determine that the action so directed would be unjustly prejudicial to the Certificateholders of such series not taking part in such Direction, and (3) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such Direction. Section 6.05. Waiver of Past Defaults. Subject to any Intercreditor Agreement, the Certificateholders holding Certificates of a series evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust (i) may on behalf of all of the Certificateholders waive any past Event of Default hereunder and its consequences or (ii) if the Trustee is the Controlling Party, may direct the Trustee to instruct the applicable Indenture Trustee to waive, any past Indenture Default under any Indenture and its consequences, and thereby annul any Direction given by such Certificateholders or the Trustee to such Indenture Trustee with respect thereto, except a default: (1) in the deposit of any Scheduled Payment or Special Payment under Section 4.01 or in the distribution of any payment under Section 4.02 on the Certificates of a series, or (2) in the payment of the principal of (premium, if any) or interest on the Equipment Notes, or (3) in respect of a covenant or provision hereof which under Article IX hereof cannot be modified or amended without the consent of each Certificateholder holding an Outstanding Certificate of a series affected thereby. Upon any such waiver, such default shall cease to exist with respect to Certificates of such series and any Event of Default arising therefrom shall be deemed to have been cured for every purpose and any direction given by the Trustee on behalf of the Certificateholders of such series to the relevant Indenture Trustee shall be annulled with respect thereto; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Upon any such waiver, the Trustee shall vote the Equipment Notes issued under 41 35 the relevant Indenture to waive the corresponding Indenture Default. Section 6.06. Right of Certificateholders to Receive Payments Not To Be Impaired. Anything in this Agreement to the contrary notwithstanding, including without limitation Section 6.07 hereof, but subject to any Intercreditor Agreement, the right of any Certificateholder to receive distributions of payments required pursuant to Section 4.02 hereof on the applicable Certificates when due, or to institute suit for the enforcement of any such payment on or after the applicable Regular Distribution Date or Special Distribution Date, shall not be impaired or affected without the consent of such Certificateholder. Section 6.07. Certificateholders May Not Bring Suit Except Under Certain Conditions. A Certificateholder of any series shall not have the right to institute any suit, action or proceeding at law or in equity or otherwise with respect to this Agreement, for the appointment of a receiver or for the enforcement of any other remedy under this Agreement, unless: (1) such Certificateholder previously shall have given written notice to the Trustee of a continuing Event of Default; (2) the Certificateholders holding Certificates of such series evidencing Fractional Undivided Interests aggregating not less than 25% of the related Trust shall have requested the Trustee in writing to institute such action, suit or proceeding and shall have offered to the Trustee indemnity as provided in Section 7.02(e); (3) the Trustee shall have refused or neglected to institute any such action, suit or proceeding for 60 days after receipt of such notice, request and offer of indemnity; and (4) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Certificateholders holding Certificates of such series evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the related Trust. It is understood and intended that no one or more of the Certificateholders of any series shall have any right in any manner whatever hereunder or under the related Trust Supplement or under the Certificates of such series to (i) surrender, impair, waive, affect, disturb or prejudice any property in the Trust Property of the related Trust or the lien of any related Indenture on any property subject thereto, or the rights of the Certificateholders of such series or the holders of the related 42 36 Equipment Notes, (ii) obtain or seek to obtain priority over or preference to any other such Certificateholder of such series or (iii) enforce any right under this Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all the Certificateholders of such series subject to the provisions of this Agreement. Section 6.08. Remedies Cumulative. Every remedy given hereunder to the Trustee or to any of the Certificateholders of any series shall not be exclusive of any other remedy or remedies, and every such remedy shall be cumulative and in addition to every other remedy given hereunder or now or hereafter given by statute, law, equity or otherwise. Section 6.09. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Agreement, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, a court may require any party litigant in such suit to file an undertaking to pay the costs of such suit, and may assess costs against any such party litigant, in the manner and to the extent provided in the Trust Indenture Act; provided that neither this Section nor the Trust Indenture Act shall be deemed to authorize any court to require such an undertaking or to make such an assessment in any suit instituted by the Company. ARTICLE VII THE TRUSTEE Section 7.01. Notice of Defaults. As promptly as practicable after, and in any event within 90 days after the occurrence of any default (as such term is defined below) hereunder known to the Trustee, the Trustee shall transmit by mail to the Company, any related Owner Trustees, the related Indenture Trustees and the Certificateholders holding Certificates of the related series in accordance with Section 313(c) of the Trust Indenture Act, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (premium, if any) or interest on any Equipment Note, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interests of the Certificateholders of the related series. For the purpose of this Section in respect of any Trust, the term "default" means any event that is, or after notice or lapse of time or both would become, an Event of Default in respect of that Trust. 43 37 Section 7.02. Certain Rights of Trustee. Subject to the provisions of Section 315 of the Trust Indenture Act: (a) the Trustee may rely and shall be protected in acting or refraining from acting in reliance upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Request; (c) whenever in the administration of this Agreement or any Intercreditor Agreement the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate of the Company, any related Owner Trustee or any related Indenture Trustee; (d) the Trustee may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement or any Intercreditor Agreement at the request or direction of any of the Certificateholders pursuant to this Agreement or any Intercreditor Agreement unless such Certificateholders shall have offered to the Trustee reasonable security or indemnity against the cost, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, or report, notice, request, direction, consent, order, bond, debenture or other paper or document; (g) the Trustee may execute any of the trusts or powers under this Agreement or any Intercreditor Agreement or perform any duties under this Agreement or any Intercreditor Agreement either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it under this Agreement or any Intercreditor Agreement; 44 38 (h) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Certificateholders holding Certificates of any series evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the related Trust relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement or any Intercreditor Agreement; (i) the Trustee shall not be required to expend or risk its own funds in the performance of any of its duties under this Agreement, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk is not reasonably assured to it; and (j) except during the continuance of an Event of Default, the Trustee undertakes and shall be responsible to perform only such duties as are specifically set forth herein and no implied covenants or obligations shall be read into this Agreement or be enforceable against Trustee. Section 7.03. Not Responsible for Recitals or Issuance of Certificates. The recitals contained herein and in the Certificates of each series, except the certificates of authentication, shall not be taken as the statements of the Trustee, and the Trustee assumes no responsibility for their correctness. Subject to Section 7.14, the Trustee makes no representations as to the validity or sufficiency of this Basic Agreement or any Trust Supplement, any Note Documents, any Refunding Agreement or any Intercreditor Agreement, any Equipment Notes or the Certificates of any series, except that the Trustee hereby represents and warrants that this Basic Agreement has been, and each Trust Supplement, each Certificate and each Intercreditor Agreement of, or relating to, each series will be, executed and delivered by one of its officers who is duly authorized to execute and deliver such document on its behalf. Section 7.04. May Hold Certificates. The Trustee, any Paying Agent, Registrar or any of their Affiliates or any other agent, in their respective individual or any other capacity, may become the owner or pledgee of Certificates and subject to Sections 310(b) and 311 of the Trust Indenture Act may otherwise deal with the Company, any Owner Trustees or the Indenture Trustees with the same rights it would have if it were not Trustee, Paying Agent, Registrar or such other agent. Section 7.05. Money Held in Trust. Money held by the Trustee or the Paying Agent in trust hereunder or under any Trust Supplement need not be segregated from other funds except to the extent required herein or by law and neither the Trustee nor the 45 39 Paying Agent shall have any liability for interest upon any such moneys except as provided for herein. Section 7.06. Compensation and Reimbursement. The Company agrees: (1) to pay, or cause to be paid, to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided in any Trust Supplement, to reimburse, or cause to be reimbursed, the Trustee upon its request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Basic Agreement, any Trust Supplement or any Intercreditor Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence, willful misconduct or bad faith or as may be incurred due to the Trustee's breach of its representations and warranties set forth in Section 7.14; (3) to indemnify, or cause to be indemnified, the Trustee for, and to hold it harmless against, any loss, liability or expense (other than for or with respect to any tax) incurred without negligence, willful misconduct or bad faith, on its part, arising out of or in connection with the acceptance or administration of this Trust, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, except for any such loss, liability or expense incurred by reason of the Trustee's breach of its representations and warranties set forth in Section 7.14. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel with the consent of the Company and the Company will pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent; and (4) to indemnify, or cause to be indemnified, the Trustee, solely in its individual capacity, for, and to hold it harmless against, any tax (except to the extent the Trustee is reimbursed therefor pursuant to the next paragraph, provided that no indemnification shall be available with respect to any tax attributable to the Trustee's compensation for serving as such) incurred without 46 40 negligence, willful misconduct or bad faith, on its part, arising out of or in connection with the acceptance or administration of this Trust, including any costs and expenses incurred in contesting the imposition of any such tax. The Trustee, in its individual capacity, shall notify the Company promptly of any claim for any tax for which it may seek indemnity. The Trustee shall permit the Company to contest the imposition of such tax and the Trustee, in its individual capacity, shall, at the Company's expense, cooperate in the defense. The Trustee, in its individual capacity, may have separate counsel with the consent of the Company and the Company will pay the reasonable fees and expenses of such counsel. The Company need not pay for any taxes paid, in settlement or otherwise, without its consent. The Trustee shall be entitled to reimbursement from, and shall have a lien prior to the Certificates of each series upon, all property and funds held or collected by the Trustee in its capacity as Trustee with respect to such series or the related Trust for any tax incurred without negligence, bad faith or willful misconduct, on its part, arising out of or in connection with the acceptance or administration of such Trust (other than any tax attributable to the Trustee's compensation for serving as such), including any costs and expenses incurred in contesting the imposition of any such tax. The Trustee shall notify the Company of any claim for any tax for which it may seek reimbursement. The Trustee shall cooperate in the contest by the Company of any such claim. If the Trustee reimburses itself from the Trust Property of such Trust for any such tax it will within 30 days mail a brief report setting forth the amount of such tax and the circumstances thereof to all Certificateholders of such series as their names and addresses appear in the Register. As security for the performance of the obligations of the Company under this Section 7.06 with respect to each Trust the Trustee shall have a lien prior to the Certificates of the related series upon all property and funds held or collected by the Trustee in its capacity as Trustee with respect to such Certificates and the related Trust. Section 7.07. Corporate Trustee Required; Eligibility. Each Trust shall at all times have a Trustee which shall be eligible to act as a trustee under Section 310(a) of the Trust Indenture Act and shall have a combined capital and surplus of at least $100,000,000 (or a combined capital and surplus in excess of $5,000,000 and the obligations of which, whether now in existence or hereafter incurred, are fully and unconditionally guaranteed by a corporation organized and doing business under the laws of the United States, any State or Territory thereof or of the District of Columbia that has a combined capital and surplus of at least $100,000,000). If such corporation publishes reports of conditions at least annually, pursuant to law or to the requirements of Federal, State, Territorial or District of 47 41 Columbia supervising or examining authority, then for the purposes of this Section 7.07, 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 conditions so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.07 to act as Trustee of any Trust, the Trustee shall resign immediately as Trustee of such Trust in the manner and with the effect specified in Section 7.08. Section 7.08. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee of any Trust pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 7.09. (b) The Trustee may resign at any time as trustee of any or all Trusts by giving written notice thereof to the Company, the Authorized Agents, the related Owner Trustees and the related Indenture Trustees. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Company, the related Owner Trustees and the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time as trustee of any Trust by Act of the Certificateholders of the related series holding Certificates of such series evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust delivered to the Trustee and to the Company, the related Owner Trustees and the related Indenture Trustees. (d) If at any time in respect of any Trust: (1) the Trustee shall fail to comply with Section 310 of the Trust Indenture Act after written request therefor by the Company or by any Certificateholder of the related series who has been a bona fide certificateholder for at least six months; or (2) the Trustee shall cease to be eligible under Section 7.07 and shall fail to resign after written request therefor by the Company or by any such Certificateholder; or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any 48 42 public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any case, (i) the Company may remove the Trustee or (ii) any Certificateholder of the related series who has been a bona fide Certificateholder 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 Trustee and the appointment of a successor Trustee of such Trust. (e) If a Responsible Officer of the Trustee shall obtain actual knowledge of an Avoidable Tax (as hereinafter defined) in respect of any Trust which has been or is likely to be asserted, the Trustee shall promptly notify the Company and shall, within 30 days of such notification, resign as Trustee of such Trust hereunder unless within such 30-day period the Trustee shall have received notice that the Company has agreed to pay such tax. The Company shall promptly appoint a successor Trustee of such Trust in a jurisdiction where there are no Avoidable Taxes. As used herein, an "Avoidable Tax" in respect of such Trust means a state or local tax (i) upon (w) such Trust, (x) such Trust Property, (y) Certificateholders of such Trust or (z) the Trustee for which the Trustee is entitled to seek reimbursement from the Trust Property of such Trust, and (ii) which would be avoided if the Trustee were located in another state, or jurisdiction within a state, within the United States. A tax shall not be an Avoidable Tax in respect of any Trust if the Company or any Owner Trustee shall agree to pay, and shall pay, such tax. (f) If the Trustee shall resign, be removed or become incapable of acting as trustee of any Trust, or if a vacancy shall occur in the office of the Trustee of any Trust for any cause, the Company shall promptly appoint a successor Trustee of such Trust. If, within one year after such resignation, removal or incapability, or other occurrence of such vacancy, a successor Trustee of such Trust shall be appointed by Act of the Certificateholders of the related series holding Certificates of such series evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust delivered to the Company, the related Owner Trustees, the related Indenture Trustee and the retiring Trustee, the successor Trustee so appointed shall, with the approval of the Company, which approval shall not be unreasonably withheld, forthwith upon its acceptance of such appointment, become the successor Trustee of such Trust and supersede the successor Trustee of such Trust appointed as provided above. If no successor Trustee shall have been so appointed as provided above and accepted appointment in the manner hereinafter provided, the resigning Trustee or any Certificateholder who has been a bona fide Certificateholder of the related series for at least six months may, on behalf of himself and all others similarly situated, petition any court of 49 43 competent jurisdiction for the appointment of a successor Trustee of such Trust. (g) The successor Trustee of a Trust shall give notice of the resignation and removal of the Trustee and appointment of the successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Certificateholders of the related series as their names and addresses appear in the Register. Each notice shall include the name of such successor Trustee and the address of its Corporate Trust Office. Section 7.09. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee with respect to any or all Trusts an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee with respect to such Trusts shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall execute and deliver an instrument transferring to such successor Trustee all such rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee in respect of such Trusts hereunder, subject nevertheless to its lien, if any, provided for in Section 7.06. Upon request of any such successor Trustee, the Company, the retiring Trustee and such successor Trustee shall execute and deliver any and all instruments containing such provisions as shall be necessary or desirable to transfer and confirm to, and for more fully and certainly vesting in, such successor Trustee all such rights, powers and trusts. If a successor Trustee is appointed with respect to one or more (but not all) Trusts, the Company, the predecessor Trustee and each successor Trustee with respect to any Trust shall execute and deliver a supplemental agreement hereto which shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the predecessor Trustee with respect to the Trusts as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor Trustee, and shall add to or change any of the provisions of this Basic Agreement and the applicable Trust Supplements as shall be necessary to provide for or facilitate the administration of the Trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental agreement shall constitute such Trustees co-Trustees of the same Trust and that each such Trustee shall be Trustee of separate Trusts. 50 44 No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article VII. Section 7.10. Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the 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 Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee (including this account), shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. The parties hereto acknowledge that the Fleet National Bank intends to sell its corporate trust business to State Street Bank and Trust Company or an affiliate thereof during 1997 and that upon the sale of this account to such purchaser, such purchaser shall be the successor of the Trustee hereunder provided it shall be otherwise qualified and eligible under this Article. In case any Certificates shall have been executed or authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such execution or authentication and deliver the Certificates so executed or authenticated with the same effect as if such successor Trustee had itself executed or authenticated such Certificates. Section 7.11. Maintenance of Agencies. (a) With respect to each series of Certificates, there shall at all times be maintained in the Borough of Manhattan, The City of New York, an office or agency where Certificates of such series may be presented or surrendered for registration of transfer or for exchange, and for payment thereof and where notices and demands to or upon the Trustee in respect of such Certificates or of the related Trust Supplement may be served. Such office or agency shall be initially Fleet National Bank, c/o Shawmut Trust Company, 14 Wall Street, New York, New York 10005. Written notice of the location of each such other office or agency and of any change of location thereof shall be given by the Trustee to the Company, any Owner Trustees, the Indenture Trustees and the Certificateholders of such series. In the event that no such office or agency shall be maintained or no such notice of location or of change of location shall be given, presentations and demands may be made and notices may be served at the Corporate Trust Office of the Trustee. (b) There shall at all times be a Registrar and a Paying Agent hereunder with respect to the Certificates of each series. Each such Authorized Agent shall be a bank or trust company, shall be a corporation organized and doing business 51 45 under the laws of the United States or any state, with a combined capital and surplus of at least $75,000,000, or a corporation having a combined capital and surplus in excess of $5,000,000 the obligations of which are guaranteed by a corporation organized and doing business under the laws of the United States or any state, with a combined capital and surplus of at least $75,000,000, and shall be authorized under such laws to exercise corporate trust powers, subject to supervision by Federal or state authorities. The Trustee shall initially be the Paying Agent and, as provided in Section 3.04, Registrar hereunder with respect to the Certificates of each series. Each Registrar shall furnish to the Trustee, at stated intervals of not more than six months, and at such other times as the Trustee may request in writing, a copy of the Register maintained by such Registrar. (c) Any corporation into which any Authorized Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any Authorized Agent shall be a party, or any corporation succeeding to the corporate trust business of any Authorized Agent, shall be the successor of such Authorized Agent hereunder, if such successor corporation is otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the parties hereto or such Authorized Agent or such successor corporation. (d) Any Authorized Agent may at any time resign by giving written notice of resignation to the Trustee, the Company, any related Owner Trustees and the related Indenture Trustees. The Company may, and at the request of the Trustee shall, at any time terminate the agency of any Authorized Agent by giving written notice of termination to such Authorized Agent and to the Trustee. Upon the resignation or termination of an Authorized Agent or in case at any time any such Authorized Agent shall cease to be eligible under this Section (when in either case, no other Authorized Agent performing the functions of such Authorized Agent shall have been appointed), the Company shall promptly appoint one or more qualified successor Authorized Agents, reasonably satisfactory to the Trustee, to perform the functions of the Authorized Agent which has resigned or whose agency has been terminated or who shall have ceased to be eligible under this Section. The Company shall give written notice of any such appointment made by it to the Trustee, any related Owner Trustees and the related Indenture Trustees; and in each case the Trustee shall mail notice of such appointment to all Certificateholders of the related series as their names and addresses appear on the Register for such series. (e) The Company agrees to pay, or cause to be paid, from time to time to each Authorized Agent reasonable compensation for its services and to reimburse it for its reasonable expenses. 52 46 Section 7.12. Money for Certificate Payments to Be Held in Trust. All moneys deposited with any Paying Agent for the purpose of any payment on Certificates shall be deposited and held in trust for the benefit of the Certificateholders entitled to such payment, subject to the provisions of this Section. Moneys so deposited and held in trust shall constitute a separate trust fund for the benefit of the Certificateholders with respect to which such money was deposited. The Trustee may at any time, for the purpose of obtaining the satisfaction and discharge of this Agreement or for any other purpose, direct any Paying Agent to pay to the Trustee all sums held in trust by such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Section 7.13. Registration of Equipment Notes in Trustee's Name. Subject to Section 12.04, the Trustee agrees that all Equipment Notes, and Permitted Investments, if any, shall be issued in the name of the Trustee as trustee for the applicable Trust or its nominee and held by the Trustee, or, if not so held, the Trustee or its nominee shall be reflected as the owner of such Equipment Notes or Permitted Investments as the case may be, in the register of the issuer of such Equipment Notes or Permitted Investments. Section 7.14. Representations and Warranties of Trustee. The Trustee hereby represents and warrants that: (a) the Trustee is a national banking association organized and validly existing and in good standing under the laws of the United States of America; (b) the Trustee has full power, authority and legal right to execute, deliver, and perform this Agreement, any Intercreditor Agreement and the Refunding Agreements and has taken all necessary action to authorize the execution, delivery, and performance by it of this Agreement, any Intercreditor Agreement and the Refunding Agreements; (c) the execution, delivery and performance by the Trustee of this Agreement, any Intercreditor Agreement and the Refunding Agreements (i) will not violate any provision of any United States federal law or the law of the State of Connecticut, in each case, governing the banking and trust powers of the Trustee or any order, writ, judgment, or decree of any court, arbitrator, or governmental authority applicable to the Trustee or any of its assets, (ii) will not violate any provision of the articles of association or by-laws of the Trustee, and (iii) will not violate any provision of, or constitute, with or without notice or lapse 53 47 of time, a default under, or result in the creation or imposition of any lien on any properties included in the Trust Property pursuant to the provisions of any mortgage, indenture, contract, agreement or other undertaking to which it is a party, which violation, default or lien could reasonably be expected to have an adverse effect on the Trustee's performance or ability to perform its duties hereunder or thereunder or on the transactions contemplated herein or therein; (d) the execution, delivery and performance by the Trustee of this Agreement, any Intercreditor Agreement and the Refunding Agreements will not require the authorization, consent or approval of, the giving of notice to, the filing or registration with, or the taking of any other action in respect of, any governmental authority or agency of the United States or the State of Connecticut regulating the banking and corporate trust activities of the Trustee; and (e) this Agreement, any Intercreditor Agreement and the Refunding Agreements have been duly executed and delivered by the Trustee and constitute the legal, valid, and binding agreements of the Trustee, enforceable against it in accordance with their respective terms, provided that enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and (ii) general principles of equity. Section 7.15. Withholding Taxes; Information Reporting. As to the Certificates of any series, the Trustee, as trustee of the related grantor trust created by this Agreement, shall exclude and withhold from each distribution of principal, premium, if any, and interest and other amounts due under this Agreement or under the Certificates of such series any and all withholding taxes applicable thereto as required by law. The Trustee agrees to act as such withholding agent and, in connection therewith, whenever any taxes or similar charges are required to be withheld with respect to any amounts paid by or on behalf of the Trustee in respect of the Certificates of such series, to withhold such amounts and timely pay the same to the authority in the name of and on behalf of the Certificateholders of such series, that it will file any necessary withholding tax returns or statements when due, and that, as promptly as possible after the payment thereof, it will deliver to each such Certificateholder necessary documentation showing the payment thereof together with such additional documentary evidence as such Certificateholders of such series may reasonably request from time to time. The Trustee agrees to file any other information reports as it may be required to file under United States law. 54 48 Section 7.16. Trustee's Liens. The Trustee in its individual capacity agrees that it will in respect of each Trust created by this Agreement at its own cost and expense promptly take any action as may be necessary to duly discharge and satisfy in full any mortgage, pledge, lien, charge, encumbrance, security interest or claim ("Trustee's Liens") on or with respect to the Trust Property of such Trust which is attributable to the Trustee either (i) in its individual capacity and which is unrelated to the transactions contemplated by this Agreement, the related Refunding Agreements or the related Note Documents, or (ii) as Trustee hereunder or in its individual capacity and which arises out of acts or omissions by the Trustee which are in breach of this Agreement. Section 7.17. Preferential Collection of Claims. The Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. If the Trustee shall resign or be removed as Trustee, it shall be subject to Section 311(a) of the Trust Indenture Act to the extent provided therein. ARTICLE VIII CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE Section 8.01. The Company to Furnish Trustee with Names and Addresses of Certificateholders. The Company will furnish to the Trustee within 15 days after each Record Date with respect to a Scheduled Payment, and at such other times as the Trustee may request in writing, within 30 days after receipt by the Company of any such request, a list, in such form as the Trustee may reasonably require, of all information in the possession or control of the Company as to the names and addresses of the Certificateholders of such series, in each case as of a date not more than 15 days prior to the time such list is furnished; provided, however, that so long as the Trustee is the sole Registrar for such series, no such list need be furnished; and provided, further, however, that no such list need be furnished for so long as a copy of the Register is being furnished to the Trustee pursuant to Section 7.11. Section 8.02. Preservation of Information; Communications to Certificateholders. The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Certificateholders of each series contained in the most recent list furnished to the Trustee as provided in Section 7.11 or Section 8.01, as the case may be, and the names and addresses of Certificateholders of each series received by the Trustee in its capacity as Registrar, if so acting. The Trustee may destroy any list furnished to it as provided in Section 7.11 or Section 8.01, as the case may be, upon receipt of a new list so furnished. 55 49 Section 8.03. Reports by Trustee. Within 60 days after May 15 of each year commencing with the first full year following the issuance of any series of Certificates, the Trustee shall transmit to the Certificateholders of each series, as provided in Section 313(c) of the Trust Indenture Act, a brief report dated as of such May 15, if required by Section 313(a) of the Trust Indenture Act. Section 8.04. Reports by the Company. The Company shall: (a) file with the Trustee, within 30 days after the Company is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934, as amended; or, if the Company is not required to file information, documents or reports pursuant to either of such sections, then to file with the Trustee and the SEC, in accordance with rules and regulations prescribed by the SEC, such of the supplementary and periodic information, documents and reports which may be required pursuant to section 13 of the Securities Exchange Act of 1934, as amended, in respect of a security listed and registered on a national securities exchange as may be prescribed in such rules and regulations; (b) file with the Trustee and the SEC, in accordance with the rules and regulations prescribed by the SEC, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of the Company provided for in this Agreement, as may be required by such rules and regulations, including, in the case of annual reports, if required by such rules and regulations, certificates or opinions of independent public accountants, conforming to the requirements of Section 1.02; (c) transmit to all Certificateholders, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act such summaries of any information, documents and reports required to be filed by the Company pursuant to Subsections (a) and (b) of this Section 8.04 as may be required by rules and regulations prescribed by the SEC; (d) furnish to the Trustee, not less often than annually, a brief certificate from the principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Company's compliance with all conditions and covenants under this Agreement (it being understood that for purposes of this paragraph (d), such compliance shall be determined without 56 50 regard to any period of grace or requirement of notice provided under this Agreement); and (e) make available to any Certificateholder upon request, the annual audited and quarterly unaudited financial statements of the Company which are provided to the Trustee. ARTICLE IX SUPPLEMENTAL AGREEMENTS Section 9.01. Supplemental Agreements Without Consent of Certificateholders. Without the consent of the Certificateholders, the Company may, and the Trustee (subject to Section 9.03) shall, at any time and from time to time, enter into one or more agreements supplemental hereto or, if applicable, to any Intercreditor Agreement, any Refunding Agreement or any Liquidity Facility in form satisfactory to the Trustee, for any of the following purposes: (1) to provide for the formation of a Trust, the issuance of a series of certificates and the other matters contemplated by Section 2.01(b); or (2) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein contained; or (3) to add to the covenants of the Company for the benefit of the Certificateholders of any series, or to surrender any right or power in this Agreement conferred upon the Company; or (4) to correct or supplement any provision in this Agreement, any Intercreditor Agreement, any Refunding Agreement, any Liquidity Facility or any Indenture which may be defective or inconsistent with any other provision herein or in any Trust Supplement or to cure any ambiguity, correct any mistake or to modify any other provisions with respect to matters or questions arising under this Agreement, any Intercreditor Agreement, any Refunding Agreement, any Liquidity Facility or any Indenture, provided that any such action shall not adversely affect the interests of the Certificateholders of any series; or (5) to modify, eliminate or add to the provisions of this Agreement to such extent as shall be necessary to continue the qualification of this Agreement (including any supplemental agreement) under the Trust Indenture Act, or under any similar Federal statute hereafter enacted, and to add to this Agreement such other provisions as may be expressly permitted by the Trust Indenture Act, excluding, 57 51 however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of which this instrument was executed or any corresponding provision in any similar Federal statute hereafter enacted; or (6) to evidence and provide for the acceptance of appointment under this Agreement by a successor Trustee with respect to one or more Trusts and to add to or change any of the provisions of this Agreement as shall be necessary to provide for or facilitate the administration of the Trusts hereunder and thereunder by more than one Trustee, pursuant to the requirements of Section 7.09; or (7) to make any other amendments or modifications hereto, provided such amendments or modifications shall only apply to Certificates of one or more series to be thereafter issued; provided, however, that no such supplemental agreement shall adversely affect the status of any Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes. The Trustee shall be entitled to rely upon an Opinion of Counsel to such effect. Section 9.02. Supplemental Agreements with Consent of Certificateholders. With respect to each separate Trust and the series of Certificates relating thereto, with the consent of the Certificateholders holding Certificates of any series evidencing Fractional Undivided Interests aggregating not less than a majority in interest in such Trust, by Act of said Certificateholders delivered to the Company and the Trustee, the Company may (with the consent of the Owner Trustee, if any, relating to such certificates, which consent shall not be unreasonably withheld), and the Trustee (subject to Section 9.03) shall enter into an agreement or agreements supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement, any Intercreditor Agreement, any Liquidity Facility or any Refunding Agreement to the extent applicable to such Certificateholders or of modifying in any manner the rights and obligations of such Certificateholders under this Agreement; provided, however, that no such supplemental agreement shall, without the consent of the Certificateholder of each Outstanding Certificate affected thereby: (1) reduce in any manner the amount of, or delay the timing of, any receipt by the Trustee of payments on the Equipment Notes held in such Trust or distributions that are required to be made herein on any Certificate of such series, or change any date of payment of any Certificate of such series, or change the place of payment where, or the coin or currency in which, any Certificate of such series is 58 52 payable, or impair the right to institute suit for the enforcement of any such payment or distribution on or after the Regular Distribution Date or Special Distribution Date applicable thereto; or (2) permit the disposition of any Equipment Note in the Trust Property of such Trust except as permitted by this Agreement or otherwise deprive such Certificateholder of the benefit of the ownership of the Equipment Notes in such Trust; or (3) alter the priority of distributions specified in any Intercreditor Agreement; or (4) reduce the specified percentage of the aggregate Fractional Undivided Interests of such Trust which is required for any such supplemental agreement, or reduce such specified percentage required for any waiver (of compliance with certain provisions of this Agreement or certain defaults hereunder and their consequences) provided for in this Agreement; (5) modify any of the provisions of this Section or Section 6.05, except to increase any such percentage or to provide that certain other provisions of this Agreement cannot be modified or waived without the consent of the Certificateholder of each Certificate or such series affected thereby; or (6) adversely affect the status of any Trust as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, for U.S. federal income tax purposes. It shall not be necessary for any Act of such Certificateholders under this Section to approve the particular form of any proposed supplemental agreement but it shall be sufficient if such Act shall approve the substance thereof. Section 9.03. Documents Affecting Immunity or Indemnity. If in the opinion of the Trustee any document required to be executed by it pursuant to the terms of Section 9.01 or 9.02 affects any interest, right, duty, immunity or indemnity in favor of the Trustee under this Basic Agreement or any Trust Supplement, the Trustee may in its discretion decline to execute such document. Section 9.04. Execution of Supplemental Agreements. In executing, or accepting the additional trusts created by, any supplemental agreement permitted by this Article or the modifications thereby of the trusts created by this Agreement, the Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the 59 53 execution of such supplemental agreement is authorized or permitted by this Agreement. Section 9.05. Effect of Supplemental Agreements. Upon the execution of any supplemental agreement under this Article, this Basic Agreement shall be modified in accordance therewith, and such supplemental agreement shall form a part of this Basic Agreement for all purposes; and every Certificateholder of each series theretofore or thereafter authenticated and delivered hereunder shall be bound thereby to the extent applicable to such series. Section 9.06. Conformity with Trust Indenture Act. Every supplemental agreement executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. Section 9.07. Reference in Certificates to Supplemental Agreements. Certificates of each series authenticated and delivered after the execution of any supplemental agreement applicable to such series pursuant to this Article may bear a notation in form approved by the Trustee as to any matter provided for in such supplemental agreement; and, in such case, suitable notation may be made upon Outstanding Certificates of such series after proper presentation and demand. ARTICLE X AMENDMENTS TO INDENTURE AND NOTE DOCUMENTS Section 10.01. Amendments and Supplements to Indenture and Other Note Documents. In the event that the Trustee, as holder of any Equipment Notes in trust for the benefit of the Certificateholders of any series or as Controlling Party, receives a request for a consent to any amendment, modification, waiver or supplement under any Indenture or other Note Document the Trustee shall forthwith send a notice of such proposed amendment, modification, waiver or supplement to each Certificateholder of such series registered on the Register as of the date of such notice. The Trustee shall request from Certificateholders of such series a Direction as to (a) whether or not to take or refrain from taking any action which a holder of such Equipment Note has the option to direct, (b) whether or not to give or execute any waivers, consents, amendments, modifications or supplements as a holder of such Equipment Note and (c) how to vote any Equipment Note if a vote has been called for with respect thereto. Provided such a request for Certificateholder Direction shall have been made, in directing any action or casting any vote or giving any consent as the holder of any Equipment Note, the Trustee shall vote for or give consent to any such action with respect to such Equipment Note in the same proportion as that of (i) the aggregate face amounts of all Certificates of such series actually voted in favor of or for 60 54 giving consent to such action by Acts of Certificateholders to (ii) the aggregate face amount of all Outstanding Certificates. For purposes of the immediately preceding sentence, a Certificate shall have been "actually voted" if the Holder of such Certificate has delivered to the Trustee an instrument evidencing such Holder's consent to such Direction on or prior to the Business Day before the Trustee directs such action or casts such vote or gives such consent. Notwithstanding the foregoing, but subject to Section 6.04 and any Intercreditor Agreement, the Trustee may, in its own discretion and at its own direction consent and notify the relevant Indenture Trustee of such consent to any amendment, modification, waiver or supplement under the relevant Indenture or any Note Document, if an Event of Default hereunder shall have occurred and be continuing, or if such amendment modification or waiver will not adversely affect the interests of the Certificateholders. ARTICLE XI TERMINATION OF TRUSTS Section 11.01. Termination of the Trusts. In respect of each Trust created by the Basic Agreement as supplemented by a related Trust Supplement, the respective obligations and responsibilities of the Company and the Trustee created under this Agreement with respect to the Trust created hereby and such Trust shall terminate upon the distribution to all Holders of the Certificates of the series of such Trust and the Trustee of all amounts required to be distributed to them pursuant to this Agreement and the disposition of all property held as part of the Trust Property of the related series of such Trust; provided, however, that in no event shall such Trust continue beyond the earlier of (i) one hundred ten (110) years following the date of the earliest execution of this Agreement or (ii) the expiration of twenty-one (21) years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James's, living on the date hereof. Notice of any termination of a Trust, specifying the applicable Regular Distribution Date (or applicable Special Distribution Date, as the case may be) upon which the Certificateholders of any series may surrender their Certificates to the Trustee for payment of the final distribution and cancellation, shall be mailed promptly by the Trustee to Certificateholders of such series not earlier than the minimum number of days and not more than the maximum number of days specified therefor in the related Trust Supplement preceding such final distribution specifying (A) the Regular Distribution Date (or Special Distribution Date, as the case may be) upon which the proposed final payment of the Certificates of such series will be made upon presentation and surrender of Certificates of such series at the office or agency of the Trustee therein specified, 61 55 (B) the amount of any such proposed final payment, and (C) that the Record Date otherwise applicable to such Regular Distribution Date (or Special Distribution Date, as the case may be) is not applicable, payments being made only upon presentation and surrender of the Certificates of such series at the office or agency of the Trustee therein specified. The Trustee shall give such notice to the Registrar at the time such notice is given to Certificateholders of such series. Upon presentation and surrender of the Certificates of such series in accordance with such notice, the Trustee shall cause to be distributed to Certificateholders of such series amounts distributable on such Regular Distribution Date (or Special Distribution Date, as the case may be) pursuant to Section 4.02. In the event that all of the Certificateholders of such series shall not surrender their Certificates for cancellation within six months after the date specified in the above-mentioned written notice, the Trustee shall give a second written notice to the remaining Certificateholders of such series to surrender their Certificates for cancellation and receive the final distribution with respect thereto. No additional interest shall accrue on the Certificates after the Regular Distribution Date (or Special Distribution Date, as the case may be) specified in the first written notice. In the event that any money held by the Trustee for the payment of distributions on the Certificates of such series shall remain unclaimed for two years (or such lesser time as the Trustee shall be satisfied, after sixty days' notice from the Company, is one month prior to the escheat period provided under applicable law) after the final distribution date with respect thereto, the Trustee shall pay to each Indenture Trustee the appropriate amount of money relating to such Indenture Trustee and shall give written notice thereof to the related Owner Trustees and the Company. ARTICLE XII MISCELLANEOUS PROVISIONS Section 12.01. Limitation on Rights of Certificateholders. The death or incapacity of any Certificateholder of any series shall not operate to terminate this Agreement, or the related Trust, nor entitle such Certificateholder's legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the Trust, nor otherwise affect the rights, obligations, and liabilities of the parties hereto or any of them. Section 12.02. Liabilities of Certificateholders. Neither the existence of the Trust nor any provision in this Agreement is intended to or shall limit the liability the Certificateholders would otherwise incur if the Certificateholders owned Trust Property as co-owners, or incurred 62 56 any obligations of the Trust, directly rather than through the Trust. Section 12.03. Certificates Nonassessable and Fully Paid. Certificateholders of each series shall not be personally liable for obligations of the related Trust, the Fractional Undivided Interests represented by the Certificates of such series shall be nonassessable for any losses or expenses of such Trust or for any reason whatsoever, and Certificates of such series upon authentication thereof by the Trustee pursuant to Section 3.02 are and shall be deemed fully paid. No Certificateholder of such series shall have any right (except as expressly provided herein) to vote or in any manner otherwise control the operation and management of the related Trust Property, the related Trust, or the obligations of the parties hereto, nor shall anything set forth herein, or contained in the terms of the Certificates of such series, be construed so as to constitute the Certificateholders of such series from time to time as partners or members of an association. Section 12.04. Registration of Equipment Notes in Name of Subordination Agent. If a Trust is party to an Intercreditor Agreement, the Trustee agrees that all Equipment Notes to be purchased by such Trust shall be issued in the name of the Subordination Agent under such Intercreditor Agreement or its nominee and held by such Subordination Agent in trust for the benefit of the Certificateholders, or, if not so held, such Subordination Agent or its nominee shall be reflected as the owner of such Equipment Notes in the register of the issuer of such Equipment Notes. Section 12.05. Notices. (a) Unless otherwise specifically provided herein or in the applicable Trust Supplement with respect to any Trust, all notices required under the terms and provisions of this Basic Agreement or such Trust Supplement with respect to such Trust shall be in English and in writing and any such notice may be given by United States mail, courier service, telegram, telex, telemessage, telecopy, telefax, cable or facsimile (confirmed by telephone or in writing in the case of notice by telegram, telex, telemessage, telecopy, telefax, cable or facsimile) or any other customary means of communication, if to the Company, to: Mail: America West Airlines, Inc. 4000 East Sky Harbor Boulevard Phoenix, Arizona 85043 Attention: Senior Vice President-Legal Affairs 63 57 Facsimile: (602) 693-5904 if to the Trustee, to: Mail: Fleet National Bank 777 Main Street Hartford, Connecticut 06115 Attention: Corporate Trust Administration - Responsible Officer - America West Airlines Pass Through Trusts under the Pass Through Trust Agreement dated June __, 1997 Facsimile: (860) 986-7920 Telephone: (860) 986-4545 Any such notice shall be effective when received. (b) The Company or the Trustee, by notice to the other, may designate additional or different addresses for subsequent notices or communications. (c) Any notice or communication to Certificateholders of any series shall be mailed by first-class mail to the addresses for Certificateholders of such series shown on the Register kept by the Registrar and to addresses filed with the Trustee for Certificate Owners of such series. Failure so to mail a notice or communication or any defect in such notice or communication shall not affect its sufficiency with respect to other Certificateholders or Certificate Owners of such series. (d) If the Company mails a notice or communication to the Certificateholders of such series, it shall mail a copy to the Trustee and to each Paying Agent for such series at the same time. (e) Notwithstanding the foregoing, all communications or notices to the Trustee shall be deemed to be given only when received by a Responsible Officer of the Trustee. (f) The Trustee shall promptly furnish the Company with a copy of any demand, notice or written communication received by the Trustee hereunder from any Certificateholder, Owner Trustee or Indenture Trustee. Section 12.06. Governing Law. THIS BASIC AGREEMENT HAS BEEN DELIVERED IN THE STATE OF NEW YORK AND, TOGETHER WITH ALL TRUST SUPPLEMENTS AND CERTIFICATES, SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. 64 58 Section 12.07. Severability of Provisions. If any one or more of the covenants, agreements, provisions, or terms of this Agreement shall be for any reason whatsoever held invalid, then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions, or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or any Trust or of the Certificates of any series or the rights of the Certificateholders thereof. Section 12.08. Trust Indenture Act Controls. This Agreement is subject to the provisions of the Trust Indenture Act and shall, to the extent applicable, be governed by such provisions. Section 12.09. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. Section 12.10. Successors and Assigns. All covenants, agreements, representations and warranties in this Agreement by the Trustee and the Company shall bind and, to the extent permitted hereby, shall inure to the benefit of and be enforceable by their respective successors and permitted assigns, whether so expressed or not. Section 12.11. Benefits of Agreement. Nothing in this Agreement or in the Certificates of any series, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Certificateholders of each series, any benefit or any legal or equitable right, remedy or claim under this Agreement. Section 12.12. Legal Holidays. In any case where any Regular Distribution Date or Special Distribution Date relating to any Certificate of any series shall not be a Business Day with respect to such series, then (notwithstanding any other provision of this Agreement) payment need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on such Regular Distribution Date or Special Distribution Date, and no interest shall accrue during the intervening period. Section 12.13. Counterparts. For the purpose of facilitating the execution of this Agreement and for other purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original and all of which counterparts shall constitute but one and the same instrument. Section 12.14. Communication by Certificateholders with Other Certificateholders. Certificateholders of any series 65 59 may communicate with other Certificateholders of such series with respect to their rights under this Basic Agreement, the related Trust Supplement or the Certificates of such series pursuant to Section 3.12(b) of the Trust Indenture Act. The Company, the Trustee and any and all other persons benefitted by this Agreement shall have the protection afforded by Section 312(c) of the Trust Indenture Act. Section 12.15. Intention of Parties. The parties hereto intend that any Trust created hereunder be classified for U.S. federal income tax purposes as a grantor trust under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended, and not as a trust or association taxable as a corporation or as a partnership. The powers granted and obligations undertaken pursuant to this Agreement shall be so construed so as to further such intent. 66 60 IN WITNESS WHEREOF, the Company and the Trustee have caused this Basic Agreement to be duly executed by their respective officers, all as of the day and year first above written. AMERICA WEST AIRLINES, INC. By: --------------------------- Name: ------------------------- Title: ------------------------ FLEET NATIONAL BANK, as Trustee By: --------------------------- Name: ------------------------- Title: ------------------------ 67 EXHIBIT A FORM OF CERTIFICATE (1)UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] AMERICA WEST AIRLINES PASS THROUGH TRUST _________________ Pass Through Certificate, Series___________ Issuance Date: _____________ __, ____ Final Distribution Date: ______________, ____ evidencing a fractional undivided interest in a trust, the property of which includes certain equipment notes each secured by one or more Aircraft owned by or leased to America West Airlines, Inc. Certificate No.__________ $__________ Fractional Undivided Interest representing ________% of the Trust per $1,000 of Reference Principal Amount THIS CERTIFIES THAT ___________________, for value received, is the registered owner of a Fractional Undivided Interest in the amount of $________________ (_________________ dollars) (the "Reference Principal Amount") in the America West Airlines Pass Through Trust _____________ (the "Trust") created by Fleet National Bank, as trustee (the "Trustee"), pursuant to a Pass Through Trust Agreement dated as of June __, 1997 (the "Basic Agreement") between the Trustee and America West Airlines, Inc., a Delaware corporation (the "Company"), as supplemented by Trust Supplement No.________ thereto dated ____________, ____ (collectively, the "Agreement"), between the Trustee and 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 ____________________ (1) This legend to appear on Book_Entry Certificates to be deposited with The Depository Trust Company. One Certificate may be issued in definitive form which shall not have this legend. 68 2 assigned to them in the Agreement. This Certificate is one of the duly authorized Certificates designated as "America West Airlines Pass Through Certificates, Series _________" (herein called the "Certificates"). This Certificate is issued under and is subject to the terms, provisions, and conditions of the Agreement and any Intercreditor Agreement, to which agreements the Certificateholder of this Certificate by virtue of the acceptance hereof assents and by which such Certificateholder is bound. The property of the Trust includes certain Equipment Notes and all rights of the Trust to receive any payments under any Intercreditor Agreement or Liquidity Facility (the "Trust Property"). Each issue of the Equipment Notes is secured by a security interest in aircraft leased to or owned by the Company. The Certificates represent fractional undivided interests in the 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 Basic Agreement for any other series of certificates issued pursuant thereto. The undivided percentage interest in the Trust represented by each of this Certificate (as specified above) and the other America West Airlines Pass Through Certificates, Series [____] was determined on the basis of (x) the aggregate of the Reference Principal Amount of this Certificate (as specified above) and of the other America West Airlines Pass Through Certificates, Series [____] and (y) the aggregate original principal amounts of the Equipment Notes constituting the Trust Property. Subject to and in accordance with the terms of the Agreement and any Intercreditor Agreement, from funds then available to the Trustee, there will be distributed on each ________and _____________ (a "Regular Distribution Date"), commencing on ______________, ____, to the Person in whose name this Certificate is registered at the close of business on the 15th day preceding the Regular Distribution Date, an amount in respect of the Scheduled Payments on the Equipment Notes due on such Regular Distribution Date, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Scheduled Payments. Subject to and in accordance with the terms of the Agreement, in the event that Special Payments on the Equipment Notes are received by the Trustee, from funds then available to the Trustee, there shall be distributed on the applicable Special Distribution Date, to the Person in whose name this Certificate is registered at the close of business on the 15th day preceding the Special Distribution Date, an amount in respect of such Special Payments on the Equipment Notes, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Special Payments so received. If a Regular Distribution Date or Special Distribution Date is not a Business Day, distribution shall be made on the immediately following 69 3 Business Day with the same force and effect as if made on such Regular Distribution Date or Special Distribution Date and no interest shall accrue during the intervening period. The Trustee shall mail notice of each Special Payment and the Special Distribution Date therefor to the Certificateholder of this Certificate. Distributions on this Certificate will be made by the Trustee by check mailed to the Person entitled thereto, without the presentation or surrender of this Certificate or the making of any notation hereon. Except as otherwise provided in the Agreement and notwithstanding the above, the final distribution on this Certificate will be made after notice mailed by the Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Trustee specified in such notice. The Certificates do not represent a direct obligation of, or an obligation guaranteed by, or an interest in, the Company or the Trustee or any affiliate thereof. The Certificates are limited in right or payment, all as more specifically set forth on the face hereof and in the Agreement. All payments or distributions made to Certificateholders under the Agreement shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of the Agreement. Each Certificateholder of this 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 Agreement. This Certificate does not purport to summarize the entire Agreement and reference is made to the Agreement for information with respect to the interests, rights, benefits, obligations, proceeds, and duties evidenced hereby. A copy of the Agreement may be examined during normal business hours at the principal office of the Trustee, and at such other places, if any, designated by the Trustee, by any Certificateholder upon request. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Certificateholders under the Agreement at any time by the Company and the Trustee with the consent of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust. Any such consent by the Certificateholder of this Certificate shall be conclusive and binding on such Certificateholder and upon all future Certificateholders of this Certificate and of any Certificate issued upon transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent is made upon this Certificate. The Agreement also permits the amendment 70 4 thereof, in certain limited circumstances, without the consent of the Certificateholders of any of the Certificates. As provided in the Agreement and subject to certain limitations set forth, the transfer of this Certificate is registrable in the Register upon surrender of this Certificate for registration of transfer at the offices or agencies maintained by the 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 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 Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Trust will be issued to the designated transferee or transferees. The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 Fractional Undivided Interest and integral multiples thereof, provided that one Certificate may be in a different denomination. As provided in the Agreement and subject to certain limitations therein set forth, the Certificates are exchangeable for new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the 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 Trustee shall require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Trustee, the Registrar, and any agent of the Trustee or the Registrar may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and neither the Trustee, the Registrar, nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Agreement and the Trust created thereby shall terminate upon the distribution to Certificateholders of all amounts to be distributed to them pursuant to the Agreement and the disposition of all property held as part of the Trust Property. THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF THE STATE OF NEW YORK. Unless the certificate of authentication hereon has been executed by the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. 71 5 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed. AMERICA WEST AIRLINES PASS THROUGH TRUST By: FLEET NATIONAL BANK, as Trustee By ----------------------------------- Name: -------------------------------- Title: ------------------------------- Dated: ------------------- 72 6 [FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Certificates referred to in the within-mentioned Agreement. FLEET NATIONAL BANK, as Trustee By ----------------------------------- Name: -------------------------------- Title: ------------------------------- EX-4.6 4 TRUST SUPP. NO.1997-1A 1 EXHIBIT 4.6 This Trust Supplement No. 1997-1A, dated as of June __, 1997 (herein called the "Trust Supplement"), between America West Airlines, Inc., a Delaware corporation (the "Company"), and Fleet National Bank, as trustee (the "Trustee"), to the Pass Through Trust Agreement, dated as of June __, 1997, between the Company and the Trustee (the "Basic Agreement"). W I T N E S S E T H: WHEREAS, the Basic Agreement, unlimited as to the aggregate principal amount of Certificates (unless otherwise specified herein, capitalized terms used herein without definition having the respective meanings specified heretofore in the Basic Agreement) which may be issued thereunder, has heretofore been executed and delivered: WHEREAS, each Owner Trustee, acting on behalf of its respective Owner Participant, will issue, on a non-recourse basis, Equipment Notes, among other things, to refinance the outstanding debt portion of the purchase price of the aircraft purchased by such Owner Trustee and leased to the Company pursuant to the related Lease; WHEREAS, pursuant to the terms and conditions of the Basic Agreement as supplemented by this Trust Supplement (the "Agreement"), the Trustee shall purchase such Equipment Notes issued by each Owner Trustee having the same interest rate as, and final maturity dates not later than the final Regular Distribution Date of, the Certificates issued hereunder and shall hold such Equipment Notes in trust for the benefit of the Certificateholders; WHEREAS, the Trustee hereby declares the creation of the America West Airlines Pass Through Trust 1997-1A (the "1997-1A Trust") for the benefit of the Certificateholders, and the initial Certificateholders as the grantors of the 1997-1A Trust, by their respective acceptances of the Certificates, join in the creation of this 1997-1A Trust with the Trustee; WHEREAS, all of the conditions and requirements necessary to make this Trust Supplement, when duly executed and delivered, a valid, binding and legal instrument in accordance with its terms and for the purposes herein expressed, have been done, performed and fulfilled, and the execution and delivery of this Trust Supplement in the form and with the terms hereof have been in all respects duly authorized; WHEREAS, this Trust Supplement is subject to the provisions of the Trust Indenture Act of 1939, as amended, and shall, to the extent applicable, be governed by such provisions; NOW THEREFORE, in consideration of the premises herein, it is agreed between the Company and the Trustee as follows: 2 ARTICLE I THE CERTIFICATES Section 1.01. The Certificates. There is hereby created a series of Certificates to be issued under the Agreement to be distinguished and known as "America West Airlines Pass Through Certificates, Series 1997-1A" (hereinafter defined as the "Series 1997-1A Certificates"). Each Series 1997-1A Certificate represents a Fractional Undivided Interest in the 1997-1A Trust created hereby. The terms and conditions applicable to the Series 1997-1A Certificates are as follows: (a) The aggregate principal amount of the Series 1997-1A Certificates that shall be authenticated under the Agreement (which limit shall not pertain to Series 1997-1A Certificates authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of other Series 1997-1A Certificates pursuant to Sections 3.03, 3.04 and 3.05 of the Basic Agreement) upon their initial issuance is $___________. [The parties hereto acknowledge that the provisions of Section 2.02(b) of the Basic Agreement are of no force or effect with respect to the Series 1997-1A Certificates.] (b) The Regular Distribution Dates with respect to any payment of Scheduled Payments means each January 2 and July 2 commencing [July 2, 1997], until payment of all of the Scheduled Payments to be made under the Equipment Notes has been made. (c) The Final Legal Distribution Date is _________, ____. (d) The Special Distribution Date with respect to a Special Payment shall be the date specified as such in the notice which the Trustee must give with respect to such Special Payment pursuant to Section 4.02(c) of the Basic Agreement, which date shall be the date specified as the Special Distribution Date (as defined in the Intercreditor Agreement) with respect to the related Special Payment (as defined in the Intercreditor Agreement) in the applicable written notice given to the Trustee pursuant to Section 2.4(a) of the Intercreditor Agreement. (e) (i) The Series 1997-1A Certificates shall be substantially in the form attached hereto as Exhibit A (ii) The Series 1997-1A Certificates shall be Book-Entry Certificates. Series 1997-1A Trust Supplement 3 3 (f) The Scheduled Payments of principal shall be as set forth in Exhibit B. (g) The proceeds of the Series 1997-1A Certificates shall be used to purchase the Series A Equipment Notes in the principal amount specified below:
Equipment Note Principal Amount Maturity -------------- ---------------- -------- N628AW-A $ N627AW-A N629AW-A N632AW-A
(h) Each Owner Trustee, acting on behalf of its respective Owner Participant, will issue on a non-recourse basis, the Equipment Notes, the proceeds of which shall be used, among other things, to refinance the outstanding debt portion of the purchase price to such Owner Trustee of the following Aircraft:
U.S. Registration Number/Manufacturer's Aircraft Serial Number -------- --------------------- Airbus A320-231 N628AW/067 Airbus A320-231 N627AW/066 Airbus A320-231 N629AW/076 Airbus A320-231 N632AW/081
(i) The related Note Documents are listed on Exhibit C. (j) (i) The Trustee and the Other Trustees are parties to the Intercreditor Agreement which sets forth certain terms of subordination and other matters. The Series 1997-1A Certificates are senior in right of payment to the America West Airlines Pass Through Certificates, Series 1997-1B, the America West Airlines Pass Through Certificates, Series 1997-1C and the America West Airlines Pass Through Certificates, Series 1997-1D. (ii) The Series 1997-1A Certificates may be purchased by the holders of certain series of Certificates with a lower seniority as provided in Article III hereof and as further set forth in Section 6.01(b) of the Basic Agreement. Series 1997-1A Trust Supplement 4 4 (k) Notice of any termination of the 1997-1A Trust shall be mailed promptly by the Trustee to Certificateholders not earlier than the 60th day and not later than the 20th day next preceding such final distribution. ARTICLE II DEFINITIONS Section 2.01. Definitions. For all purposes of the Basic Agreement as supplemented by this Trust Supplement, the following capitalized term has the following meaning: Intercreditor Agreement: Means the Intercreditor Agreement dated as of the date hereof among the Trustee, the Other Trustees, the Liquidity Providers named therein and Fleet National Bank, as Subordination Agent, as amended, supplemented or otherwise modified from time to time in accordance with its terms. Liquidity Facility: Means, initially, the Irrevocable Revolving Credit Agreement dated as of June __, 1997, between Fleet National Bank, as Subordination Agent, as agent and trustee for the 1997-1A Trust, and Kredietbank N.V., acting through its New York branch, and, from and after the replacement of such Agreement pursuant hereto, the Replacement Liquidity Facility therefor, if any, in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms. Other Agreements: Means (i) the Basic Agreement as supplemented by Trust Supplement No. 1997-1B dated the date hereof relating to America West Airlines 1997-1B Pass Through Trust, (ii) the Basic Agreement as supplemented by Trust Supplement No. 1997-1C dated the date hereof relating to America West Airlines 1997-1C Pass Through Trust and (iii) the Basic Agreement as supplemented by Trust Supplement No. 1997-1D dated the date hereof relating to America West Airlines 1997-1D Pass Through Trust. Other Trustees: Means the trustee under the Other Agreements, and any successor or other trustee appointed as provided therein. PTC Event of Default: Means the failure to pay within 10 Business Days of the due date thereof: (i) the outstanding Pool Balance of the Series 1997-1A Certificates on the Final Legal Distribution Date for such Certificates or (ii) interest due on such Certificates on any Distribution Date (unless the Subordination Agent shall have made an Interest Drawing (as Series 1997-1A Trust Supplement 5 5 defined in the Intercreditor Agreement) with respect thereto in an amount sufficient to pay such interest and shall have distributed such amount to the holders of the Certificates entitled thereto). Special Payment: Means any payment (other than a Scheduled Payment) in respect of, or any proceeds of, any Equipment Note or Trust Indenture Estate (as defined in each Indenture), including Overdue Scheduled Payments (as defined in the Intercreditor Agreement), payments in respect of the redemption or repurchase of any Equipment Note and payments in respect of the sale, of any Equipment Note to the related Owner Trustee, Owner Participant or any other Person. Trust Property: Means (i) the Equipment Notes held as the property of the Trust and all monies at any time paid thereon and all monies due and to become due thereunder, (ii) funds from time to time deposited in the Certificate Account and the Special Payments Account, and (iii) all rights of the Trust and the Trustee, on behalf of the Trust, under the Intercreditor Agreement and the Liquidity Facility, including, without limitation, all rights to receive certain payments thereunder, and all monies paid to the Trustee on behalf of the Trust pursuant to the Intercreditor Agreement or the Liquidity Facility. Underwriter: Means Morgan Stanley & Co. Incorporated. ARTICLE III PURCHASE RIGHTS OF CERTIFICATEHOLDERS Section 3.01. By acceptance of its Certificate, each Certificateholder agrees that at any time after the occurrence and during the continuation of a Triggering Event, (i) each Class B Certificateholder shall have the right to purchase all, but not less than all, of the Series 1997-1A Certificates upon ten days' written notice to the Trustee and each other Class B Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class B Certificateholder notifies such purchasing Class B Certificateholder that such other Class B Certificateholder wants to participate in such purchase, then such other Class B Certificateholder may join with the purchasing Class B Certificateholder to purchase all, but not less than all, of the Series 1997-1A Certificates pro rata based on the Fractional Undivided Interest in the Class B Trust held by each such Class B Certificateholder and (B) if prior to the end of such ten day period any other Series 1997-1A Trust Supplement 6 6 Class B Certificateholder fails to notify the purchasing Class B Certificateholder of such other Class B Certificateholder's desire to participate in such a purchase, then such other Class B Certificateholder shall lose its right to purchase the Series 1997-1A Certificates pursuant to this Section and Section 6.01(b) of the Basic Agreement; and (ii) each Class C Certificateholder shall have the right (which shall not expire upon any purchase of the Series 1997-1A Certificates pursuant to clause (i) above) to purchase all, but not less than all, of the Series 1997-1A Certificates and the Class B Certificates upon ten days' written notice to the Trustee, the Class B Trustee and each other Class C Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class C Certificateholder notifies such purchasing Class C Certificateholder that such other Class C Certificateholder wants to participate in such purchase, then such other Class C Certificateholder may join with the purchasing Class C Certificateholder to purchase all, but not less than all, of the Series 1997- 1A Certificates and the Class B Certificates pro rata based on the Fractional Undivided Interest in the Class C Trust held by each such Class C Certificateholder and (B) if prior to the end of such ten day period any other Class C Certificateholder fails to notify the purchasing Class C Certificateholder of such other Class C Certificateholder's desire to participate in such a purchase, then such other Class C Certificateholder shall lose its right to purchase the Series 1997-1A Certificates and the Class B Certificates pursuant to this Section and Section 6.01(b) of the Basic Agreement; and (iii) each Class D Certificateholder shall have the right (which shall not expire upon any purchase of the Series 1997-1A Certificates pursuant to clause (i) above or the purchase of the Series 1997-1A Certificates and the Class B Certificates pursuant to clause (ii) above) to purchase all, but not less than all, of the Series 1997-1A Certificates, the Class B Certificates and the Class C Certificates upon ten days' written notice to the Trustee, the Class B Trustee, the Class C Trustee and each other Class D Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class D Certificateholder notifies such purchasing Class D Certificateholder that such other Class D Certificateholder wants to participate in such purchase, then such other Class D Certificateholder may join with the purchasing Certificateholder to purchase all, but not less than all, of the Series 1997-1A Certificates, the Class B Certificates and the Class C Certificates pro rata based on the Series 1997-1A Trust Supplement 7 7 Fractional Undivided Interest in the Class D Trust held by each such Class D Certificateholder and (B) if prior to the end of such ten day period any other Class D Certificateholder fails to notify the purchasing Class D Certificateholder of such other Class D Certificateholder's desire to participate in such a purchase, then such other Class D Certificateholder shall lose its right to purchase the Series 1997-1A Certificates, the Class B Certificates, and the Class C Certificates pursuant to this Section and Section 6.01(b) of the Basic Agreement; and As used in this Article III, the terms "Class B Certificate", "Class B Certificateholder", "Class B Trust", "Class B Trustee", "Class C Certificate", "Class C Certificateholder", "Class C Trust", "Class C Trustee", "Class D Certificate", "Class D Certificateholder" and "Class D Trust" shall have the respective meanings assigned to such terms in the Intercreditor Agreement. ARTICLE IV THE TRUSTEE Section 4.01. The Trustee. The Trustee is hereby directed to execute and deliver the Intercreditor Agreement on or prior to the Issuance Date in the form delivered to the Trustee by the Company. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Trust Supplement or the due execution hereof by the Company, or for or in respect of the recitals and statements contained herein, all of which recitals and statements are made solely by the Company. Except as herein otherwise provided, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed by the Trustee by reason of this Trust Supplement other than as set forth in the Basic Agreement, and this Trust Supplement is executed and accepted on behalf of the Trustee, subject to all the terms and conditions set forth in the Basic Agreement, upon the effectiveness thereof, as fully to all intents as if the same were herein set forth at length. The Trustee represents and warrants that the Intercreditor Agreement will be duly executed and delivered by one of its officers who is duly authorized to execute and deliver such document on its behalf. Series 1997-1A Trust Supplement 8 8 ARTICLE V MISCELLANEOUS PROVISIONS Section 5.01. Basic Agreement Ratified. Except and so far as herein expressly provided, all of the provisions, terms and conditions of the Basic Agreement are in all respects ratified and confirmed; and the Basic Agreement and this Trust Supplement shall be taken, read and construed as one and the same instrument. Section 5.02. GOVERNING LAW. THIS TRUST SUPPLEMENT AND THE SERIES 1997-1A CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Section 5.03. Execution in Counterparts. This Trust Supplement may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. Series 1997-1A Trust Supplement 9 9 IN WITNESS WHEREOF, the Company and the Trustee have caused this Trust Supplement to be duly executed by their respective officers thereto duly authorized, as of the day and year first written above. AMERICA WEST AIRLINES, INC. By: -------------------------- Name: ------------------------ Title: ----------------------- FLEET NATIONAL BANK, as Trustee By: -------------------------- Name: ------------------------ Title: ----------------------- Series 1997-1A Trust Supplement 10 EXHIBIT A FORM OF CERTIFICATE [Include on each Certificate that is a Global Certificate: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.(1) AMERICA WEST AIRLINES PASS THROUGH TRUST 1997-1A Pass Through Certificate, Series 1997-1A Issuance Date: June ___, 1997 Final Legal Distribution Date: ______________ Evidencing A Fractional Undivided Interest In the 1997-1A Trust, The Property Of Which Includes Certain Equipment Notes Each Secured By An Aircraft Leased To America West Airlines, Inc. Certificate No.___ $_____________ Fractional Undivided Interest representing 0._ % of the Trust per $1,000 of Reference Principal Amount CUSIP No. _____________ THIS CERTIFIES THAT _________________________, for value received, is the registered owner of a Fractional Undivided Interest in the amount of $ ____________________(the "Reference Principal Amount") in the America West Airlines Pass Through Trust 1997-1A (the "Trust") created by Fleet National Bank, as trustee (the "Trustee"), pursuant to a Pass Through Trust Agreement, dated as of June __, 1997 (the "Basic Agreement"), between the Trustee and America West Airlines, Inc., a Delaware corporation (the "Company"), as supplemented by Trust Supplement No. 1997-1A thereto, dated as of June __, 1997 (collectively, the "Agreement"), between the Trustee and 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 Agreement. This Certificate is one of the duly authorized Certificates designated as "America West Airlines Pass Through Certificates, - ------------------ (1) Not necessarily applicable in respect of one Certificate in definitive form. Series 1997-1A Trust Supplement 11 2 Series 1997-1A" (herein called the "Certificates"). This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement and the Intercreditor Agreement, to which agreements the Certificateholder of this Certificate by virtue of the acceptance hereof assents and by which such Certificateholder is bound. The property of the Trust includes certain Equipment Notes and all rights of the Trust to receive payments under the Intercreditor Agreement and the Liquidity Facility (the "Trust Property"). Each issue of the Equipment Notes is secured by a security interest in the Aircraft leased to the Company. Each of the Certificates represents a Fractional Undivided Interest in the Trust and the Trust Property and has no rights, benefits or interest in respect of any other separate trust established pursuant to the terms of the Basic Agreement for any other series of certificates issued pursuant thereto. The undivided percentage interest in the Trust represented by each of this Certificate (as specified above) and the other America West Airlines Pass Through Certificates, Series 1997-1A, was determined on the basis of (x) the aggregate of the Reference Principal Amount of this Certificate (as specified above) and of the other America West Airlines Pass Through Certificates, Series 1997-1A and (y) the aggregate original principal amounts of the Equipment Notes constituting the Trust Property. Subject to and in accordance with the terms of the Agreement and the Intercreditor Agreement, from funds then available to the Trustee, there will be distributed on each January 2 and July 2 (a "Regular Distribution Date") commencing [July 2, 1997] to the Person in whose name this Certificate is registered at the close of business on the 15th day preceding the Regular Distribution Date, an amount in respect of the Scheduled Payments on the Equipment Notes due on such Regular Distribution Date, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Scheduled Payments. Subject to and in accordance with the terms of the Agreement, in the event that Special Payments on the Equipment Notes are received by the Trustee, from funds then available to the Trustee, there shall be distributed on the applicable Special Distribution Date, to the Person in whose name this Certificate is registered at the close of business on the 15th day preceding the Special Distribution Date, an amount in respect of such Special Payments on the Equipment Notes, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Special Payments so received. If a Regular Distribution Date or Special Distribution Date is not a Business Day, distribution shall be made on the immediately following Business Day with the same Series 1997-1A Trust Supplement 12 3 force and effect as if made on such Regular Distribution Date or Special Distribution Date and no interest shall accrue during the intervening period. The Trustee shall mail notice of each Special Payment and the Special Distribution Date therefor to the Certificateholder of this Certificate. Distributions on this Certificate will be made by the Trustee by check mailed to the Person entitled thereto, without the presentation or surrender of this Certificate or the making of any notation hereon. Except as otherwise provided in the Agreement and notwithstanding the above, the final distribution on this Certificate will be made after notice mailed by the Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Trustee specified in such notice. The Certificates do not represent an obligation of, or an obligation guaranteed by, or an interest in, the Company or the Trustee or any affiliate thereof. The Certificates are limited in right of payment, all as more specifically set forth herein and in the Agreement. All payments or distributions made to Certificateholders under the Agreement shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of the Agreement. Each Certificateholder of this 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 Agreement. This Certificate does not purport to summarize the entire Agreement and reference is made to the Agreement for information with respect to the interests, rights, benefits, obligations, proceeds, and duties evidenced hereby. A copy of the Agreement may be examined during normal business hours at the principal office of the Trustee, and at such other places, if any, designated by the Trustee, by any Certificateholder upon request. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Certificateholders under the Agreement at any time by the Company and the Trustee with the consent of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust. Any such consent by the Certificateholder of this Certificate shall be conclusive and binding on such Certificateholder and upon all future Certificateholders of this Certificate and of any 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 Certificate. The Agreement also permits the amendment Series 1997-1A Trust Supplement 13 4 thereof, in certain limited circumstances, without the consent of the Certificateholders of any of the Certificates. As provided in the Agreement and subject to certain limitations set forth therein, the transfer of this Certificate is registrable in the Register upon surrender of this Certificate for registration of transfer at the offices or agencies maintained by the 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 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 Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Trust will be issued to the designated transferee or transferees. The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 Fractional Undivided Interests and integral multiples thereof, provided that one Certificate may be in a different denomination. As provided in the Agreement and subject to certain limitations therein set forth, the Certificates are exchangeable for new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the 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 Trustee shall require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Trustee, the Registrar, and any agent of the Trustee or the Registrar may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and neither the Trustee, the Registrar, nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Agreement and the Trust created thereby shall terminate upon the distribution to Certificateholders of all amounts required to be distributed to them pursuant to the Agreement and the disposition of all property held as part of the Trust Property. THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF THE STATE OF NEW YORK. Unless the certificate of authentication hereon has been executed by the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. Series 1997-1A Trust Supplement 14 5 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed. AMERICA WEST AIRLINES PASS THROUGH TRUST 1997-1A By: FLEET NATIONAL BANK, as Trustee By: --------------------------- Name: ------------------------- Title: ------------------------ Dated: ------------ Series 1997-1A Trust Supplement 15 [FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Certificates referred to in the within-mentioned Agreement. FLEET NATIONAL BANK, as Trustee By: -------------------------- Name: ------------------------ Title: ----------------------- Series 1997-1A Trust Supplement 16 EXHIBIT B REGULAR DISTRIBUTION DATES AND SCHEDULED PAYMENTS
Regular Distribution Date Scheduled Payment ------------------------- ----------------- July 2, 1997 $ January 2, 1998 July 2, 1998 January 2, 1999 July 2, 1999 January 2, 2000 July 2, 2000 January 2, 2001 July 2, 2001 January 2, 2002 July 2, 2002 January 2, 2003 July 2, 2003 January 2, 2004 July 2, 2004 January 2, 2005 July 2, 2005 January 2, 2006 July 2, 2006 January 2, 2007 July 2, 2007 January 2, 2008 July 2, 2008 January 2, 2009 July 2, 2009
Series 1997-1A Trust Supplement 17 EXHIBIT C Related Note Documents Series 1997-1A Trust Supplement EX-4.7 5 TRUST SUPP. NO.1997-1B 1 Exhibit 4.7 This Trust Supplement No. 1997-1B, dated as of June __, 1997 (herein called the "Trust Supplement"), between America West Airlines, Inc., a Delaware corporation (the "Company"), and Fleet National Bank, as trustee (the "Trustee"), to the Pass Through Trust Agreement, dated as of June __, 1997, between the Company and the Trustee (the "Basic Agreement"). W I T N E S S E T H: WHEREAS, the Basic Agreement, unlimited as to the aggregate principal amount of Certificates (unless otherwise specified herein, capitalized terms used herein without definition having the respective meanings specified heretofore in the Basic Agreement) which may be issued thereunder, has heretofore been executed and delivered: WHEREAS, each Owner Trustee, acting on behalf of its respective Owner Participant, will issue, on a non-recourse basis, Equipment Notes, among other things, to refinance the outstanding debt portion of the purchase price of the aircraft purchased by such Owner Trustee and leased to the Company pursuant to the related Lease; WHEREAS, pursuant to the terms and conditions of the Basic Agreement as supplemented by this Trust Supplement (the "Agreement"), the Trustee shall purchase such Equipment Notes issued by each Owner Trustee having the same interest rate as, and final maturity dates not later than the final Regular Distribution Date of, the Certificates issued hereunder and shall hold such Equipment Notes in trust for the benefit of the Certificateholders; WHEREAS, the Trustee hereby declares the creation of the America West Airlines Pass Through Trust 1997-1B (the "1997-1B Trust") for the benefit of the Certificateholders, and the initial Certificateholders as the grantors of the 1997-1B Trust, by their respective acceptances of the Certificates, join in the creation of this 1997-1B Trust with the Trustee; WHEREAS, all of the conditions and requirements necessary to make this Trust Supplement, when duly executed and delivered, a valid, binding and legal instrument in accordance with its terms and for the purposes herein expressed, have been done, performed and fulfilled, and the execution and delivery of this Trust Supplement in the form and with the terms hereof have been in all respects duly authorized; WHEREAS, this Trust Supplement is subject to the provisions of the Trust Indenture Act of 1939, as amended, and shall, to the extent applicable, be governed by such provisions; 2 2 NOW THEREFORE, in consideration of the premises herein, it is agreed between the Company and the Trustee as follows: ARTICLE I THE CERTIFICATES Section 1.01. The Certificates. There is hereby created a series of Certificates to be issued under the Agreement to be distinguished and known as "America West Airlines Pass Through Certificates, Series 1997-1B" (hereinafter defined as the "Series 1997-1B Certificates"). Each Series 1997-1B Certificate represents a Fractional Undivided Interest in the 1997-1B Trust created hereby. The terms and conditions applicable to the Series 1997-1B Certificates are as follows: (a) The aggregate principal amount of the Series 1997-1B Certificates that shall be authenticated under the Agreement (which limit shall not pertain to Series 1997-1B Certificates authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of other Series 1997-1B Certificates pursuant to Sections 3.03, 3.04 and 3.05 of the Basic Agreement) upon their initial issuance is $__________. [The parties hereto acknowledge that the provisions of Section 2.02(b) of the Basic Agreement are of no force or effect with respect to the Series 1997-1B Certificates.] (b) The Regular Distribution Dates with respect to any payment of Scheduled Payments means each January 2 and July 2 commencing [July 2, 1997], until payment of all of the Scheduled Payments to be made under the Equipment Notes has been made. (c) The Final Legal Distribution Date is __________. (d) The Special Distribution Date with respect to a Special Payment shall be the date specified as such in the notice the Trustee must give with respect to such Special Payment pursuant to Section 4.02(c) of the Basic Agreement, which date shall be the date specified as the Special Distribution Date (as defined in the Intercreditor Agreement) with respect to the related Special Payment (as defined in the Intercreditor Agreement) in the applicable written notice given to the Trustee pursuant to Section 2.4(a) of the Intercreditor Agreement. (e) (i) The Series 1997-1B Certificates shall be substantially in the form attached hereto as Exhibit A. Each purchaser of Series 1997-1B Certificates will be deemed Series 1997-1B Trust Supplement 3 3 to represent that either (A) the assets of an employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or of a plan subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), have not been used to purchase Series 1997-1B Certificates or (B) the purchase and holding of Series 1997-1B Certificates is exempt from the prohibited transaction restrictions of ERISA and the Code pursuant to Prohibited Transaction Class Exemption 95-60 (promulgated under ERISA and the Code). (ii ) The Series 1997-1B Certificates shall be Book-Entry Certificates. (f) The Scheduled Payments of principal shall be as set forth in Exhibit B. (g) The proceeds of the Series 1997-1B Certificates shall be used to purchase the Series B Equipment Notes in the principal amount specified below:
Equipment Note Principal Amount Maturity -------------- ---------------- -------- N628AW - B __________ __________ N627AW - B __________ __________ N629AW - B __________ __________ N632AW - B __________ __________
(h) Each Owner Trustee, acting on behalf of its respective Owner Participant, will issue on a non-recourse basis, the Equipment Notes, the proceeds of which shall be used, among other things, to refinance the outstanding debt portion of the purchase price to such Owner Trustee of the following Aircraft:
U.S. Registration Number/Manufacturer's Aircraft Serial Number -------- --------------------- Airbus A320-231 N628AW/067 Airbus A320-231 N627AW/066 Airbus A320-231 N629AW/076 Airbus A320-231 N632AW/081
(i) The related Note Documents are listed on Exhibit C. (j) (i) The Trustee and the Other Trustees are parties to the Intercreditor Agreement which sets forth Series 1997-1B Trust Supplement 4 4 certain terms of subordination and other matters. The Series 1997-1B are junior in right of payment to the America West Airlines Pass Through Certificates, Series 1997-1A and senior in right of payment to the America West Airlines Pass Through Certificates, Series 1997-1C and the America West Airlines Pass Through Certificates, Series 1997-1D. (ii) The holders of Series 1997-1B Certificates may purchase America West Airlines Pass Through Certificates, Series 1997-1A and the Series 1997-1B Certificates may be purchased by the holders of certain series of Certificates with a lower seniority as provided in Article III hereof and as further set forth in Section 6.01(b) of the Basic Agreement. (k) Notice of the termination of the Series 1997-1B Trust shall be mailed promptly by the Trustee to Certificateholders not earlier than the 60th day and not later than the 20th day next preceding such final distribution. ARTICLE II DEFINITIONS Section 2.01. Definitions. For all purposes of the Basic Agreement as supplemented by this Trust Supplement, the following capitalized term has the following meaning: Intercreditor Agreement: Means the Intercreditor Agreement dated as of the date hereof among the Trustee, the Other Trustees, the Liquidity Providers named therein and Fleet National Bank, as Subordination Agent, as amended, supplemented or otherwise modified from time to time in accordance with its terms. Liquidity Facility: Means, initially, the Irrevocable Revolving Credit Agreement dated as of June __, 1997, between Fleet National Bank, as Subordination Agent, as agent and trustee for the 1997-1B Trust, and Kredietbank N.V., acting through its New York branch, and, from and after the replacement of such Agreement pursuant hereto, the Replacement Liquidity Facility therefor, if any, in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms. Other Agreements: Means (i) the Basic Agreement as supplemented by Trust Supplement No. 1997-1A dated the date hereof relating to America West Airlines 1997-1A Pass Through Trust, (ii) the Basic Agreement as supplemented by Trust Supplement No. 1997-1C dated the date hereof relating to America Series 1997-1B Trust Supplement 5 5 West Airlines 1997-1C Pass Through Trust and (iii) the Basic Agreement as supplemented by Trust Supplement No. 1997-1D dated the date hereof relating to America West Airlines 1997-1D Pass Through Trust. Other Trustees: Means the trustee under the Other Agreements, and any successor or other trustee appointed as provided therein. Plan Transferee: Means any Plan or other entity that is using the assets of any Plan to purchase or hold its interest in a Series 1997-1B Certificate. For purposes of this definition, a "Plan" means any employee benefit plan subject to ERISA as well as any plan that is not subject to ERISA but which is subject to Section 4975 of the Internal Revenue Code of 1986, as amended. PTC Event of Default: Means the failure to pay within 10 Business Days of the due date thereof: (i) the outstanding Pool Balance of the Series 1997-1B Certificates on the Final Legal Distribution Date for such Certificates or (ii) interest due on such Certificates on any Distribution Date (unless the Subordination Agent shall have made an Interest Drawing (as defined in the Intercreditor Agreement) with respect thereto in an amount sufficient to pay such interest and shall have distributed such amount to the holders of the Certificates entitled thereto). Special Payment: Means any payment (other than a Scheduled Payment) in respect of, or any proceeds of, any Equipment Note or Trust Indenture Estate (as defined in each Indenture), including Overdue Scheduled Payments (as defined in the Intercreditor Agreement), payments in respect of the redemption or repurchase of any Equipment Note and payments in respect of the sale, of any Equipment Note to the related Owner Trustee, Owner Participant or any other Person. Trust Property: Means (i) the Equipment Notes held as the property of the Trust and all monies at any time paid thereon and all monies due and to become due thereunder, (ii) funds from time to time deposited in the Certificate Account and the Special Payments Account, and (iii) all rights of the Trust and the Trustee, on behalf of the Trust, under the Intercreditor Agreement and the Liquidity Facility, including, without limitation, all rights to receive certain payments thereunder, and all monies paid to the Trustee on behalf of the Trust pursuant to the Intercreditor Agreement or the Liquidity Facility. Underwriter: Means Morgan Stanley & Co. Incorporated. Series 1997-1B Trust Supplement 6 6 ARTICLE III PURCHASE RIGHTS OF CERTIFICATEHOLDERS Section 3.01. (i) At any time after the occurrence and during the continuation of a Triggering Event, each Certificateholder shall have the right to purchase all, but not less than all, of the Class A Certificates upon ten days' written notice to the Class A Trustee and each other Certificateholder, provided that (A) if prior to the end of such ten day period any other Certificateholder notifies such purchasing Certificateholder that such other Certificateholder wants to participate in such purchase, then such other Certificateholder may join with the purchasing Certificateholder to purchase all, but not less than all, of the Class A Certificates pro rata based on the outstanding principal amount of the Certificates held by each such Certificateholder and (B) if prior to the end of such ten-day period any other Certificateholder fails to notify the purchasing Certificateholder of such other Certificateholder's desire to participate in such a purchase, then such other Certificateholder shall lose its right to purchase the Class A Certificates pursuant to this Section and Section 6.01(b) of the Basic Agreement. (ii) By acceptance of its Certificate, each Certificateholder agrees that at any time after the occurrence and during the continuation of a Triggering Event, (1) each Class C Certificateholder shall have the right (which shall not expire upon any purchase of the Class A Certificates pursuant to paragraph (i) above) to purchase all, but not less than all, of the Class A Certificates and the Series 1997-1B Certificates upon ten days' written notice to the Class A Trustee, the Trustee and each other Class C Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class C Certificateholder notifies such purchasing Class C Certificateholder that such other Class C Certificateholder wants to participate in such purchase, then such other Class C Certificateholder may join with the purchasing Class C Certificateholder to purchase all, but not less than all, of the Class A Certificates and the Series 1997-1B Certificates pro rata based on the Fractional Undivided Interest in the Class C Trust held by each such Class C Certificateholder and (B) if prior to the end of such ten day period any other Class C Certificateholder fails to notify the purchasing Class C Certificateholder of such other Class C Certificateholder's desire to participate in such a purchase, then such other Class C Certificateholder shall lose its right to purchase the Class A Certificates Series 1997-1B Trust Supplement 7 7 and Series 1997-1B Certificates pursuant to this Section and Section 6.01(b) of the Basic Agreement; and (2) each Class D Certificateholder shall have the right (which shall not expire upon any purchase of the Class A Certificates pursuant to paragraph (i) above or the purchase of the Class A Certificates and the Series 1997-1B Certificates pursuant to clause (ii)(1) above) to purchase all, but not less than all, of the Class A Certificates, the Series 1997-1B Certificates and the Class C Certificates upon ten days' written notice to the Class A Trustee, the Trustee, the Class C Trustee and each other Class D Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class D Certificateholder notifies such purchasing Class D Certificateholder that such other Class D Certificateholder wants to participate in such purchase, then such other Class D Certificateholder may join with the purchasing Certificateholder to purchase all, but not less than all, of the Class A Certificates, the Series 1997-1B Certificates and the Class C Certificates pro rata based on the Fractional Undivided Interest in the Class D Trust held by each such Class D Certificateholder and (B) if prior to the end of such ten day period any other Class D Certificateholder fails to notify the purchasing Class D Certificateholder of such other Class D Certificateholder's desire to participate in such a purchase, then such other Class D Certificateholder shall lose its right to purchase the Class A Certificates, the Series 1997-1B Certificates, and the Class C Certificates pursuant to this Section and Section 6.01(b) of the Basic Agreement. As used in this Article III, the terms "Class A Certificate", "Class A Trustee", "Class C Certificate", "Class C Certificateholder", "Class C Trust", "Class C Trustee", "Class D Certificate", "Class D Certificateholder" and "Class D Trust" shall have the respective meanings assigned to such terms in the Intercreditor Agreement. ARTICLE IV THE TRUSTEE Section 4.01. The Trustee. The Trustee is hereby directed to execute and deliver the Intercreditor Agreement on or prior to the Issuance Date in the form delivered to the Trustee by the Company. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Trust Supplement or the due execution hereof by the Company, or for or in respect of the recitals and statements contained herein, all of which recitals and statements are made solely by the Company. Series 1997-1B Trust Supplement 8 8 Except as herein otherwise provided, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed by the Trustee by reason of this Trust Supplement other than as set forth in the Basic Agreement, and this Trust Supplement is executed and accepted on behalf of the Trustee, subject to all the terms and conditions set forth in the Basic Agreement, upon the effectiveness thereof, as fully to all intents as if the same were herein set forth at length. The Trustee represents and warrants that the Intercreditor Agreement will be duly executed and delivered by one of its officers who is duly authorized to execute and deliver such document on its behalf. ARTICLE V MISCELLANEOUS PROVISIONS Section 5.01. Basic Agreement Ratified. Except and so far as herein expressly provided, all of the provisions, terms and conditions of the Basic Agreement are in all respects ratified and confirmed; and the Basic Agreement and this Trust Supplement shall be taken, read and construed as one and the same instrument. Section 5.02. GOVERNING LAW. THIS TRUST SUPPLEMENT AND THE SERIES 1997-1B CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Section 5.03. Execution in Counterparts. This Trust Supplement may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. Series 1997-1B Trust Supplement 9 9 IN WITNESS WHEREOF, the Company and the Trustee have caused this Trust Supplement to be duly executed by their respective officers thereto duly authorized, as of the day and year first written above. AMERICA WEST AIRLINES, INC. By: -------------------------- Name: ------------------------ Title: ----------------------- FLEET NATIONAL BANK, as Trustee By: -------------------------- Name: ------------------------ Title: ----------------------- Series 1997-1B Trust Supplement 10 EXHIBIT A FORM OF CERTIFICATE [Include on each Certificate that is a Global Certificate: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.](1) BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS NOT A PLAN TRANSFEREE (AS DEFINED IN THE TRUST AGREEMENT) OR (B) IT IS AN INSURANCE COMPANY USING THE ASSETS OF ITS GENERAL ACCOUNT TO ACQUIRE THIS CERTIFICATE, AND THE CONDITIONS OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ISSUED BY THE U.S. DEPARTMENT OF LABOR HAVE BEEN AND WILL CONTINUE TO BE SATISFIED IN CONNECTION WITH ITS PURCHASE AND HOLDING OF THIS CERTIFICATE. THE TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS. AMERICA WEST AIRLINES PASS THROUGH TRUST 1997-1B Pass Through Certificate, Series 1997-1B Issuance Date: June __, 1997 Final Legal Distribution Date: __________ Evidencing A Fractional Undivided Interest In the 1997-1B Trust, The Property Of Which Includes Certain Equipment Notes Each Secured By An Aircraft Leased To America West Airlines, Inc. Certificate No.___ $_____________ Fractional Undivided Interest representing 0._ % of the Trust per $1,000 of Reference Principal Amount CUSIP No. __________ THIS CERTIFIES THAT _________________________, for value received, is the registered owner of a Fractional Undivided Interest in the amount of $ ____________________(the "Reference Principal Amount") in the America West Airlines Pass Through Trust 1997-1B (the "Trust") created by Fleet National Bank, as trustee (the "Trustee"), pursuant to a Pass Through Trust Agreement, dated as of June __, 1997 (the "Basic Agreement"), ____________________ (1) Not necessarily applicable in respect of one Certificate in definitive form. 11 2 between the Trustee and America West Airlines, Inc., a Delaware corporation (the "Company"), as supplemented by Trust Supplement No. 1997-1B thereto, dated as of June __, 1997 (collectively, the "Agreement"), between the Trustee and 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 Agreement. This Certificate is one of the duly authorized Certificates designated as "America West Airlines Pass Through Certificates, Series 1997-1B" (herein called the "Certificates"). This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement and the Intercreditor Agreement, to which agreements the Certificateholder of this Certificate by virtue of the acceptance hereof assents and by which such Certificateholder is bound. The property of the Trust includes certain Equipment Notes and all rights of the Trust to receive payments under the Intercreditor Agreement and the Liquidity Facility (the "Trust Property"). Each issue of the Equipment Notes is secured by a security interest in the Aircraft leased to the Company. Each of the Certificates represents a Fractional Undivided Interest in the Trust and the Trust Property and has no rights, benefits or interest in respect of any other separate trust established pursuant to the terms of the Basic Agreement for any other series of certificates issued pursuant thereto. The undivided percentage interest in the Trust represented by each of this Certificate (as specified above) and the other America West Airlines Pass Through Certificates, Series 1997-1B, was determined on the basis of (x) the aggregate of the Reference Principal Amount of this Certificate (as specified above) and of the other America West Airlines Pass Through Certificates, Series 1997-1B and (y) the aggregate original principal amounts of the Equipment Notes constituting the Trust Property. Subject to and in accordance with the terms of the Agreement and the Intercreditor Agreement, from funds then available to the Trustee, there will be distributed on each January 2 and July 2 (a "Regular Distribution Date") commencing [July 2, 1997] to the Person in whose name this Certificate is registered at the close of business on the 15th day preceding the Regular Distribution Date, an amount in respect of the Scheduled Payments on the Equipment Notes due on such Regular Distribution Date, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Scheduled Payments. Subject to and in accordance with the terms of the Agreement, in the event that Special Payments on the Equipment Notes are received by the Trustee, from funds then available to the Trustee, there shall be distributed on the applicable Special Distribution Date, to the Person in whose name this Certificate Series 1997-1B Trust Supplement 12 3 is registered at the close of business on the 15th day preceding the Special Distribution Date, an amount in respect of such Special Payments on the Equipment Notes, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Special Payments so received. If a Regular Distribution Date or Special 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 Regular Distribution Date or Special Distribution Date and no interest shall accrue during the intervening period. The Trustee shall mail notice of each Special Payment and the Special Distribution Date therefor to the Certificateholder of this Certificate. Distributions on this Certificate will be made by the Trustee by check mailed to the Person entitled thereto, without the presentation or surrender of this Certificate or the making of any notation hereon. Except as otherwise provided in the Agreement and notwithstanding the above, the final distribution on this Certificate will be made after notice mailed by the Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Trustee specified in such notice. The Certificates do not represent an obligation of, or an obligation guaranteed by, or an interest in, the Company or the Trustee or any affiliate thereof. The Certificates are limited in right of payment, all as more specifically set forth herein and in the Agreement. All payments or distributions made to Certificateholders under the Agreement shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of the Agreement. Each Certificateholder of this 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 Agreement. This Certificate does not purport to summarize the entire Agreement and reference is made to the Agreement for information with respect to the interests, rights, benefits, obligations, proceeds, and duties evidenced hereby. A copy of the Agreement may be examined during normal business hours at the principal office of the Trustee, and at such other places, if any, designated by the Trustee, by any Certificateholder upon request. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Certificateholders under the Agreement at any time by the Company Series 1997-1B Trust Supplement 13 4 and the Trustee with the consent of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust. Any such consent by the Certificateholder of this Certificate shall be conclusive and binding on such Certificateholder and upon all future Certificateholders of this Certificate and of any 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 Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Certificateholders of any of the Certificates. As provided in the Agreement and subject to certain limitations set forth therein, the transfer of this Certificate is registrable in the Register upon surrender of this Certificate for registration of transfer at the offices or agencies maintained by the 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 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 Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Trust will be issued to the designated transferee or transferees. The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 Fractional Undivided Interests and integral multiples thereof, provided, that one Certificate may be in a different denomination. As provided in the Agreement and subject to certain limitations therein set forth, the Certificates are exchangeable for new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the 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 Trustee shall require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Trustee, the Registrar, and any agent of the Trustee or the Registrar may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and neither the Trustee, the Registrar, nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Agreement and the Trust created thereby shall terminate upon the distribution to Certificateholders of all amounts required to be Series 1997-1B Trust Supplement 14 5 distributed to them pursuant to the Agreement and the disposition of all property held as part of the Trust Property. THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF THE STATE OF NEW YORK. Unless the certificate of authentication hereon has been executed by the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed. AMERICA WEST AIRLINES PASS THROUGH TRUST 1997-1B By: FLEET NATIONAL BANK, as Trustee By: --------------------------- Name: ------------------------- Title: ------------------------ Dated: -------------- Series 1997-1B Trust Supplement 15 [FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Certificates referred to in the within-mentioned Agreement. FLEET NATIONAL BANK, as Trustee By: --------------------------- Name: ------------------------- Title: ------------------------ Series 1997-1B Trust Supplement 16 EXHIBIT B REGULAR DISTRIBUTION DATES AND SCHEDULED PAYMENTS
Regular Distribution Date Scheduled Payment ------------------------- ----------------- July 2, 1997 $ January 2, 1998 July 2, 1998 January 2, 1999 July 2, 1999 January 2, 2000 July 2, 2000 January 2, 2001 July 2, 2001 January 2, 2002 July 2, 2002 January 2, 2003 July 2, 2003 January 2, 2004 July 2, 2004 January 2, 2005 July 2, 2005 January 2, 2006 July 2, 2006 January 2, 2007 July 2, 2007 January 2, 2008 July 2, 2008 January 2, 2009 July 2, 2009
Series 1997-1B Trust Supplement 17 EXHIBIT C Related Note Documents Series 1997-1B Trust Supplement EX-4.8 6 TRUST SUPP. NO. 1997-1C 1 Exhibit 4.8 This Trust Supplement No. 1997-1C, dated as of June __, 1997 (herein called the "Trust Supplement"), between America West Airlines, Inc., a Delaware corporation (the "Company"), and Fleet National Bank, as trustee (the "Trustee"), to the Pass Through Trust Agreement, dated as of June __, 1997, between the Company and the Trustee (the "Basic Agreement"). W I T N E S S E T H: WHEREAS, the Basic Agreement, unlimited as to the aggregate principal amount of Certificates (unless otherwise specified herein, capitalized terms used herein without definition having the respective meanings specified heretofore in the Basic Agreement) which may be issued thereunder, has heretofore been executed and delivered: WHEREAS, each Owner Trustee, acting on behalf of its respective Owner Participant, will issue, on a non-recourse basis, Equipment Notes, among other things, to refinance the outstanding debt portion of the purchase price of the aircraft purchased by such Owner Trustee and leased to the Company pursuant to the related Lease; WHEREAS, pursuant to the terms and conditions of the Basic Agreement as supplemented by this Trust Supplement (the "Agreement"), the Trustee shall purchase such Equipment Notes issued by each Owner Trustee having the same interest rate as, and final maturity dates not later than the final Regular Distribution Date of, the Certificates issued hereunder and shall hold such Equipment Notes in trust for the benefit of the Certificateholders; WHEREAS, the Trustee hereby declares the creation of the America West Airlines Pass Through Trust 1997-1C (the "1997-1C Trust") for the benefit of the Certificateholders, and the initial Certificateholders as the grantors of the 1997-1C Trust, by their respective acceptances of the Certificates, join in the creation of this 1997-1C Trust with the Trustee; WHEREAS, all of the conditions and requirements necessary to make this Trust Supplement, when duly executed and delivered, a valid, binding and legal instrument in accordance with its terms and for the purposes herein expressed, have been done, performed and fulfilled, and the execution and delivery of this Trust Supplement in the form and with the terms hereof have been in all respects duly authorized; WHEREAS, this Trust Supplement is subject to the provisions of the Trust Indenture Act of 1939, as amended, and shall, to the extent applicable, be governed by such provisions; NOW THEREFORE, in consideration of the premises herein, it is agreed between the Company and the Trustee as follows: Series 1997-1C Trust Supplement 2 2 ARTICLE I THE CERTIFICATES Section 1.01. The Certificates. There is hereby created a series of Certificates to be issued under the Agreement to be distinguished and known as "America West Airlines Pass Through Certificates, Series 1997-1C" (hereinafter defined as the "Series 1997-1C Certificates"). Each Series 1997-1C Certificate represents a Fractional Undivided Interest in the 1997-1C Trust created hereby. The terms and conditions applicable to the Series 1997-1C Certificates are as follows: (a) The aggregate principal amount of the Series 1997-1C Certificates that shall be authenticated under the Agreement (which limit shall not pertain to Series 1997-1C Certificates authenticated and delivered upon registration of transfer for, or in lieu of, other Series 1997-1C Certificates pursuant to Sections 3.03, 3.04 and 3.05 of the Basic Agreement) upon their initial issuance is $__________. [The parties hereto acknowledge that the provisions of Section 2.02(b) of the Basic Agreement are of no force or effect with respect to the Series 1997-1C Certificates.] (b) The Regular Distribution Dates with respect to any payment of Scheduled Payments means each January 2 and July 2 commencing [July 2, 1997], until payment of all of the Scheduled Payments to be made under the Equipment Notes has been made. (c) The Final Legal Distribution Date is __________. (d) The Special Distribution Date with respect to a Special Payment shall be the date specified as such in the notice the Trustee must give with respect to such Special Payment pursuant to Section 4.02(c) of the Basic Agreement, which date shall be the date specified as the Special Distribution Date (as defined in the Intercreditor Agreement) with respect to the related Special Payment (as defined in the Intercreditor Agreement) in the applicable written notice given to the Trustee pursuant to Section 2.4(a) of the Intercreditor Agreement. (e) (i) The Series 1997-1C Certificates shall be substantially in the form attached hereto as Exhibit A. Each purchaser of Series 1997-1C Certificates will be deemed to represent that either (A) the assets of an employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or of a plan subject to Section 4975 of the Internal Revenue Code of Series 1997-1C Trust Supplement 3 3 1986, as amended (the "Code"), have not been used to purchase Series 1997-1C Certificates or (B) the purchase and holding of Series 1997-1C Certificates is exempt from the prohibited transaction restrictions of ERISA and the Code pursuant to Prohibited Transaction Class Exemption 95-60 (promulgated under ERISA and the Code). (ii) The Series 1997-1C Certificates shall be Book-Entry Certificates. (f) The Scheduled Payments of principal shall be as set forth in Exhibit B. (g) The proceeds of the Series 1997-1C Certificates shall be used to purchase the Series C Equipment Notes in the principal amount specified below:
Equipment Note Principal Amount Maturity -------------- ---------------- -------- N628AW-C $ N627AW-C N629AW-C N632AW-C
(h) Each Owner Trustee, acting on behalf of its respective Owner Participant, will issue on a non-recourse basis, the Equipment Notes, the proceeds of which shall be used, among other things, to refinance the outstanding debt portion of the purchase price to such Owner Trustee of the following Aircraft:
U.S. Registration Number/Manufacturer's Aircraft Serial Number -------- --------------------- Airbus A320-231 N628AW/067 Airbus A320-231 N627AW/066 Airbus A320-231 N629AW/076 Airbus A320-231 N632AW/081
(i) The related Note Documents are listed on Exhibit C. (j) (i) The Trustee and the Other Trustees are parties to the Intercreditor Agreement which sets forth certain terms of subordination and other matters. The Series 1997-1C are junior in right of payment to the America West Airlines Pass Through Certificates, Series 1997-1A and the America West Airlines Pass Through Certificates, Series Series 1997-1C Trust Supplement 4 4 1997-1B and senior in right of payment to the America West Airlines Pass Through Certificates, Series 1997-1D. (ii) The holders of Series 1997-1C Certificates may purchase America West Airlines Pass Through Certificates, Series 1997-1A and America West Airlines Pass Through Certificates, Series 1997-1B and the Series 1997-1C Certificates may be purchased by the holders of certain series of Certificates with a lower seniority as provided in Article III hereof and as further set forth in Section 6.01(b) of the Basic Agreement. (k) Notice of the termination of the Series 1997-1C Trust shall be mailed promptly by the Trustee to Certificateholders not earlier than the 60th day and not later than the 20th day next preceding such final distribution. ARTICLE II DEFINITIONS Section 2.01. Definitions. For all purposes of the Basic Agreement as supplemented by this Trust Supplement, the following capitalized term has the following meaning: Intercreditor Agreement: Means the Intercreditor Agreement dated as of the date hereof among the Trustee, the Other Trustees, the Liquidity Providers named therein and Fleet National Bank, as Subordination Agent, as amended, supplemented or otherwise modified from time to time in accordance with its terms. Liquidity Facility: Means, initially, the Irrevocable Revolving Credit Agreement dated as of June __, 1997, between Fleet National Bank, as Subordination Agent, as agent and trustee for the 1997-1C Trust, and Kredietbank N.V., acting through its New York branch, and, from and after the replacement of such Agreement pursuant hereto, the Replacement Liquidity Facility therefor, if any, in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms. Other Agreements: Means (i) the Basic Agreement as supplemented by Trust Supplement No. 1997-1A dated the date hereof relating to America West Airlines 1997-1A Pass Through Trust, (ii) the Basic Agreement as supplemented by Trust Supplement No. 1997-1B dated the date hereof relating to America West Airlines 1997-1B Pass Through Trust and (iii) the Basic Agreement as supplemented by Trust Supplement No.1997-1D dated Series 1997-1C Trust Supplement 5 5 the date hereof relating to America West Airlines 1997-1D Pass Through Trust. Other Trustees: Means the trustee under the Other Agreements, and any successor or other trustee appointed as provided therein. Plan Transferee: Means any Plan or other entity that is using the assets of any Plan to purchase or hold its interest in a Series 1997-1C Certificate. For purposes of this definition, a "Plan" means any employee benefit plan subject to ERISA as well as any plan that is not subject to ERISA but which is subject to Section 4975 of the Internal Revenue Code of 1986, as amended. PTC Event of Default: Means the failure to pay within 10 Business Days of the due date thereof: (i) the outstanding Pool Balance of the Series 1997-1C Certificates on the Final Legal Distribution Date for such Certificates or (ii) interest due on such Certificates on any Distribution Date (unless the Subordination Agent shall have made an Interest Drawing (as defined in the Intercreditor Agreement) with respect thereto in an amount sufficient to pay such interest and shall have distributed such amount to the holders of the Certificates entitled thereto). Special Payment: Means any payment (other than a Scheduled Payment) in respect of, or any proceeds of, any Equipment Note or Trust Indenture Estate (as defined in each Indenture), including Overdue Scheduled Payments (as defined in the Intercreditor Agreement), payments in respect of the redemption or repurchase of any Equipment Note and payments in respect of the sale, of any Equipment Note to the related Owner Trustee, Owner Participant or any other Person. Trust Property: Means (i) the Equipment Notes held as the property of the Trust and all monies at any time paid thereon and all monies due and to become due thereunder, (ii) funds from time to time deposited in the Certificate Account and the Special Payments Account, and (iii) all rights of the Trust and the Trustee, on behalf of the Trust, under the Intercreditor Agreement and the Liquidity Facility, including, without limitation, all rights to receive certain payments thereunder, and all monies paid to the Trustee on behalf of the Trust pursuant to the Intercreditor Agreement or the Liquidity Facility. Underwriter: Means Morgan Stanley & Co. Incorporated. Series 1997-1C Trust Supplement 6 6 ARTICLE III PURCHASE RIGHTS OF CERTIFICATEHOLDERS Section 3.01. (i) At any time after the occurrence and during the continuation of a Triggering Event, each Certificateholder shall have the right (which shall not expire upon any purchase of the Class A Certificates pursuant to the Class B Trust Agreement) to purchase all, but not less than all, of the Class A Certificates and the Class B Certificates upon ten days' written notice to the Class A Trustee, the Class B Trustee and each other Certificateholder, provided that (A) if prior to the end of such ten day period any other Certificateholder notifies such purchasing Certificateholder that such other Certificateholder wants to participate in such purchase, then such other Certificateholder may join with the purchasing Certificateholder to purchase all, but not less than all, of the Class A Certificates and the Class B Certificates pro rata based on the outstanding principal amount of the Certificates held by each such Certificateholder and (B) if prior to the end of such ten-day period any other Certificateholder fails to notify the purchasing Certificateholder of such other Certificateholder's desire to participate in such a purchase, then such other Certificateholder shall lose its right to purchase the Class A Certificates and Class B Certificates pursuant to this Section and Section 6.01(b) of the Basic Agreement. (ii) By acceptance of its Certificate, each Certificateholder agrees that at any time after the occurrence and during the continuation of a Triggering Event, (1) each Class D Certificateholder shall have the right (which shall not expire upon any purchase of the Class A Certificates pursuant to the Class B Trust Agreement or the purchase of the Class A Certificates and the Class B Certificates pursuant to paragraph (i) above) to purchase all, but not less than all, of the Class A Certificates, the Class B Certificates and the Series 1997-1C Certificates upon ten days' written notice to the Class A Trustee, the Class B Trustee, the Trustee and each other Class D Certificateholder, provided that (A) if prior to the end of such ten-day period any other Class D Certificateholder notifies such purchasing Class D Certificateholder that such other Class D Certificateholder wants to participate in such purchase, then such other Class D Certificateholder may join with the purchasing Certificateholder to purchase all, but not less than all, of the Class A Certificates, the Class B Certificates and the Series 1997-1C Certificates pro rata based on the Fractional Undivided Interest in the Class D Trust held by each such Class D Certificateholder and (B) if prior to the end of such ten day period any other Class D Series 1997-1C Trust Supplement 7 7 Certificateholder fails to notify the purchasing Class D Certificateholder of such other Class D Certificateholder's desire to participate in such a purchase, then such other Class D Certificateholder shall lose its right to purchase the Class A Certificates, the Class B Certificates, and the Series 1997-1C Certificates pursuant to this Section and Section 6.01(b) of the Basic Agreement. As used in this Article III, the terms "Class A Certificate", "Class A Trustee", ""Class B Certificate", "Class B Trust Agreement", "Class B Trustee", "Class D Certificate", "Class D Certificateholder" and "Class D Trust" shall have the respective meanings assigned to such terms in the Intercreditor Agreement. ARTICLE IV THE TRUSTEE Section 4.01. The Trustee. The Trustee is hereby directed to execute and deliver the Intercreditor Agreement on or prior to the Issuance Date in the form delivered to the Trustee by the Company. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Trust Supplement or the due execution hereof by the Company, or for or in respect of the recitals and statements contained herein, all of which recitals and statements are made solely by the Company. Except as herein otherwise provided, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed by the Trustee by reason of this Trust Supplement other than as set forth in the Basic Agreement, and this Trust Supplement is executed and accepted on behalf of the Trustee, subject to all the terms and conditions set forth in the Basic Agreement, upon the effectiveness thereof, as fully to all intents as if the same were herein set forth at length. The Trustee represents and warrants that the Intercreditor Agreement will be duly executed and delivered by one of its officers who is duly authorized to execute and deliver such document on its behalf. ARTICLE V MISCELLANEOUS PROVISIONS Section 5.01. Basic Agreement Ratified. Except and so far as herein expressly provided, all of the provisions, terms and conditions of the Basic Agreement are in all respects ratified and confirmed; and the Basic Agreement and this Trust Supplement Series 1997-1C Trust Supplement 8 8 shall be taken, read and construed as one and the same instrument. Section 5.02. GOVERNING LAW. THIS TRUST SUPPLEMENT AND THE SERIES 1997-1C CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Section 5.03. Execution in Counterparts. This Trust Supplement may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. Series 1997-1C Trust Supplement 9 9 IN WITNESS WHEREOF, the Company and the Trustee have caused this Trust Supplement to be duly executed by their respective officers thereto duly authorized, as of the day and year first written above. AMERICA WEST AIRLINES, INC. By: ---------------------------- Name: -------------------------- Title: ------------------------- FLEET NATIONAL BANK, as Trustee By: ---------------------------- Name: -------------------------- Title: ------------------------- Series 1997-1C Trust Supplement 10 EXHIBIT A FORM OF CERTIFICATE [Include on each Certificate that is a Global Certificate: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.(1) BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS NOT A PLAN TRANSFEREE (AS DEFINED IN THE TRUST AGREEMENT) OR (B) IT IS AN INSURANCE COMPANY USING THE ASSETS OF ITS GENERAL ACCOUNT TO ACQUIRE THIS CERTIFICATE, AND THE CONDITIONS OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ISSUED BY THE U.S. DEPARTMENT OF LABOR HAVE BEEN AND WILL CONTINUE TO BE SATISFIED IN CONNECTION WITH ITS PURCHASE AND HOLDING OF THIS CERTIFICATE. THE TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS. AMERICA WEST AIRLINES PASS THROUGH TRUST 1997-1C Pass Through Certificate, Series 1997-1C Issuance Date: June __, 1997 Final Legal Distribution Date: __________ Evidencing A Fractional Undivided Interest In the 1997-1C Trust, The Property Of Which Includes Certain Equipment Notes Each Secured By An Aircraft Leased To America West Airlines, Inc. Certificate No.___ $_____________ Fractional Undivided Interest representing 0._ % of the Trust per $1,000 of Reference Principal Amount CUSIP No. __________ THIS CERTIFIES THAT _________________________, for value received, is the registered owner of a Fractional Undivided Interest in the amount of $ ____________________(the "Reference Principal Amount") in the America West Airlines 1997-1C Pass Through Trust 1997-1C (the "Trust") created by Fleet National Bank, as trustee (the "Trustee"), pursuant to a Pass Through Trust Agreement, dated as of June __, 1997 (the "Basic - --------------- (1) Not necessarily applicable in respect of one Certificate in definitive form. 11 2 Agreement"), between the Trustee and America West Airlines, Inc., a Delaware corporation (the "Company"), as supplemented by Trust Supplement No. 1997-1C thereto, dated as of June __, 1997 (collectively, the "Agreement"), between the Trustee and 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 Agreement. This Certificate is one of the duly authorized Certificates designated as "America West Airlines Pass Through Certificates, Series 1997-1C" (herein called the "Certificates"). This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement and the Intercreditor Agreement, to which agreements the Certificateholder of this Certificate by virtue of the acceptance hereof assents and by which such Certificateholder is bound. The property of the Trust includes certain Equipment Notes and all rights of the Trust to receive payments under the Intercreditor Agreement and the Liquidity Facility (the "Trust Property"). Each issue of the Equipment Notes is secured by a security interest in the Aircraft leased to the Company. Each of the Certificates represents a Fractional Undivided Interest in the Trust and the Trust Property and has no rights, benefits or interest in respect of any other separate trust established pursuant to the terms of the Basic Agreement for any other series of certificates issued pursuant thereto. The undivided percentage interest in the Trust represented by each of this Certificate (as specified above) and the other America West Airlines Pass Through Certificates, Series 1997-1C, was determined on the basis of (x) the aggregate of the Reference Principal Amount of this Certificate (as specified above) and of the other America West Airlines Pass Through Certificates, Series 1997-1C and (y) the aggregate original principal amounts of the Equipment Notes constituting the Trust Property. Subject to and in accordance with the terms of the Agreement and the Intercreditor Agreement, from funds then available to the Trustee, there will be distributed on each January 2 and July 2 (a "Regular Distribution Date") commencing [July 2, 1997] to the Person in whose name this Certificate is registered at the close of business on the 15th day preceding the Regular Distribution Date, an amount in respect of the Scheduled Payments on the Equipment Notes due on such Regular Distribution Date, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Scheduled Payments. Subject to and in accordance with the terms of the Agreement, in the event that Special Payments on the Equipment Notes are received by the Trustee, from funds then available to the Trustee, there shall be distributed on the applicable Special Distribution Date, to the Person in whose name this Certificate Series 1997-1C Trust Supplement 12 3 is registered at the close of business on the 15th day preceding the Special Distribution Date, an amount in respect of such Special Payments on the Equipment Notes, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Special Payments so received. If a Regular Distribution Date or Special 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 Regular Distribution Date or Special Distribution Date and no interest shall accrue during the intervening period. The Trustee shall mail notice of each Special Payment and the Special Distribution Date therefor to the Certificateholder of this Certificate. Distributions on this Certificate will be made by the Trustee by check mailed to the Person entitled thereto, without the presentation or surrender of this Certificate or the making of any notation hereon. Except as otherwise provided in the Agreement and notwithstanding the above, the final distribution on this Certificate will be made after notice mailed by the Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Trustee specified in such notice. The Certificates do not represent an obligation of, or an obligation guaranteed by, or an interest in, the Company or the Trustee or any affiliate thereof. The Certificates are limited in right of payment, all as more specifically set forth herein and in the Agreement. All payments or distributions made to Certificateholders under the Agreement shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of the Agreement. Each Certificateholder of this 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 Agreement. This Certificate does not purport to summarize the entire Agreement and reference is made to the Agreement for information with respect to the interests, rights, benefits, obligations, proceeds, and duties evidenced hereby. A copy of the Agreement may be examined during normal business hours at the principal office of the Trustee, and at such other places, if any, designated by the Trustee, by any Certificateholder upon request. The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Certificate holders under the Agreement at any time by the Company Series 1997-1C Trust Supplement 13 4 and the Trustee with the consent of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust. Any such consent by the Certificateholder of this Certificate shall be conclusive and binding on such Certificateholder and upon all future Certificateholders of this Certificate and of any 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 Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Certificateholders of any of the Certificates. As provided in the Agreement and subject to certain limitations set forth therein, the transfer of this Certificate is registrable in the Register upon surrender of this Certificate for registration of transfer at the offices or agencies maintained by the 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 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 Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Trust will be issued to the designated transferee or transferees. The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 Fractional Undivided Interests and integral multiples thereof, provided, that one Certificate may be in a different denomination. As provided in the Agreement and subject to certain limitations therein set forth, the Certificates are exchangeable for new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the 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 Trustee shall require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Trustee, the Registrar, and any agent of the Trustee or the Registrar may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and neither the Trustee, the Registrar, nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Agreement and the Trust created thereby shall terminate upon the distribution to Certificateholders of all amounts required to be Series 1997-1C Trust Supplement 14 5 distributed to them pursuant to the Agreement and the disposition of all property held as part of the Trust Property. THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF THE STATE OF NEW YORK. Unless the certificate of authentication hereon has been executed by the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed. AMERICA WEST AIRLINES PASS THROUGH TRUST 1997-1C By: FLEET NATIONAL BANK, as Trustee By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- Dated: ------------ Series 1997-1C Trust Supplement 15 [FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Certificates referred to in the within-mentioned Agreement. FLEET NATIONAL BANK, as Trustee By: ------------------------- Name: ----------------------- Title: ---------------------- Series 1997-1C Trust Supplement 16 EXHIBIT B REGULAR DISTRIBUTION DATES AND SCHEDULED PAYMENTS
Regular Distribution Date Scheduled Payment ------------------------- ----------------- July 2, 1997 $ January 2, 1998 July 2, 1998 January 2, 1999 July 2, 1999 January 2, 2000 July 2, 2000 January 2, 2001 July 2, 2001 January 2, 2002 July 2, 2002 January 2, 2003 July 2, 2003 January 2, 2004 July 2, 2004
Series 1997-1C Trust Supplement 17 EXHIBIT C Related Note Documents Series 1997-1C Trust Supplement EX-4.9 7 TRUST SUPP NO. 1997-1D 1 Exhibit 4.9 This Trust Supplement No. 1997-1D, dated as of June __, 1997 (herein called the "Trust Supplement"), between America West Airlines, Inc., a Delaware corporation (the "Company"), and Fleet National Bank, as trustee (the "Trustee"), to the Pass Through Trust Agreement, dated as of June __, 1997, between the Company and the Trustee (the "Basic Agreement"). W I T N E S S E T H: WHEREAS, the Basic Agreement, unlimited as to the aggregate principal amount of Certificates (unless otherwise specified herein, capitalized terms used herein without definition having the respective meanings specified heretofore in the Basic Agreement) which may be issued thereunder, has heretofore been executed and delivered: WHEREAS, each Owner Trustee, acting on behalf of its respective Owner Participant, will issue, on a non-recourse basis, Equipment Notes, among other things, to refinance the outstanding debt portion of the purchase price of the aircraft purchased by such Owner Trustee and leased to the Company pursuant to the related Lease; WHEREAS, pursuant to the terms and conditions of the Basic Agreement as supplemented by this Trust Supplement (the "Agreement"), the Trustee shall purchase such Equipment Notes issued by each Owner Trustee having the same interest rate as, and final maturity dates not later than the final Regular Distribution Date of, the Certificates issued hereunder and shall hold such Equipment Notes in trust for the benefit of the Certificateholders; WHEREAS, the Trustee hereby declares the creation of the America West Airlines Pass Through Trust 1997-1D (the "1997-1D Trust") for the benefit of the Certificateholders, and the initial Certificateholders as the grantors of the 1997-1D Trust, by their respective acceptances of the Certificates, join in the creation of this 1997-1D Trust with the Trustee; WHEREAS, all of the conditions and requirements necessary to make this Trust Supplement, when duly executed and delivered, a valid, binding and legal instrument in accordance with its terms and for the purposes herein expressed, have been done, performed and fulfilled, and the execution and delivery of this Trust Supplement in the form and with the terms hereof have been in all respects duly authorized; WHEREAS, this Trust Supplement is subject to the provisions of the Trust Indenture Act of 1939, as amended, and shall, to the extent applicable, be governed by such provisions; Series 1997-1D Trust Supplement 2 NOW THEREFORE, in consideration of the premises herein, it is agreed between the Company and the Trustee as follows: ARTICLE I THE CERTIFICATES Section 1.01. The Certificates. There is hereby created a series of Certificates to be issued under the Agreement to be distinguished and known as "America West Airlines Pass Through Certificates, Series 1997-1D" (hereinafter defined as the "Series 1997-1D Certificates"). Each Series 1997-1D Certificate represents a Fractional Undivided Interest in the 1997-1D Trust created hereby. The terms and conditions applicable to the Series 1997-1D Certificates are as follows: (a) The aggregate principal amount of the Series 1997-1D Certificates that shall be authenticated under the Agreement (which limit shall not pertain to Series 1997-1D Certificates authenticated and delivered upon registration of transfer for, or in lieu of, other Series 1997-1D Certificates pursuant to Sections 3.03, 3.04 and 3.05 of the Basic Agreement) upon their initial issuance is $____________. [The parties hereto acknowledge that the provisions of Section 2.02(b) of the Basic Agreement are of no force or effect with respect to the Series 1997-1D Certificates.] (b) The Regular Distribution Dates with respect to any payment of Scheduled Payments means each January 2 and July 2 commencing [July 2, 1997], until payment of all of the Scheduled Payments to be made under the Equipment Notes has been made. (c) The Final Legal Distribution Date is ____________. (d) The Special Distribution Date with respect to a Special Payment shall be the date specified as such in the notice the Trustee must give with respect to such Special Payment pursuant to Section 4.02(c) of the Basic Agreement, which date shall be the date specified as the Special Distribution Date (as defined in the Intercreditor Agreement) with respect to the related Special Payment (as defined in the Intercreditor Agreement) in the applicable written notice given to the Trustee pursuant to Section 2.4(a) of the Intercreditor Agreement. Series 1997-1D Trust Supplement 3 3 (e) (i) The Series 1997-1D Certificates shall be substantially in the form attached hereto as Exhibit A. Each purchaser of Series 1997-1D Certificates will be deemed to represent that either (A) the assets of an employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or of a plan subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"), have not been used to purchase Series 1997-1D Certificates or (B) the purchase and holding of Series 1997-1D Certificates is exempt from the prohibited transaction restrictions of ERISA and the Code pursuant to Prohibited Transaction Class Exemption 95-60 (promulgated under ERISA and the Code). (ii) The Series 1997-1D Certificates shall be Book-Entry Certificates. (f) The Scheduled Payments of principal shall be as set forth in Exhibit B. (g) The proceeds of the Series 1997-1D Certificates shall be used to purchase the Series D Equipment Notes in the principal amount specified below:
Equipment Note Principal Amount Maturity -------------- ---------------- -------- N628AW-D $ N627AW-D N629AW-D N632AW-D
(h) Each Owner Trustee, acting on behalf of its respective Owner Participant, will issue on a non-recourse basis, the Equipment Notes, the proceeds of which shall be used, among other things, to refinance the outstanding debt portion of the purchase price to such Owner Trustee of the following Aircraft: Series 1997-1D Trust Supplement 4 4
U.S. Registration Number/Manufacturer's Aircraft Serial Number -------- --------------------- Airbus A320-231 N628AW/067 Airbus A320-231 N627AW/066 Airbus A320-231 N629AW/076 Airbus A320-231 N632AW/081
(i) The related Note Documents are listed on Exhibit C. (j) (i) The Trustee and the Other Trustees are parties to the Intercreditor Agreement which sets forth certain terms of subordination and other matters. The Series 1997-1D are junior in right of payment to the America West Airlines Pass Through Certificates, Series 1997-1A, the America West Airlines Pass Through Certificates, Series 1997-1B and the America West Pass Through Certificates, Series 1997-1C. (ii) The holders of Series 1997-1D Certificates may purchase America West Airlines Pass Through Certificates, Series 1997- 1A, America West Airlines Pass Through Certificates, Series 1997-1B and America West Pass Through Certificates, Series 1997-1C. (k) Notice of the termination of the Series 1997-1D Trust shall be mailed promptly by the Trustee to Certificateholders not earlier than the 60th day and not later than the 20th day next preceding such final distribution. ARTICLE II DEFINITIONS Section 2.01. Definitions. For all purposes of the Basic Agreement as supplemented by this Trust Supplement, the following capitalized term has the following meaning: Intercreditor Agreement: Means the Intercreditor Agreement dated as of the date hereof among the Trustee, the Other Trustees, the Liquidity Providers named therein and Fleet National Bank, as Subordination Agent, as amended, supplemented or otherwise modified from time to time in accordance with its terms. Series 1997-1D Trust Supplement 5 5 Other Agreements: Means (i) the Basic Agreement as supplemented by Trust Supplement No. 1997-1A dated the date hereof relating to America West Airlines 1997-1A Pass Through Trust, (ii) the Basic Agreement as supplemented by Trust Supplement No. 1997-1B dated the date hereof relating to America West Airlines 1997-1B Pass Through Trust and (iii) the Basic Agreement as supplemented by Trust Supplement No.1997-1C dated the date hereof relating to America West Airlines 1997-1C Pass Through Trust. Other Trustees: Means the trustee under the Other Agreements, and any successor or other trustee appointed as provided therein. Plan Transferee: Means any Plan or other entity that is using the assets of any Plan to purchase or hold its interest in a Series 1997-1D Certificate. For purposes of this definition, a "Plan" means any employee benefit plan subject to ERISA as well as any plan that is not subject to ERISA but which is subject to Section 4975 of the Internal Revenue Code of 1986, as amended. PTC Event of Default: Means any failure to pay within 10 Business Days of the due date thereof: (i) the outstanding Pool Balance on the Final Legal Distribution Date for such series specified in the related Trust Supplement or (ii) interest due on such Certificates on any Distribution Date. Special Payment: Means any payment (other than a Scheduled Payment) in respect of, or any proceeds of, any Equipment Note or Trust Indenture Estate (as defined in each Indenture), including Overdue Scheduled Payments (as defined in the Intercreditor Agreement), payments in respect of the redemption or repurchase of any Equipment Note and payments in respect of the sale, of any Equipment Note to the related Owner Trustee, Owner Participant or any other Person. Trust Property: Means (i) the Equipment Notes held as the property of the Trust and all monies at any time paid thereon and all monies due and to become due thereunder, (ii) funds from time to time deposited in the Certificate Account and the Special Payments Account, and (iii) all rights of the Trust and the Trustee, on behalf of the Trust and under the Intercreditor Agreement, including, without limitation, all rights to receive certain payments thereunder, and all monies paid to the Trustee on behalf of the Trust pursuant to the Intercreditor Agreement. Underwriter: Means Morgan Stanley & Co. Incorporated. Series 1997-1D Trust Supplement 6 6 ARTICLE III PURCHASE RIGHTS OF CERTIFICATEHOLDERS Section 3.01. At any time after the occurrence and during the continuation of a Triggering Event, each Certificateholder shall have the right (which shall not expire upon any purchase of the Class A Certificates pursuant to the Class B Trust Agreement or the purchase of the Class A Certificates and the Class B Certificates pursuant to the Class C Trust Agreement) to purchase all, but not less than all, of the Class A Certificates, the Class B Certificates and the Class C Certificates upon ten days' written notice to the Class A Trustee, the Class B Trustee, the Class C Trustee and each other Certificateholder, provided that (A) if prior to the end of such ten day period any other Certificateholder notifies such purchasing Certificateholder that such other Certificateholder wants to participate in such purchase, then such other Certificateholder may join with the purchasing Certificateholder to purchase all, but not less than all, of the Class A Certificates, the Class B Certificates and the Class C Certificates pro rata based on the outstanding principal amount of the Certificates held by each such Certificateholder and (B) if prior to the end of such ten-day period any other Certificateholder fails to notify the purchasing Certificateholder of such other Certificateholder's desire to participate in such a purchase, then such other Certificateholder shall lose its right to purchase the Class A Certificates, Class B Certificates and the Class C Certificates pursuant to this Section and Section 6.01(b) of the Basic Agreement. As used in this Article III, the terms "Class A Certificate", "Class A Trustee", ""Class B Certificate", "Class B Trust Agreement", "Class B Trustee", "Class C Certificate", "Class C Trust Agreement" and "Class C Trustee" shall have the respective meanings assigned to such terms in the Intercreditor Agreement. ARTICLE IV THE TRUSTEE Section 4.01. The Trustee. The Trustee is hereby directed to execute and deliver the Intercreditor Agreement on or prior to the Issuance Date in the form delivered to the Trustee by the Company. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Trust Supplement or the due execution hereof by the Company, or for or in respect of the recitals and Series 1997-1D Trust Supplement 7 7 statements contained herein, all of which recitals and statements are made solely by the Company. Except as herein otherwise provided, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed by the Trustee by reason of this Trust Supplement other than as set forth in the Basic Agreement, and this Trust Supplement is executed and accepted on behalf of the Trustee, subject to all the terms and conditions set forth in the Basic Agreement, upon the effectiveness thereof, as fully to all intents as if the same were herein set forth at length. The Trustee represents and warrants that the Intercreditor Agreement will be duly executed and delivered by one of its officers who is duly authorized to execute and deliver such document on its behalf. ARTICLE V MISCELLANEOUS PROVISIONS Section 5.01. Basic Agreement Ratified. Except and so far as herein expressly provided, all of the provisions, terms and conditions of the Basic Agreement are in all respects ratified and confirmed; and the Basic Agreement and this Trust Supplement shall be taken, read and construed as one and the same instrument. Section 5.02. GOVERNING LAW. THIS TRUST SUPPLEMENT AND THE SERIES 1997-1D CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Section 5.03. Execution in Counterparts. This Trust Supplement may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument. Series 1997-1D Trust Supplement 8 8 IN WITNESS WHEREOF, the Company and the Trustee have caused this Trust Supplement to be duly executed by their respective officers thereto duly authorized, as of the day and year first written above. AMERICA WEST AIRLINES, INC. By: --------------------------- Name: ------------------------- Title: ------------------------ FLEET NATIONAL BANK, as Trustee By: --------------------------- Name: ------------------------- Title: ------------------------ Series 1997-1D Trust Supplement 9 EXHIBIT A FORM OF CERTIFICATE [Include on each Certificate that is a Global Certificate: UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN].(1) BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS NOT A PLAN TRANSFEREE (AS DEFINED IN THE TRUST AGREEMENT) OR (B) IT IS AN INSURANCE COMPANY USING THE ASSETS OF ITS GENERAL ACCOUNT TO ACQUIRE THIS CERTIFICATE, AND THE CONDITIONS OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 ISSUED BY THE U.S. DEPARTMENT OF LABOR HAVE BEEN AND WILL CONTINUE TO BE SATISFIED IN CONNECTION WITH ITS PURCHASE AND HOLDING OF THIS CERTIFICATE. THE TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS. AMERICA WEST AIRLINES PASS THROUGH TRUST 1997-1D Pass Through Certificate, Series 1997-1D Issuance Date: June __, 1997 Final Legal Distribution Date: ________________ Evidencing A Fractional Undivided Interest In the 1997-1D Trust, The Property Of Which Includes Certain Equipment Notes Each Secured By An Aircraft Leased To America West Airlines, Inc. Certificate No.___ $_____________ Fractional Undivided Interest representing 0._ % of the Trust per $1,000 of Reference Principal Amount CUSIP No. ___________ THIS CERTIFIES THAT _________________________, for value received, is the registered owner of a Fractional Undivided Interest in the amount of $ ____________________(the "Reference Principal Amount") in the America West Airlines Pass Through Trust 1997-1D (the "Trust") created by Fleet National Bank, as trustee (the "Trustee"), pursuant to a Pass Through Trust Agreement, dated as of June __, 1997 (the "Basic Agreement"), - --------------- (1) Not necessarily applicable in respect of one Certificate in definitive form. 10 2 between the Trustee and America West Airlines, Inc., a Delaware corporation (the "Company"), as supplemented by Trust Supplement No. 1997-1D thereto, dated as of June __, 1997 (collectively, the "Agreement"), between the Trustee and 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 Agreement. This Certificate is one of the duly authorized Certificates designated as "America West Airlines Pass Through Certificates, Series 1997-1D" (herein called the "Certificates"). This Certificate is issued under and is subject to the terms, provisions and conditions of the Agreement and the Intercreditor Agreement, to which agreements the Certificateholder of this Certificate by virtue of the acceptance hereof assents and by which such Certificateholder is bound. The property of the Trust includes certain Equipment Notes and all rights of the Trust to receive payments under the Intercreditor Agreement (the "Trust Property"). Each issue of the Equipment Notes is secured by a security interest in the Aircraft leased to the Company. Each of the Certificates represents a Fractional Undivided Interest in the Trust and the Trust Property and has no rights, benefits or interest in respect of any other separate trust established pursuant to the terms of the Basic Agreement for any other series of certificates issued pursuant thereto. The undivided percentage interest in the Trust represented by each of this Certificate (as specified above) and the other America West Airlines Pass Through Certificates, Series 1997-1D, was determined on the basis of (x) the aggregate of the Reference Principal Amount of this Certificate (as specified above) and of the other America West Airlines Pass Through Certificates, Series 1997-1D and (y) the aggregate original principal amounts of the Equipment Notes constituting the Trust Property. Subject to and in accordance with the terms of the Agreement and the Intercreditor Agreement, from funds then available to the Trustee, there will be distributed on each January 2 and July 2 (a "Regular Distribution Date") commencing [July 2, 1997] to the Person in whose name this Certificate is registered at the close of business on the 15th day preceding the Regular Distribution Date, an amount in respect of the Scheduled Payments on the Equipment Notes due on such Regular Distribution Date, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Scheduled Payments. Subject to and in accordance with the terms of the Agreement, in the event that Special Payments on the Equipment Notes are received by the Trustee, from funds then available to the Trustee, there shall be distributed on the applicable Special Series 1997-1D Trust Supplement 11 3 Distribution Date, to the Person in whose name this Certificate is registered at the close of business on the 15th day preceding the Special Distribution Date, an amount in respect of such Special Payments on the Equipment Notes, the receipt of which has been confirmed by the Trustee, equal to the product of the percentage interest in the Trust evidenced by this Certificate and an amount equal to the sum of such Special Payments so received. If a Regular Distribution Date or Special 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 Regular Distribution Date or Special Distribution Date and no interest shall accrue during the intervening period. The Trustee shall mail notice of each Special Payment and the Special Distribution Date therefor to the Certificateholder of this Certificate. Distributions on this Certificate will be made by the Trustee by check mailed to the Person entitled thereto, without the presentation or surrender of this Certificate or the making of any notation hereon. Except as otherwise provided in the Agreement and notwithstanding the above, the final distribution on this Certificate will be made after notice mailed by the Trustee of the pendency of such distribution and only upon presentation and surrender of this Certificate at the office or agency of the Trustee specified in such notice. The Certificates do not represent an obligation of, or an obligation guaranteed by, or an interest in, the Company or the Trustee or any affiliate thereof. The Certificates are limited in right of payment, all as more specifically set forth herein and in the Agreement. All payments or distributions made to Certificateholders under the Agreement shall be made only from the Trust Property and only to the extent that the Trustee shall have sufficient income or proceeds from the Trust Property to make such payments in accordance with the terms of the Agreement. Each Certificateholder of this 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 Agreement. This Certificate does not purport to summarize the entire Agreement and reference is made to the Agreement for information with respect to the interests, rights, benefits, obligations, proceeds, and duties evidenced hereby. A copy of the Agreement may be examined during normal business hours at the principal office of the Trustee, and at such other places, if any, designated by the Trustee, by any Certificateholder upon request. Series 1997-1D Trust Supplement 12 4 The Agreement permits, with certain exceptions therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Certificateholders under the Agreement at any time by the Company and the Trustee with the consent of the Certificateholders holding Certificates evidencing Fractional Undivided Interests aggregating not less than a majority in interest in the Trust. Any such consent by the Certificateholder of this Certificate shall be conclusive and binding on such Certificateholder and upon all future Certificateholders of this Certificate and of any 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 Certificate. The Agreement also permits the amendment thereof, in certain limited circumstances, without the consent of the Certificateholders of any of the Certificates. As provided in the Agreement and subject to certain limitations set forth therein, the transfer of this Certificate is registrable in the Register upon surrender of this Certificate for registration of transfer at the offices or agencies maintained by the 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 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 Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the Trust will be issued to the designated transferee or transferees. The Certificates are issuable only as registered Certificates without coupons in denominations of $1,000 Fractional Undivided Interests and integral multiples thereof, provided, that one Certificate may be in a different denomination. As provided in the Agreement and subject to certain limitations therein set forth, the Certificates are exchangeable for new Certificates of authorized denominations evidencing the same aggregate Fractional Undivided Interest in the 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 Trustee shall require payment of a sum sufficient to cover any tax or governmental charge payable in connection therewith. The Trustee, the Registrar, and any agent of the Trustee or the Registrar may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and neither Series 1997-1D Trust Supplement 13 5 the Trustee, the Registrar, nor any such agent shall be affected by any notice to the contrary. The obligations and responsibilities created by the Agreement and the Trust created thereby shall terminate upon the distribution to Certificateholders of all amounts required to be distributed to them pursuant to the Agreement and the disposition of all property held as part of the Trust Property. THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS OF THE STATE OF NEW YORK. Unless the certificate of authentication hereon has been executed by the Trustee, by manual signature, this Certificate shall not be entitled to any benefit under the Agreement or be valid for any purpose. IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed. AMERICA WEST AIRLINES PASS THROUGH TRUST 1997-1D By: FLEET NATIONAL BANK, as Trustee By: --------------------------- Name: ------------------------- Title: ------------------------ Dated: ----------------- Series 1997-1D Trust Supplement 14 [FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Certificates referred to in the within-mentioned Agreement. FLEET NATIONAL BANK, as Trustee By: --------------------------- Name: ------------------------- Title: ------------------------ Series 1997-1D Trust Supplement 15 EXHIBIT B REGULAR DISTRIBUTION DATES AND SCHEDULED PAYMENTS
Regular Distribution Date Scheduled Payment ------------------------- ----------------- July 2, 1997 $ January 2, 1998 July 2, 1998 January 2, 1999 July 2, 1999 January 2, 2000 July 2, 2000 January 2, 2001 July 2, 2001 January 2, 2002 July 2, 2002
Series 1997-1D Trust Supplement 16 EXHIBIT C Related Note Documents Series 1997-1D Trust Supplement EX-4.10 8 REVOLVING CREDIT AGREEMENT - CLASS A CERTIF 1 Exhibit 4.10 IRREVOCABLE REVOLVING CREDIT AGREEMENT CLASS A CERTIFICATES Dated as of June __, 1997 between FLEET NATIONAL BANK, as Subordination Agent, as agent and trustee for the America West Airlines Pass Through Trust 1997-1A, as Borrower and KREDIETBANK N.V., NEW YORK BRANCH, as Liquidity Provider Relating to America West Airlines Pass Through Trust 1997-1A [_._]% America West Airlines Pass Through Certificates, Series 1997-1A 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS . . . . . . . . . . . . . . 1 Section 1.1 Certain Defined Terms . . . . . . . . . . . . . . . . 1 ARTICLE II AMOUNT AND TERMS OF THE COMMITMENT . . . . . . . . 5 Section 2.1 The Advances . . . . . . . . . . . . . . . . . . . . . 5 Section 2.2 Making the Advances . . . . . . . . . . . . . . . . . 6 Section 2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 2.4 Reduction or Termination of the Commitment . . . . . . . . . . . . . . . . . . . . . 8 Section 2.5 Repayments of Interest Advances or the Final Advance . . . . . . . . . . . . . . . . . . . . 8 Section 2.6 Repayments of Downgrade Advances . . . . . . . . . . . 8 Section 2.7 Payments to the Liquidity Provider Under the Intercreditor Agreement . . . . . . . . . . . . . 9 Section 2.8 Book Entries . . . . . . . . . . . . . . . . . . . . . 9 Section 2.9 Payments from Available Funds Only . . . . . . . . . . 9 ARTICLE III OBLIGATIONS OF THE BORROWER . . . . . . . . . . 10 Section 3.1 Increased Costs . . . . . . . . . . . . . . . . . . . 10 Section 3.2 Capital Adequacy . . . . . . . . . . . . . . . . . . . 11 Section 3.3 Payments Free of Deductions . . . . . . . . . . . . . 12 Section 3.4 Payments . . . . . . . . . . . . . . . . . . . . . . . 12 Section 3.5 Computations . . . . . . . . . . . . . . . . . . . . . 13 Section 3.6 Payment on Non-Business Days . . . . . . . . . . . . . 13 Section 3.7 Interest . . . . . . . . . . . . . . . . . . . . . . . 13 Section 3.8 Replacement of Borrower . . . . . . . . . . . . . . . 14 Section 3.9 Funding Loss Indemnification . . . . . . . . . . . . . 14 Section 3.10 Illegality . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE IV CONDITIONS PRECEDENT . . . . . . . . . . . . 15 Section 4.1 Conditions Precedent to Effectiveness of Section 2.1 . . . . . . . . . . . . . . . . . . . . . 15 Section 4.2 Conditions Precedent to Borrowing . . . . . . . . . . 18
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Page ---- ARTICLE V COVENANTS . . . . . . . . . . . . . . . 18 Section 5.1 Affirmative Covenants of the Borrower . . . . . . . . 18 Section 5.2 Negative Covenants of the Borrower . . . . . . . . . . 18 ARTICLE VI FINAL ADVANCE . . . . . . . . . . . . . . 19 Section 6.1 Final Advance . . . . . . . . . . . . . . . . . . . . 19 ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . 19 Section 7.1 Amendments, Etc. . . . . . . . . . . . . . . . . . . . 19 Section 7.2 Notices, Etc. . . . . . . . . . . . . . . . . . . . . 19 Section 7.3 No Waiver; Remedies . . . . . . . . . . . . . . . . . 20 Section 7.4 Further Assurances . . . . . . . . . . . . . . . . . . 20 Section 7.5 Indemnification; Survival of Certain Provisions . . . . . . . . . . . . . . . . . . . . . 20 Section 7.6 Liability of the Liquidity Provider . . . . . . . . . 21 Section 7.7 Costs, Expenses and Taxes . . . . . . . . . . . . . . 21 Section 7.8 Binding Effect; Participations . . . . . . . . . . . . 22 Section 7.9 Severability . . . . . . . . . . . . . . . . . . . . . 24 Section 7.10 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . 24 Section 7.11 Submission to Jurisdiction; Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . 24 Section 7.12 Execution in Counterparts . . . . . . . . . . . . . . 25 Section 7.13 Entirety . . . . . . . . . . . . . . . . . . . . . . 25 Section 7.14 Headings; Section References . . . . . . . . . . . . 25 Section 7.15 LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES . . . . . . . . . . . . . . . . . . . . . . 25 Annex I - Interest Advance Notice of Borrowing Annex II - Downgrade Advance Notice of Borrowing Annex III - Notice of Automatic Reduction of Commitment Annex IV - Notice of Replacement Borrower
ii 4 IRREVOCABLE REVOLVING CREDIT AGREEMENT CLASS A CERTIFICATES IRREVOCABLE REVOLVING CREDIT AGREEMENT, CLASS A CERTIFICATES dated as of June __, 1997 between FLEET NATIONAL BANK, a national banking association, not in its individual capacity but solely as Subordination Agent under the Intercreditor Agreement (each as defined below), as agent and trustee for the Class A Trust (as defined below) (the "Borrower"), and KREDIETBANK, N.V., acting through its New York Branch (the "Liquidity Provider"). W I T N E S S E T H WHEREAS, pursuant to the Class A Trust Agreement (such term and all other capitalized terms used in these recitals having the meanings set forth or referred to in Section 1.1), the Class A Trust is issuing the Class A Certificates; and WHEREAS, the Borrower, in order to support the timely payment of a portion of the interest on the Class A Certificates in accordance with their terms, has requested the Liquidity Provider to enter into this Agreement, providing in part for the Borrower to request in specified circumstances that advances be made hereunder. NOW, THEREFORE, in consideration of the premises, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.1 Certain Defined Terms. (a) Definitions. As used in this Agreement and unless otherwise expressly indicated, or unless the context clearly requires otherwise, the following capitalized terms shall have the following respective meanings for all purposes of this Agreement: "Advance" means an Interest Advance, a Final Advance or a Downgrade Advance, as the case may be. "Applicable Liquidity Rate" means the rates of interest specified in Section 3.7 with respect to any Advance. "Applicable Margin" means (x) with respect to any Downgrade Advance (other than an Applied Downgrade Advance) .40% (40 basis points) per annum and (y) with respect to any other Advance including an Applied Downgrade Advance 1.5% (150 basis points) per annum. "Applied Downgrade Advance" means any amount in respect of a Downgrade Advance withdrawn from the Class A Cash Collateral Account for the purpose of paying interest on the Class A 5 Certificates in accordance with Section 3.6(f) of the Intercreditor Agreement. "Available Commitment" means, at any time of determination, an amount equal to (i) the Commitment at such time less (ii) subject to the proviso contained in the third sentence of Section 2.2(a), the aggregate amount of each Advance outstanding at such time; provided that following a Downgrade Advance or a Final Advance, the Available Commitment shall be zero. "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of (i) the base commercial lending rate announced from time to time by the Liquidity Provider, or (ii) the rate quoted by the Liquidity Provider, at approximately 11:00 A.M., New York City time, to dealers in the New York Federal funds market for overnight offering of dollars by the Liquidity Provider, for deposit plus .50 of 1 percent (.50%). "Base Rate Advance" means an Advance that bears interest at a rate based upon the Base Rate. "Borrower" has the meaning assigned to such term in the recital of parties to this Agreement. "Borrowing" means the making of Advances requested by delivery of a Notice of Borrowing or pursuant to Section 6.1. "Business Day" means any day other than a Saturday or Sunday or a day on which commercial banks are required or authorized to close in New York, New York or Hartford, Connecticut, and, if the applicable Business Day relates to any Advance or other amount bearing interest based on the LIBOR Rate, on which dealings are carried on in the London interbank market. "Commitment" means, initially, [$__,___,___] as the same may be reduced from time to time in accordance with Section 2.4(a). "Downgrade Advance" means an Advance made pursuant to Section 2.2(b). "Effective Date" has the meaning specified in Section 4.1. The delivery of the certificate of the Liquidity Provider contemplated by Section 4.1(e) shall be conclusive evidence that the Effective Date has occurred. "Expenses" means liabilities, obligations, damages, settlements, penalties, claims, actions, suits, costs, expenses and disbursements (including, without limitation, reasonable fees 2 6 and disbursements of legal counsel and costs of investigation), provided that Expenses shall not include any Taxes. "Expiry Date" means [__], [____]. "Final Advance" means an Advance made pursuant to Sections 2.2(c) and 6.1. "Intercreditor Agreement" means the Intercreditor Agreement dated as of the date hereof, among the Trustees, the Liquidity Provider, the liquidity provider under each Liquidity Facility (other than this Agreement) and the Subordination Agent, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Interest Advance" means an Advance made pursuant to Section 2.2(a). "Interest Period" means, with respect to any LIBOR Advance, each of the following periods: (i) the period beginning on the date such LIBOR Advance is made (or is converted from a Base Rate Advance) and ending on the next Regular Distribution Date; and (ii) each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the next Regular Distribution Date. "Lending Office" means the lending office of the Liquidity Provider, presently located at 125 West 55th Street, New York, NY 10019, or such other lending office as the Liquidity Provider from time to time shall notify the Borrower as its lending office hereunder. "LIBOR Advance" means an Advance bearing interest at a rate based upon the LIBOR Rate. "LIBOR Rate" means, with respect to any Interest Period, the rate per annum at which deposits in Dollars are offered for the relevant Interest Period by the Liquidity Provider to prime banks in the London interbank market at approximately 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in the principal amount of the Advance to which such Interest Period is to apply and for a period of time comparable to such Interest Period, as quoted by the Liquidity Provider to the Subordination Agent. "Liquidity Event of Default" means the occurrence of the following: all of the Equipment Notes shall have been either declared to be immediately due and payable or shall not have been paid at their final maturity. A Liquidity Event of Default shall 3 7 not occur upon an automatic acceleration of the Equipment Notes as a result of an America West Bankruptcy Event. "Liquidity Indemnitee" means (i) the Liquidity Provider, (ii) each affiliate of the Liquidity Provider, (iii) the respective directors, officers, employees, agents and servants of the Liquidity Provider and its affiliates, and (iv) the successors and permitted assigns of the persons described in clauses (i) through (iii), inclusive. "Liquidity Provider" has the meaning assigned to such term in the recital of parties to this Agreement. "Margin" means 0.40% per annum. "Non-Excluded Tax" has the meaning specified in Section 3.3. "Notice of Borrowing" has the meaning specified in Section 2.2(d). "Notice of Replacement Borrower" has the meaning specified in Section 3.8. "Participant" has the meaning assigned to such term in Section 7.8(b). "Prospectus" means the prospectus included in the registration statement on Form S-3 (File No. 333-_____) filed by America West relating to certain pass through certificates, as such Prospectus may be amended or supplemented. "Related Indemnitee" means, with respect to any Liquidity Indemnitee, its director, officer, employee, agent, affiliate or employer. "Required Amount" means, for any day, the sum of the aggregate amount of interest, calculated at the rate per annum equal to the Stated Interest Rate for the Class A Certificates, that would be payable on the Class A Certificates on each of the three successive semiannual Regular Distribution Dates immediately following such day or, if such day is a Regular Distribution Date, on such day and the succeeding two semiannual Regular Distribution Dates, in each case calculated on the basis of the Pool Balance of the Class A Certificates on such day and without regard to expected future payments of principal on the Class A Certificates. "Termination Date" means the earliest to occur of the following: (i) the Expiry Date; (ii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that all of 4 8 the Class A Certificates have been paid in full (or provision has been made for such payment in accordance with the Intercreditor Agreement and the Trust Agreements) or are otherwise no longer entitled to the benefits of this Agreement; (iii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that a Replacement Liquidity Facility has been substituted for this Agreement in full pursuant to Section 3.6(e) of the Intercreditor Agreement; (iv) the date on which the Liquidity Provider makes the Final Advance; and (v) the date on which no Advance is or may (including by reason of reinstatement as herein provided) become available for a Borrowing hereunder. "Unpaid Advance" has the meaning assigned to such term in Section 2.5. (b) Terms Defined in the Intercreditor Agreement. For all purposes of this Agreement, the following terms shall have the respective meanings assigned to such terms in the Intercreditor Agreement: "America West", "America West Bankruptcy Event", "Certificates", "Class A Certificates", "Class A Certificateholders", "Class A Cash Collateral Account", "Class A Trust", "Class A Trust Agreement", "Class A Trustee", "Class B Certificates", "Class C Certificates", "Class D Certificates", "Closing Date", "Controlling Party", "Distribution Date", "Dollars or $", "Equipment Notes", "Indenture", "Investment Earnings", "Lease", "Liquidity Facility", "Moody's", "Operative Agreements", "Performing Equipment Note", "Performing Note Deficiency", "Person", "Pool Balance", "Rating Agency", "Refunding Agreement", "Regular Distribution Date", "Replacement Liquidity Facility", "Responsible Officer", "Scheduled Payment", "Special Payment", "Standard & Poor's", "Stated Interest Rate", "Subordination Agent", "Taxes", "Threshold Rating", "Triggering Event", "Trust", "Trust Agreements", "Trustee", "Underwriters", "Underwriting Agreement", and "Written Notice". ARTICLE II AMOUNT AND TERMS OF THE COMMITMENT Section 2.1 The Advances. The Liquidity Provider hereby irrevocably agrees, on the terms and conditions hereinafter set forth, to make Advances to the Borrower from time to time on any Business Day during the period from the Effective Date until 12:00 Noon (New York City time) on the Expiry Date (unless the obligations of the Liquidity Provider shall be earlier terminated in accordance with the terms of Section 5 9 2.4(b)) in an aggregate amount at any time outstanding not to exceed the Commitment. Section 2.2 Making the Advances. (a) Interest Advances shall be made in one or more Borrowings by delivery to the Liquidity Provider of one or more written and completed Notices of Borrowing in substantially the form of Annex I attached hereto, signed by a Responsible Officer of the Borrower, in an amount not exceeding the Available Commitment at such time and shall be used solely for the payment when due of interest on the Class A Certificates at the Stated Interest Rate therefor in accordance with Section 3.6(a) of the Intercreditor Agreement. Each Interest Advance made hereunder shall automatically reduce the Available Commitment and the amount available to be borrowed hereunder by subsequent Advances by the amount of such Interest Advance (subject to reinstatement as provided in the next sentence). Upon repayment to the Liquidity Provider in full of the amount of any Interest Advance made pursuant to this Section 2.2(a), together with accrued interest thereon (as provided herein), the Available Commitment shall be reinstated by the amount of such repaid Interest Advance; provided, however, that the Available Commitment shall not be so reinstated at any time if (x) both (i) a Triggering Event shall have occurred and be continuing and (ii) a Performing Note Deficiency exists or (y) a Liquidity Event of Default shall have occurred and be continuing. (b) A Downgrade Advance shall be made in a single Borrowing upon a downgrading of the rating of the Liquidity Provider resulting in the Liquidity Provider's ratings not meeting the Threshold Rating (as provided for in Section 3.6(c) of the Intercreditor Agreement) unless a Replacement Liquidity Facility shall have been delivered to the Borrower in accordance with said Section 3.6(c), by delivery to the Liquidity Provider of a written and completed Notice of Borrowing in substantially the form of Annex II attached hereto, signed by a Responsible Officer of the Borrower, in an amount not exceeding the Available Commitment at such time, and shall be used to fund the Class A Cash Collateral Account in accordance with said Section 3.6(c). The Liquidity Provider shall promptly notify the Borrower of any downgrade of its unsecured debt rating by Moody's or Standard & Poor's below the applicable Threshold Rating. (c) A Final Advance shall be made by the Liquidity Provider without the necessity for a Notice of Borrowing at the option of the Liquidity Provider on the occurrence of an event described in Section 6.1(a) or 6.1(b) in an amount equal to the Available Commitment at such time, and shall be used to fund the Class A Cash Collateral Account. (d) Each Borrowing (other than under Section 2.2(c)) shall be made on notice in writing (a "Notice of Borrowing") in substantially the form required by Section 2.2(a) or 2.2(b), as 6 10 the case may be, given not later than 12:00 Noon (New York City time) on the Business Day prior to the day of the proposed Borrowing by the Borrower to the Liquidity Provider. Upon satisfaction of the conditions precedent set forth in Section 4.2 with respect to a requested Borrowing, the Liquidity Provider shall, before 12:00 Noon (New York City time) on the proposed date of such Borrowing or on such later Business Day specified by the Borrower in such Notice of Borrowing, make available to the Borrower, in U.S. dollars and in immediately available funds, the amount of such Borrowing to be paid to the Borrower in accordance with its payment instructions. If a Notice of Borrowing is delivered by the Borrower in respect of any Borrowing after 12:00 Noon (New York City time) on a Business Day, the Liquidity Provider shall, before 12:00 Noon (New York City time) on the second Business Day next following the day of receipt of such Notice of Borrowing or on such later Business Day specified by the Borrower in such Notice of Borrowing, make available to the Borrower, in Dollars and in immediately available funds, the amount of such Borrowing to be paid to the Borrower in accordance with its payment instructions. Payments of proceeds of a Borrowing shall be made by wire transfer of immediately available funds to the Borrower in accordance with such wire transfer instructions as the Borrower shall furnish from time to time to the Liquidity Provider for such purpose. Each Notice of Borrowing shall be irrevocable and binding on the Borrower. (e) Upon the making of any Advance requested pursuant to a Notice of Borrowing, in accordance with the Borrower's payment instructions, the Liquidity Provider shall be fully discharged of its obligation hereunder with respect to such Notice of Borrowing, and the Liquidity Provider shall not thereafter be obligated to make any further Advances hereunder in respect of such Notice of Borrowing to the Borrower or to any other person (including the holder of any Class A Certificate or the Class A Trustee) who makes to the Class A Trustee or the Borrower a demand for payment with respect to any Class A Certificate. By paying to the Borrower proceeds of Advances requested by the Borrower in accordance with the provisions of this Agreement, the Liquidity Provider makes no representation as to, and assumes no responsibility for, the correctness or sufficiency for any purpose of the amount of the Advances so made and requested. Section 2.3 Fees. (a) The Borrower agrees to pay to the Liquidity Provider a fee equal to 0.35% of the Commitment (as in effect on the Effective Date). Such fee shall be payable on the Effective Date. (b) The Borrower shall pay, or shall cause to be paid, to the Liquidity Provider, a fee equal to 0.40% per annum on the average Available Commitment from the Effective Date to the earlier of the date on which a Downgrade Advance is made and the 7 11 Termination Date. Such fee shall be payable in arrears on each Regular Distribution Date. Nothing contained in this Section 2.3 shall require the Borrower to pay any amount under this Section 2.3 other than to the extent the Borrower shall have funds available therefor. Section 2.4 Reduction or Termination of the Commitment. (a) Automatic Reductions. Promptly following each date on which the Required Amount is reduced as a result of a reduction in the Pool Balance of the Class A Certificates or otherwise, the Commitment shall automatically be reduced to an amount equal to such reduced Required Amount (as calculated by the Borrower). The Borrower shall give notice of any such automatic reduction of the Commitment (substantially in the form of Annex III hereto) to the Liquidity Provider (with a copy to America West) within two Business Days thereof. The failure by the Borrower to furnish any such notice shall not affect such automatic reduction of the Commitment. (b) Termination. Upon the making of any Downgrade Advance or Final Advance hereunder or the occurrence of the Termination Date, the obligation of the Liquidity Provider to make further Advances hereunder shall automatically and irrevocably terminate, and the Borrower shall not be entitled to request any further Borrowing hereunder. Section 2.5 Repayments of Interest Advances or the Final Advance. Subject to Sections 2.7 and 2.9, the Borrower hereby agrees to pay, or to cause to be paid, to the Liquidity Provider on each date on which the Liquidity Provider shall make an Interest Advance or the Final Advance, an amount equal to (a) the amount of such Interest Advance or the Final Advance (any such Interest Advance or the Final Advance, until repaid, is referred to herein as an "Unpaid Advance"), plus (b) interest on the amount of each such Unpaid Advance as provided in Section 3.7. Subject to Sections 2.6, 2.7 and 2.9, unless otherwise waived by the Liquidity Provider, the Borrower shall be obligated, without notice of an Advance or demand for repayment from the Liquidity Provider (which notice and demand are hereby waived by the Borrower), to repay the Liquidity Provider for all Interest Advances and Final Advances on the same day as made and all Applied Downgrade Advances on the same day they become Applied Downgrade Advances. The Borrower and the Liquidity Provider agree that the repayment in full of each Interest Advance and the Final Advance on the date such Interest Advance or the Final Advance is made and each Applied Downgrade Advance on the date it becomes an Applied Downgrade Advance is intended to be a contemporaneous exchange for new value given to the Borrower by the Liquidity Provider. Section 2.6 Repayments of Downgrade Advances. (a) Amounts advanced hereunder in respect of a Downgrade Advance 8 12 shall be deposited in the Class A Cash Collateral Account, and invested and withdrawn from the Class A Cash Collateral Account, as set forth in Sections 3.6(c), (e) and (f) of the Intercreditor Agreement. The Borrower agrees to pay to the Liquidity Provider, on each Regular Distribution Date, commencing on the first Regular Distribution Date after the making of a Downgrade Advance, interest on the principal amount of any such Downgrade Advance as provided in Section 3.7. Immediately upon the withdrawal of any amounts from the Class A Cash Collateral Account on account of a reduction in the Required Amount, the Borrower shall repay the Downgrade Advance in a principal amount equal to the amount of such reduction, plus interest on the principal amount repaid as provided in Section 3.7. (b) Upon the provision of a Replacement Liquidity Facility in replacement of this Agreement in accordance with Section 3.6(e) of the Intercreditor Agreement, and prior to the effectiveness of any Replacement Liquidity Facility, the Borrower agrees that all amounts owing to the Liquidity Provider shall be repaid in full, whether from advances made by the Replacement Liquidity Provider, from amounts remaining on deposit in the Class A Cash Collateral Account after giving effect to any application of funds therefrom to any payment of interest on the Class A Certificates on the date of such replacement, or otherwise. Section 2.7 Payments to the Liquidity Provider Under the Intercreditor Agreement. In order to provide for payment or repayment to the Liquidity Provider of any amounts hereunder, the Intercreditor Agreement provides that amounts available and referred to in Articles II and III of the Intercreditor Agreement, to the extent payable to the Liquidity Provider pursuant to the terms of the Intercreditor Agreement (including, without limitation, Section 3.6(f) of the Intercreditor Agreement), shall be paid to the Liquidity Provider in accordance with the terms thereof. Amounts so paid to the Liquidity Provider shall be applied by the Liquidity Provider in the order of priority required by the applicable provisions of Articles II and III of the Intercreditor Agreement. Section 2.8 Book Entries. The Liquidity Provider shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower resulting from Advances made from time to time and the amounts of principal and interest payable hereunder and paid from time to time in respect thereof; provided, however, that the failure by the Liquidity Provider to maintain such account or accounts shall not affect the obligations of the Borrower in respect of Advances. Section 2.9 Payments from Available Funds Only. All payments to be made by the Borrower under this Agreement shall be made only from amounts received by it that constitute Scheduled 9 13 Payments or Special Payments and only to the extent that the Borrower shall have sufficient income or proceeds therefrom to enable the Borrower to make payments in accordance with the terms hereof after giving effect to the priority of payments provisions set forth in the Intercreditor Agreement. The Liquidity Provider agrees that it will look solely to such amounts to the extent available for distribution to it as provided in the Intercreditor Agreement and this Agreement and that the Borrower, in its individual capacity, is not personally liable to it for any amounts payable or liability under this Agreement except as expressly provided in this Agreement, the Intercreditor Agreement or any Refunding Agreement. Amounts on deposit in the Class A Cash Collateral Account shall be available to make payments only to the extent and for the purposes expressly contemplated in Section 3.6(f) of the Intercreditor Agreement. ARTICLE III OBLIGATIONS OF THE BORROWER Section 3.1 Increased Costs. If the Liquidity Provider shall determine that (a) any change in any law or regulation or in the interpretation thereof by any court or administrative or governmental authority charged with the administration thereof or in the compliance by the Liquidity Provider (or its head office) with any applicable direction, request or requirement (whether or not having the force of law) of any central bank or competent governmental or other authority shall either (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets held by, or deposits in or for the account of, or loans made by, the Liquidity Provider, or (ii) impose on the Liquidity Provider any other condition regarding this Agreement or any Advance, or (iii) change the basis of taxation of any amounts payable to the Liquidity Provider (other than Taxes imposed on the overall net or gross income of the Liquidity Provider) and (b) the result of any event referred to in the preceding clause (i), (ii) or (iii) shall be to increase the cost to the Liquidity Provider of issuing or maintaining its commitment or funding or maintaining Advances (which increase in cost shall be determined by the Liquidity Provider's reasonable allocations of the aggregate of such cost increases resulting from such event) or to reduce the amount of any sum received or receivable by the Liquidity Provider under this Agreement with respect thereto, then, no later than 30 days after demand by the Liquidity Provider, the Borrower shall pay, or cause to be paid, to the Liquidity Provider, from time to time as specified by the Liquidity Provider, additional amounts which shall be sufficient to compensate the Liquidity Provider for such increased cost or reduction. A certificate as to such increased cost or reduction incurred by the Liquidity Provider as a result of any event mentioned in clause (i), (ii) or (iii) above, prepared in 10 14 reasonable detail and submitted by the Liquidity Provider to the Borrower, shall be conclusive, absent manifest error, as to the amount thereof. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section 3.1 that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous in any material respect to the Liquidity Provider. Section 3.2 Capital Adequacy. If the Liquidity Provider shall determine that the adoption after the date hereof of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change after the date hereof in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance after the date hereof by the Liquidity Provider (or its head office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, is generally applicable to all banks domiciled in Belgium with branches in the United States and not related to the financial condition of the Liquidity Provider and has the effect of reducing the rate of return on the Liquidity Provider's capital as a consequence of issuing or maintaining its commitment hereunder or its funding or maintaining Advances to a level below that which the Liquidity Provider could have achieved but for such adoption, change or compliance (taking into consideration the Liquidity Provider's policies with respect to capital adequacy) by an amount deemed by the Liquidity Provider to be material, then, no later than 30 days after demand by the Liquidity Provider, the Borrower shall pay to the Liquidity Provider, from time to time as specified by the Liquidity Provider, additional amounts which shall be sufficient to compensate the Liquidity Provider for such reduction in respect of issuing or maintaining its commitment hereunder or its funding or maintaining Advances. A certificate as to such additional amount describing the event which has the effect of reducing the rate of return on the Liquidity Provider's capital, prepared in reasonable detail and submitted by the Liquidity Provider to the Borrower, shall be conclusive, absent manifest error, as to the amount thereof. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section 3.2 that may thereafter accrue and would not, in the reasonable judgment of the Liquidity 11 15 Provider, be otherwise disadvantageous in any material respect to the Liquidity Provider. The Liquidity Provider further agrees that no amounts shall be payable under this Section 3.2 unless the Liquidity Provider is charging its other borrowers with whom it has agreements similar to this agreement the amounts that are payable to the Liquidity Provider under this Section 3.2. Section 3.3 Payments Free of Deductions. All payments made by the Borrower under this Agreement shall be made free and clear of, and without reduction for or on account of, any present or future stamp or other taxes, levies, imposts, duties, charges, fees, deductions, withholdings, restrictions or conditions of any nature whatsoever now or hereafter imposed, levied, collected, withheld or assessed, excluding any Taxes imposed on the overall net income of the Liquidity Provider and excluding United States federal income tax withholding to the extent such withholding is, or would be, actually imposed upon payments to the Liquidity Provider as of the date of this Agreement (such non-excluded taxes being referred to herein, collectively, as "Non-Excluded Taxes" and, individually, as a "Non-Excluded Tax"). If any Non-Excluded Taxes are required to be withheld from any amounts payable to the Liquidity Provider under this Agreement, the amounts so payable to the Liquidity Provider shall be increased to the extent necessary to yield to the Liquidity Provider (after payment of all Non-Excluded Taxes and taxes imposed on the receipt of such increase) interest or any other such amounts payable under this Agreement at the rates or in the amounts specified in this Agreement. Whenever any Non- Excluded Tax is payable by the Borrower, promptly thereafter the Borrower shall send the Liquidity Provider certified copies of tax receipts evidencing such payment by the Borrower. The Liquidity Provider agrees to provide to the Borrower on or prior to the Effective Date, and from time to time thereafter prior to the expiration of the effectiveness of and promptly upon the occurrence of any event requiring a change in the most recent form previously delivered by it (and prior to the immediately following due date of any payment by the Borrower hereunder), to the extent that the Liquidity Provider is legally entitled to do so, two original Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that the Liquidity Provider is completely exempt from United States withholding tax on payments pursuant to this Agreement. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section 3.3 that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous in any material respect to the Liquidity Provider. 12 16 Section 3.4 Payments. The Borrower shall make or cause to be made each payment to the Liquidity Provider under this Agreement so as to cause the same to be received by the Liquidity Provider not later than 1:00 P.M. (New York City time) on the day when due. The Borrower shall make all such payments in lawful money of the United States of America, to the Liquidity Provider in immediately available funds, by wire transfer to The Bank of New York, One Wall Street, New York, NY 10286, ABA No. 021-000-018, for the account of Kredietbank New York, Account No. [802-3015618] (referencing America West Airlines 1997-1A Liquidity Facility). Section 3.5 Computations. All computations of interest based on the Base Rate shall be made on the basis of a year of 365 or 366 days, as the case may be, and all computations of (x) interest based on the LIBOR Rate and (y) fees payable to the Liquidity Provider, shall be made on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. Section 3.6 Payment on Non-Business Days. Whenever any payment to be made hereunder (other than a payment on LIBOR Advances) becomes due and payable on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and interest thereon shall be payable at the then applicable rate during such extension. If any payment on a LIBOR Advance becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. Section 3.7 Interest. (a) The Borrower shall pay, or shall cause to be paid, interest on (i) the unpaid principal amount of each Advance from and including the date of such Advance to but excluding the date such principal amount shall be paid in full and (ii) any other amount due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by law, installments of interest on Advances or any such other amount) which is not paid when due (whether at stated maturity, by acceleration or otherwise) from and including the due date thereof to but excluding the date such amount is paid in full, in each such case, at a fluctuating interest rate per annum for each day equal to the Applicable Liquidity Rate for such Advance for such day, but in no event at a rate per annum greater than the maximum rate permitted by applicable law; provided, however, that, if at any time the otherwise applicable interest rate as set forth in this Section 3.7 shall exceed the maximum rate permitted by applicable law, then any subsequent reduction in such interest rate will not reduce the rate of interest 13 17 payable pursuant to this Section 3.7 below the maximum rate permitted by applicable law until the total amount of interest accrued equals the amount of interest that would have accrued if such otherwise applicable interest rate as set forth in this Section 3.7 had at all times been in effect. Nothing contained in this Section 3.7 shall require the Borrower to pay any amount under this Section 3.7 other than to the extent the Borrower shall have funds available therefor. (b) Each Advance will be either a Base Rate Advance or a LIBOR Advance as provided in this Section. Each such Advance will be a Base Rate Advance for the period from the date of its borrowing to (but excluding) the third Business Day following the Liquidity Provider's receipt of the Notice of Borrowing for such Advance. Thereafter, such Advance shall be a LIBOR Advance; provided that the Final Advance shall, until repaid in full, be a Base Rate Advance and the Borrower may not convert the Final Advance into a LIBOR Advance. (c) Each Base Rate Advance shall bear interest at a per annum rate equal to the Base Rate plus the Applicable Margin for such Base Rate Advance, payable in arrears on each Regular Distribution Date and, in the event of the payment of principal of such Base Rate Advance on a day other than a Regular Distribution Date, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). (d) Each LIBOR Advance shall bear interest during each Interest Period at a per annum rate equal to the LIBOR Rate for such Interest Period plus the Applicable Margin for such LIBOR Advance, payable in arrears on the last day of such Interest Period and, in the event of the payment of principal of such LIBOR Advance on a day other than such last day, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). (e) Each amount not paid when due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by applicable law, installments of interest on Advances) shall bear interest at the Base Rate. (f) Each change in the Base Rate shall become effective immediately. Section 3.8 Replacement of Borrower. Subject to Section 5.2(b), from time to time, upon the effective date and time specified in a written and completed Notice of Replacement Borrower in substantially the form of Annex IV attached hereto (a "Notice of Replacement Borrower") delivered to the Liquidity Provider by the then Borrower, the successor Borrower designated therein shall be substituted for as the Borrower for all purposes hereunder. 14 18 Section 3.9 Funding Loss Indemnification. The Borrower shall pay to the Liquidity Provider, upon the request of the Liquidity Provider, such amount or amounts as shall be sufficient (in the reasonable opinion of the Liquidity Provider) to compensate it for any loss, cost, or expense incurred as a result of: (a) Any payment or prepayment of a LIBOR Advance on a date other than the last day of the Interest Period for such Advance; or (b) Any failure by the Borrower to borrow a LIBOR Advance on the date for borrowing specified in the relevant notice under Section 2.2 or 3.7. Section 3.10 Illegality. Notwithstanding any other provision in this Agreement, if any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Liquidity Provider (or its Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for the Liquidity Provider (or its Lending Office) to maintain or fund its LIBOR Advances, then upon notice to the Borrower by the Liquidity Provider, the outstanding principal amount of the LIBOR Advances shall be converted to Base Rate Advances (a) immediately upon demand of the Liquidity Provider, if such change or compliance with such request, in the judgment of the Liquidity Provider, requires immediate repayment; or (b) at the expiration of the last Interest Period to expire before the effective date of any such change or request. In the event any change of the nature described in the preceding sentence shall make it unlawful or impossible for the Liquidity Provider (or its Lending Office) to maintain or fund its Base Rate Advances, the Liquidity Provider shall have the right to cause a Replacement Liquidity Facility to be substituted for this Agreement, subject to (i) the satisfaction of the conditions precedent to the effectiveness of, and the other provisions regarding, a Replacement Liquidity Facility set forth in Section 3.6(e) of the Intercreditor Agreement and (ii) such Replacement Liquidity Facility and Replacement Liquidity Provider being reasonably acceptable to America West. ARTICLE IV CONDITIONS PRECEDENT Section 4.1 Conditions Precedent to Effectiveness of Section 2.1. Section 2.1 of this Agreement shall become effective on and as of the first date (the "Effective Date") on which the following conditions precedent have been satisfied or waived: 15 19 (a) The Liquidity Provider shall have received on or before the Closing Date each of the following, each dated such date (except for those documents delivered pursuant to paragraphs (v) and (vii) of this Section 4.1(a)), and each in form and substance satisfactory to the Liquidity Provider: (i) This Agreement duly executed on behalf of the Borrower; (ii) The Intercreditor Agreement duly executed on behalf of each of the parties thereto; (iii) Counterparts (or certified copies thereof) of each of the Operative Agreements (other than this Agreement and the Intercreditor Agreement) which, when taken together, bear the signatures of all of the respective parties thereto and which are in full force and effect in accordance with their respective terms; (iv) A copy of the Prospectus and specimen copies of the Class A Certificates; (v) Evidence that, on the Effective Date, the Class A Certificates, the Class B Certificates, the Class C Certificates and the Class D Certificates will receive long-term credit ratings from Moody's of not lower than A2, Baa2, Ba1 and Ba3, respectively, and from Standard & Poor's of not lower than AA-, A-, BBB- and BB, respectively; (vi) An executed or a certified copy of each document, instrument, certificate and opinion delivered pursuant to the Class A Trust Agreement, the Intercreditor Agreement, the Refunding Agreements and the other Operative Agreements (together with, in the case of each such opinion (unless such opinion is addressed to the Liquidity Provider), other than the opinion of counsel for the Underwriters, a letter from the counsel rendering such opinion to the effect that the Liquidity Provider is entitled to rely on such opinion as if it were addressed to the Liquidity Provider); (vii) Evidence that there shall have been made and shall be in full force and effect, all filings, recordings and/or registrations, and there shall have been given or taken any notice or other similar action as may be reasonably necessary or, to the extent reasonably requested by the Liquidity Provider, reasonably advisable, in order to establish, perfect, protect and preserve the right, title and interest, 16 20 remedies, powers, privileges, liens and security interests of, or for the benefit of, the Trustees and the Liquidity Provider created by the Operative Agreements; (viii) Copies of the appraisals included in the Prospectus; (ix) A letter from America West agreeing to provide to the Liquidity Provider the periodic financial reports referred to in Section 8.04(a) of the Trust Agreements; and (x) Such other documents, instruments, opinions and approvals (and, if requested by the Liquidity Provider, certified duplicates or executed copies thereof) as the Liquidity Provider shall have reasonably requested. (b) The following statements shall be true and shall be deemed to have been represented by each party (other than clause (ii) below, which shall be deemed to have been represented only by America West) to the Refunding Agreements as being true on and as of the Effective Date: (i) The representations and warranties of such Person contained in each Refunding Agreement are true and correct on and as of the Effective Date as though made on and as of the Effective Date; and (ii) No event has occurred and is continuing, or would result from the entering into of this Agreement or the making of any Advance, which constitutes a Liquidity Event of Default. (c) The Liquidity Provider shall have received payment in full of all fees and other sums required to be paid to or for the account of the Liquidity Provider on or prior to the Effective Date. (d) All conditions precedent to the issuance of the Certificates under the Trust Agreements shall have been satisfied, all conditions precedent to the effectiveness of the other Liquidity Facilities shall have been satisfied, and all conditions precedent to the purchase of the Certificates by the Underwriters under the Underwriting Agreement shall have been satisfied (except for any of such conditions precedent under the Underwriting Agreement that shall have been waived by the Underwriters). (e) The Borrower shall have received a certificate, dated the date hereof, signed by a duly authorized 17 21 representative of the Liquidity Provider, certifying that all conditions precedent to the effectiveness of Section 2.1 have been satisfied or waived (other than this Section 4.1(e)). Section 4.2 Conditions Precedent to Borrowing. The obligation of the Liquidity Provider to make an Advance on the occasion of each Borrowing shall be subject to the conditions precedent that the Effective Date shall have occurred and, except in the case of a Final Advance, prior to the date of such Borrowing, the Borrower shall have delivered a Notice of Borrowing which conforms to the terms and conditions of this Agreement and has been completed as may be required by the relevant form of the Notice of Borrowing for the type of Advance requested. ARTICLE V COVENANTS Section 5.1 Affirmative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will, unless the Liquidity Provider shall otherwise consent in writing: (a) Performance of This and Other Agreements. Punctually pay or cause to be paid all amounts payable by it under this Agreement and the other Operative Agreements and observe and perform in all material respects the conditions, covenants and requirements applicable to it contained in this Agreement and the other Operative Agreements. (b) Reporting Requirements. Furnish to the Liquidity Provider with reasonable promptness, such information and data with respect to the transactions contemplated by the Operative Agreements as from time to time may be reasonably requested by the Liquidity Provider; and permit the Liquidity Provider, upon reasonable notice, to inspect the Borrower's books and records with respect to such transactions and to meet with officers and employees of the Borrower to discuss such transactions. Section 5.2 Negative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will not, without the written consent of the Liquidity Provider: 18 22 (a) Amendments. Modify, amend or supplement, or give any consent to any modification, amendment, or supplement, or make any waiver with respect to, any provision of the Trust Agreements or the Intercreditor Agreement, except for any supplemental agreement to the Trust Agreements provided for in Section 9.01 thereof. (b) Borrower. Appoint or permit or suffer to be appointed any successor Borrower without the prior written approval of the Liquidity Provider (which approval shall not be unreasonably withheld). ARTICLE VI FINAL ADVANCE Section 6.1 Final Advance. If (a) both (i) a Triggering Event shall have occurred and be continuing and (ii) a Performing Note Deficiency exists or (b) a Liquidity Event of Default shall have occurred and be continuing, the Liquidity Provider may, in its discretion, make a Final Advance whereupon (i) the Liquidity Provider shall have no further obligation to make Advances hereunder, (ii) all other outstanding Advances shall be automatically converted into Final Advances for purposes of determining the Applicable Liquidity Rate for interest payable thereon, and (iii) subject to Sections 2.7 and 2.9, all Advances, any accrued interest thereon and any other amounts outstanding hereunder shall become immediately due and payable to the Liquidity Provider. ARTICLE VII MISCELLANEOUS Section 7.1 Amendments, Etc. No amendment or waiver of any provision of this Agreement, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Liquidity Provider, and, in the case of an amendment, the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Section 7.2 Notices, Etc. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telecopier and mailed or delivered or sent by telecopier): Borrower: Fleet National Bank 777 Main Street Hartford, CT 06115 Attention: Corporate Trust Administration 19 23 Telecopy: (860) 986-7920 Liquidity Provider: Kredietbank N.V. New York Branch 125 West 55th Street New York, NY 10019 Attention: General Manager Telecopy: (212) 956-5580 or, as to each of the foregoing, at such other address as shall be designated by such Person in a written notice to the others. All such notices and communications shall be effective (i) if given by telecopier, when transmitted to the telecopier number specified above, (ii) if given by mail, when deposited in the mails addressed as specified above, and (iii) if given by other means, when delivered at the address specified above, except that written notices to the Liquidity Provider pursuant to the provisions of Articles II and III hereof shall not be effective until received by the Liquidity Provider. A copy of all notices delivered hereunder to either party shall in addition be delivered to each of the parties to the Refunding Agreements at their respective addresses set forth therein. Section 7.3 No Waiver; Remedies. No failure on the part of the Liquidity Provider to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Agreement preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 7.4 Further Assurances. The Borrower agrees to do such further acts and things and to execute and deliver to the Liquidity Provider such additional assignments, agreements, powers and instruments as the Liquidity Provider may reasonably require or deem advisable to carry into effect the purposes of this Agreement and the other Operative Agreements or to better assure and confirm unto the Liquidity Provider its rights, powers and remedies hereunder and under the other Operative Agreements. Section 7.5 Indemnification; Survival of Certain Provisions. The Liquidity Provider shall be indemnified hereunder to the extent and in the manner described in Sections 10 and 13 of the Lease. In addition, the Borrower agrees to indemnify, protect, defend and hold harmless the Liquidity Provider from, against and in respect of, and shall pay on demand, all Expenses of any kind or nature whatsoever, whether arising before, on or after the date hereof, that may be imposed, incurred by or asserted against any Liquidity Indemnitee, in any 20 24 way relating to, resulting from, or arising out of or in connection with, this Agreement, the Intercreditor Agreement or the Refunding Agreements; provided, however, that the Borrower shall not be required to indemnify, protect, defend and hold harmless any Liquidity Indemnitee in respect of any Expense of such Liquidity Indemnitee (i) to the extent such Expense is attributable to the gross negligence or willful misconduct of such Liquidity Indemnitee or any Related Indemnitee, (ii) that is ordinary and usual operating overhead expense or (iii) to the extent such Expense is attributable to the failure by such Liquidity Indemnitee or its Related Indemnitee to perform or observe any agreement, covenant or condition on its part to be performed or observed in any Operative Agreement. The indemnities contained in such Sections 10 and 13 of the Lease, and the provisions of Sections 3.1, 3.2, 3.3, 7.5 and 7.7, shall survive the termination of this Agreement. Section 7.6 Liability of the Liquidity Provider. (a) Neither the Liquidity Provider nor any of its officers or directors shall be liable or responsible for: (i) the use which may be made of the Advances or any acts or omissions of the Borrower or any beneficiary or transferee in connection therewith; (ii) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; or (iii) the making of Advances by the Liquidity Provider against delivery of a Notice of Borrowing and other documents which do not comply with the terms hereof; provided, however, that the Borrower shall have a claim against the Liquidity Provider, and the Liquidity Provider shall be liable to the Borrower, to the extent of any damages suffered by the Borrower which were the result of (A) the Liquidity Provider's willful misconduct or negligence in determining whether documents presented hereunder comply with the terms hereof, or (B) any breach by the Liquidity Provider of any of the terms of this Agreement, including, but not limited to, the Liquidity Provider's failure to make lawful payment hereunder after the delivery to it by the Borrower of a Notice of Borrowing strictly complying with the terms and conditions hereof. (b) The Liquidity Provider shall not be liable or responsible in any respect for (i) any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with this Agreement or any Notice of Borrowing delivered hereunder, or (ii) any action, inaction or omission which may be taken by it in good faith, absent willful misconduct or negligence (in which event the extent of the Liquidity Provider's potential liability to the Borrower shall be limited as set forth in the immediately preceding paragraph), in connection with this Agreement or any Notice of Borrowing. 21 25 Section 7.7 Costs, Expenses and Taxes. The Borrower agrees to pay, or cause to be paid (A) on the Effective Date and on such later date or dates on which the Liquidity Provider shall make demand, all reasonable out-of- pocket costs and expenses of the Liquidity Provider in connection with the preparation, negotiation, execution, delivery, filing and recording of this Agreement, any other Operative Agreement and any other documents which may be delivered in connection with this Agreement, including, without limitation, the reasonable fees and expenses of outside counsel for the Liquidity Provider and (B) on demand, all reasonable costs and expenses of the Liquidity Provider (including reasonable counsel fees and expenses) in connection with (i) the enforcement of this Agreement or any other Operative Agreement, (ii) the modification or amendment of, or supplement to, this Agreement or any other Operative Agreement or such other documents which may be delivered in connection herewith or therewith (whether or not the same shall become effective) or (iii) any action or proceeding relating to any order, injunction, or other process or decree restraining or seeking to restrain the Liquidity Provider from paying any amount under this Agreement, the Intercreditor Agreement or any other Operative Agreement or otherwise affecting the application of funds in the Cash Collateral Accounts. In addition, the Borrower shall pay any and all recording, stamp and other similar taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement, any other Operative Agreement and such other documents, and agrees to save the Liquidity Provider harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes or fees. Section 7.8 Binding Effect; Participations. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower and the Liquidity Provider and their respective successors and assigns, except that neither the Liquidity Provider (except as otherwise provided in this Section 7.8) nor the Borrower shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the other party, subject to the requirement of Section 7.8(b). The Liquidity Provider may grant participations herein or in any of its rights or security hereunder and under the other Operative Agreements to such Persons as the Liquidity Provider may in its sole discretion select, subject to the requirement of Section 7.8(b). No such granting of participations by the Liquidity Provider, however, will relieve the Liquidity Provider of its obligations hereunder. In connection with any participation or any proposed participation, the Liquidity Provider may disclose to the participant or the proposed participant any information that the Borrower is required to deliver or to disclose to the Liquidity Provider pursuant to this Agreement. The Borrower acknowledges and agrees that the Liquidity Provider's source of funds may derive in part from its participants. Accordingly, 22 26 references in this Agreement and the other Operative Agreements to determinations, reserve and capital adequacy requirements, increased costs, reduced receipts and the like as they pertain to the Liquidity Provider shall be deemed also to include those of each of its participants (subject, in each case, to the maximum amount that would have been incurred by or attributable to the Liquidity Provider directly if the Liquidity Provider, rather than the participant, had held the interest participated). (b) If, pursuant to subsection (a) above, the Liquidity Provider sells any participation to any bank or other entity (each, a "Participant"), then, concurrently with the effectiveness of such participation, the Participant shall (i) represent to the Liquidity Provider (for the benefit of the Liquidity Provider and the Borrower) either (A) that it is incorporated under the laws of the United States or a state thereof or (B) that under applicable law and treaties, no taxes will be required to be withheld by the Borrower or the Liquidity Provider with respect to any payments to be made to such Participant in respect of this Agreement, (ii) furnish to the Liquidity Provider and the Borrower either (x) a statement that it is incorporated under the laws of the United States or a state thereof or (y) if it is not so incorporated, two copies of a properly completed United States Internal Revenue Service Form 4224 or Form 1001, as appropriate, or other applicable form, certificate or document prescribed by the Internal Revenue Service certifying, in each case, such Participant's entitlement to a complete exemption from United States federal withholding tax in respect to any and all payments to be made hereunder, and (iii) agree (for the benefit of the Liquidity Provider and the Borrower) to provide the Liquidity Provider and the Borrower a new Form 4224 or Form 1001, as appropriate, (A) on or before the date that any such form expires or becomes obsolete or (B) after the occurrence of any event requiring a change in the most recent form previously delivered by it and prior to the immediately following due date of any payment by the Borrower hereunder, certifying in the case of a Form 1001 or Form 4224 that such Participant is entitled to a complete exemption from United States federal withholding tax on payments under this Agreement. Unless the Borrower has received forms or other documents reasonably satisfactory to it indicating that payments hereunder are not subject to United States federal withholding tax, the Borrower will withhold taxes as required by law from such payments at the applicable statutory rate without any obligation to gross-up or indemnify pursuant to Section 3.3. (c) Notwithstanding the other provisions of this Section 7.8, the Liquidity Provider may assign and pledge all or any portion of the Advances owing to it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal 23 27 Reserve Bank, provided that any payment in respect of such assigned Advances made by the Borrower to the Liquidity Provider in accordance with the terms of this Agreement shall satisfy the Borrower's obligations hereunder in respect of such assigned Advance to the extent of such payment. No such assignment shall release the Liquidity Provider from its obligations hereunder. Section 7.9 Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. Section 7.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Section 7.11 Submission to Jurisdiction; Waiver of Jury Trial. (a) Each of the parties hereto hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement or any other Operative Agreement, or for recognition and enforcement of any judgment in respect hereof or thereof, to the nonexclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and the appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) if such party does not maintain an office for the transaction of its business in New York, agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to each party hereto at its address set forth in Section 7.2, or at such other address of which the Liquidity Provider shall have been notified pursuant thereto; and 24 28 (iv) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. (b) THE BORROWER AND THE LIQUIDITY PROVIDER EACH HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED, including, without limitation, contract claims, tort claims, breach of duty claims and all other common law and statutory claims. The Borrower and the Liquidity Provider each warrant and represent that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with such legal counsel. THIS WAIVER CANNOT BE MODIFIED ORALLY. Section 7.12 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. Section 7.13 Entirety. This Agreement and the other Operative Agreements constitute the entire agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all prior understandings and agreements of such parties. Section 7.14 Headings; Section References. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Unless the context otherwise requires or otherwise indicated herein, all Section references in this Agreement are references to Sections hereof. Section 7.15 LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE OBLIGATIONS OF THE LIQUIDITY PROVIDER TO MAKE ADVANCES HEREUNDER, AND THE BORROWER'S RIGHTS TO DELIVER NOTICES OF BORROWING REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL BE UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED, IN EACH CASE STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. 25 29 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first set forth above. FLEET NATIONAL BANK, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class A Trust, as Borrower By ----------------------------------------- Name: Title: KREDIETBANK N.V., NEW YORK BRANCH, as Liquidity Provider By ----------------------------------------- Name: Title: By ----------------------------------------- Name: Title: 26 30 Annex I to Irrevocable Revolving Credit Agreement INTEREST ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned borrower (the "Borrower"), hereby certifies to KREDIETBANK N.V., acting through its New York Branch (the "Liquidity Provider"), with reference to the Irrevocable Revolving Credit Agreement, Class A Certificates dated as of June __, 1997, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of an Interest Advance by the Liquidity Provider to be used for the payment of interest on the Class A Certificates which was payable on the Distribution Date falling on _____________ in accordance with the terms and provisions of the Class A Trust Agreement and the Class A Certificates and has not been paid pursuant to clause fourth of Section 3.2 of the Intercreditor Agreement or clause sixth of Section 3.3 of the Intercreditor Agreement, which Advance is requested to be made on _____________. (3) The amount of the Interest Advance requested hereby (i) is $__________, to be applied in respect of the payment of interest which was due and payable on the Class A Certificates on such Distribution Date, (ii) does not include any amount with respect to the payment of the principal of, or premium on, the Class A Certificates, or principal of, or interest or premium on, the Class B Certificates, the Class C Certificates or the Class D Certificates, (iii) was computed in accordance with the provisions of the Class A Certificates, the Class A Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), (iv) does not exceed the Available Commitment on the date hereof, and (v) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will apply the same in accordance with the terms of Section 3.2 or 3.3 of the Intercreditor Agreement, as the case may be, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. 31 (5) The Borrower hereby requests that the Advance requested hereby be a Base Rate Advance and that such Base Rate Advance be converted into a LIBOR Rate Advance on the third Business Day following your receipt of this notice. The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, the making of the Interest Advance as requested by this Notice of Borrowing shall automatically reduce, subject to reinstatement in accordance with the terms of the Liquidity Agreement, the Available Commitment by an amount equal to the amount of the Interest Advance requested to be made hereby as set forth in clause (i) of paragraph (3) of this Certificate and such reduction shall automatically result in corresponding reductions in the amounts available to be borrowed pursuant to a subsequent Advance. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the _ day of ______________, ________. FLEET NATIONAL BANK, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class A Trust, as Borrower By ---------------------------------------- Name: Title: 2 32 SCHEDULE I TO INTEREST ADVANCE NOTICE OF BORROWING [Insert Copy of Computations in accordance with Interest Advance Notice of Borrowing] 3 33 Annex II to Irrevocable Revolving Credit Agreement DOWNGRADE ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned subordination agent (the "Borrower"), hereby certifies to KREDIETBANK, N.V., acting through its New York Branch (the "Liquidity Provider"), with reference to the Irrevocable Revolving Credit Agreement, Class A Certificates dated as of June __, 1997, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of the Downgrade Advance by the Liquidity Provider to be used for the funding of the Class A Cash Collateral Account in accordance with Section 3.6(c) of the Intercreditor Agreement by reason of the downgrading of the debt rating of the Liquidity Provider issued by either Rating Agency below the applicable Threshold Rating, which Advance is requested to be made on ___________. (3) The amount of the Downgrade Advance requested hereby (i) is $___________, which equals the Available Commitment on the date hereof and is to be applied in respect of the funding of the Class A Cash Collateral Account in accordance with Section 3.6(c) of the Intercreditor Agreement, (ii) does not include any amount with respect to the payment of the principal of, or premium on, the Class A Certificates, or principal of, or interest or premium on, the Class B Certificates, the Class C Certificates or the Class D Certificates, (iii) was computed in accordance with the provisions of the Class A Certificates, the Class A Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), and (iv) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing under the Liquidity Agreement. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will deposit such amount in the Class A Cash Collateral Account and apply the same in accordance with the terms of Section 3.6(c) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. 34 (5) The Borrower hereby requests that the Advance requested hereby be a Base Rate Advance and that such Base Rate Advance be converted into a LIBOR Rate Advance on the third Business Day following your receipt of this notice. The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, (A) the making of the Downgrade Advance as requested by this Notice of Borrowing shall automatically and irrevocably terminate the obligation of the Liquidity Provider to make further Advances under the Liquidity Agreement; and (B) following the making by the Liquidity Provider of the Downgrade Advance requested by this Notice of Borrowing, the Borrower shall not be entitled to request any further Advances under the Liquidity Agreement. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the _ day of __________, _____. FLEET NATIONAL BANK, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class A Trust, as Borrower By ----------------------------------------- Name: Title: 2 35 SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING [Insert Copy of computations in accordance with Downgrade Advance Notice of Borrowing] 36 Annex III to Irrevocable Revolving Credit Agreement NOTICE OF AUTOMATIC REDUCTION OF COMMITMENT [Date] Ladies and Gentlemen: The undersigned, a duly authorized signatory of the undersigned subordination agent (the "Borrower"), hereby notifies Kredietbank N.V., acting through its New York Branch (the "Liquidity Provider"), with reference to the Irrevocable Revolving Credit Agreement dated as of June __, 1997, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that, pursuant to Section 2.4(a) of the Liquidity Agreement, the Commitment has been automatically reduced to $_________. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the _ day of __________, _____. FLEET NATIONAL BANK, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class A Trust, as Borrower By --------------------------------------- Name: Title: 37 Annex IV to Irrevocable Revolving Credit Agreement NOTICE OF REPLACEMENT BORROWER [Date] Ladies and Gentlemen: For value received, the undersigned beneficiary hereby irrevocably transfers to: [Name of Transferee] [Address of Transferee] all rights of the undersigned as Borrower under the Liquidity Agreement referred to above. The transferee has succeeded the undersigned as Subordination Agent under the Intercreditor Agreement referred to in the first paragraph of the Liquidity Agreement. By this transfer, all rights of the undersigned as Borrower under the Liquidity Agreement are transferred to the transferee and the transferee shall hereafter have the sole rights as Borrower thereunder. The undersigned shall pay any costs and expenses of such transfer, including, but not limited to, transfer taxes or governmental charges. We ask that this transfer be effective as of __________, ____. FLEET NATIONAL BANK, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class A Trust, as Borrower By --------------------------------------- Name: Title: EX-4.11 9 REVOLVING CREDIT AGREEMENT CLASS B CERTIF 1 Exhibit 4.11 IRREVOCABLE REVOLVING CREDIT AGREEMENT CLASS B CERTIFICATES Dated as of June __, 1997 between FLEET NATIONAL BANK, as Subordination Agent, as agent and trustee for the America West Airlines Pass Through Trust 1997-1B, as Borrower and KREDIETBANK N.V., NEW YORK BRANCH, as Liquidity Provider Relating to America West Airlines Pass Through Trust 1997-1B [_._]% America West Airlines Pass Through Certificates, Series 1997-1B 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II AMOUNT AND TERMS OF THE COMMITMENT . . . . . . . . . . . . . . . . . . . 5 Section 2.1 The Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 2.2 Making the Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 2.4 Reduction or Termination of the Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.5 Repayments of Interest Advances or the Final Advance . . . . . . . . . . . . . . . . . . . . . 8 Section 2.6 Repayments of Downgrade Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.7 Payments to the Liquidity Provider Under the Intercreditor Agreement . . . . . . . . . . . . . 9 Section 2.8 Book Entries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 2.9 Payments from Available Funds Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE III OBLIGATIONS OF THE BORROWER . . . . . . . . . . . . . . . . . . . . . 10 Section 3.1 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 3.2 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 3.3 Payments Free of Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 3.4 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 3.5 Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 3.6 Payment on Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 3.7 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 3.8 Replacement of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 3.9 Funding Loss Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 3.10 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE IV CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . 15 Section 4.1 Conditions Precedent to Effectiveness of Section 2.1 . . . . . . . . . . . . . . . . . . . . . 15 Section 4.2 Conditions Precedent to Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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Page ---- ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 5.1 Affirmative Covenants of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 5.2 Negative Covenants of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE VI FINAL ADVANCE . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 6.1 Final Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 7.1 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 7.2 Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 7.3 No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 7.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 7.5 Indemnification; Survival of Certain Provisions . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 7.6 Liability of the Liquidity Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 7.7 Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 7.8 Binding Effect; Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 7.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 7.10 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 7.11 Submission to Jurisdiction; Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . 24 Section 7.12 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 7.13 Entirety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 7.14 Headings; Section References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 7.15 LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES . . . . . . . . . . . . . . . . . . . . . . . 25
Annex I - Interest Advance Notice of Borrowing Annex II - Downgrade Advance Notice of Borrowing Annex III - Notice of Automatic Reduction of Commitment Annex IV - Notice of Replacement Borrower ii 4 IRREVOCABLE REVOLVING CREDIT AGREEMENT CLASS B CERTIFICATES IRREVOCABLE REVOLVING CREDIT AGREEMENT, CLASS B CERTIFICATES dated as of June __, 1997 between FLEET NATIONAL BANK, a national banking association, not in its individual capacity but solely as Subordination Agent under the Intercreditor Agreement (each as defined below), as agent and trustee for the Class B Trust (as defined below) (the "Borrower"), and KREDIETBANK, N.V., acting through its New York Branch (the "Liquidity Provider"). W I T N E S S E T H WHEREAS, pursuant to the Class B Trust Agreement (such term and all other capitalized terms used in these recitals having the meanings set forth or referred to in Section 1.1), the Class B Trust is issuing the Class B Certificates; and WHEREAS, the Borrower, in order to support the timely payment of a portion of the interest on the Class B Certificates in accordance with their terms, has requested the Liquidity Provider to enter into this Agreement, providing in part for the Borrower to request in specified circumstances that advances be made hereunder. NOW, THEREFORE, in consideration of the premises, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.1 Certain Defined Terms. (a) Definitions. As used in this Agreement and unless otherwise expressly indicated, or unless the context clearly requires otherwise, the following capitalized terms shall have the following respective meanings for all purposes of this Agreement: "Advance" means an Interest Advance, a Final Advance or a Downgrade Advance, as the case may be. "Applicable Liquidity Rate" means the rates of interest specified in Section 3.7 with respect to any Advance. "Applicable Margin" means (x) with respect to any Downgrade Advance (other than an Applied Downgrade Advance) .40% (40 basis points) per annum and (y) with respect to any other Advance including an Applied Downgrade Advance 1.5% (150 basis points) per annum. "Applied Downgrade Advance" means any amount in respect of a Downgrade Advance withdrawn from the Class B Cash Collateral Account for the purpose of paying interest on the Class B 5 Certificates in accordance with Section 3.6(f) of the Intercreditor Agreement. "Available Commitment" means, at any time of determination, an amount equal to (i) the Commitment at such time less (ii) subject to the proviso contained in the third sentence of Section 2.2(a), the aggregate amount of each Advance outstanding at such time; provided that following a Downgrade Advance or a Final Advance, the Available Commitment shall be zero. "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of (i) the base commercial lending rate announced from time to time by the Liquidity Provider, or (ii) the rate quoted by the Liquidity Provider, at approximately 11:00 A.M., New York City time, to dealers in the New York Federal funds market for overnight offering of dollars by the Liquidity Provider, for deposit plus .50 of 1 percent (.50%). "Base Rate Advance" means an Advance that bears interest at a rate based upon the Base Rate. "Borrower" has the meaning assigned to such term in the recital of parties to this Agreement. "Borrowing" means the making of Advances requested by delivery of a Notice of Borrowing or pursuant to Section 6.1. "Business Day" means any day other than a Saturday or Sunday or a day on which commercial banks are required or authorized to close in New York, New York or Hartford, Connecticut, and, if the applicable Business Day relates to any Advance or other amount bearing interest based on the LIBOR Rate, on which dealings are carried on in the London interbank market. "Commitment" means, initially, [$__,___,___] as the same may be reduced from time to time in accordance with Section 2.4(a). "Downgrade Advance" means an Advance made pursuant to Section 2.2(b). "Effective Date" has the meaning specified in Section 4.1. The delivery of the certificate of the Liquidity Provider contemplated by Section 4.1(e) shall be conclusive evidence that the Effective Date has occurred. "Expenses" means liabilities, obligations, damages, settlements, penalties, claims, actions, suits, costs, expenses and disbursements (including, without limitation, reasonable fees 2 6 and disbursements of legal counsel and costs of investigation), provided that Expenses shall not include any Taxes. "Expiry Date" means [__], [____]. "Final Advance" means an Advance made pursuant to Sections 2.2(c) and 6.1. "Intercreditor Agreement" means the Intercreditor Agreement dated as of the date hereof, among the Trustees, the Liquidity Provider, the liquidity provider under each Liquidity Facility (other than this Agreement) and the Subordination Agent, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Interest Advance" means an Advance made pursuant to Section 2.2(a). "Interest Period" means, with respect to any LIBOR Advance, each of the following periods: (i) the period beginning on the date such LIBOR Advance is made (or is converted from a Base Rate Advance) and ending on the next Regular Distribution Date; and (ii ) each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the next Regular Distribution Date. "Lending Office" means the lending office of the Liquidity Provider, presently located at 125 West 55th Street, New York, NY 10019, or such other lending office as the Liquidity Provider from time to time shall notify the Borrower as its lending office hereunder. "LIBOR Advance" means an Advance bearing interest at a rate based upon the LIBOR Rate. "LIBOR Rate" means, with respect to any Interest Period, the rate per annum at which deposits in Dollars are offered for the relevant Interest Period by the Liquidity Provider to prime banks in the London interbank market at approximately 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in the principal amount of the Advance to which such Interest Period is to apply and for a period of time comparable to such Interest Period, as quoted by the Liquidity Provider to the Subordination Agent. "Liquidity Event of Default" means the occurrence of the following: all of the Equipment Notes shall have been either declared to be immediately due and payable or shall not have been paid at their final maturity. A Liquidity Event of Default shall 3 7 not occur upon an automatic acceleration of the Equipment Notes as a result of an America West Bankruptcy Event. "Liquidity Indemnitee" means (i) the Liquidity Provider, (ii) each affiliate of the Liquidity Provider, (iii) the respective directors, officers, employees, agents and servants of the Liquidity Provider and its affiliates, and (iv) the successors and permitted assigns of the persons described in clauses (i) through (iii), inclusive. "Liquidity Provider" has the meaning assigned to such term in the recital of parties to this Agreement. "Margin" means 0.40% per annum. "Non-Excluded Tax" has the meaning specified in Section 3.3. "Notice of Borrowing" has the meaning specified in Section 2.2(d). "Notice of Replacement Borrower" has the meaning specified in Section 3.8. "Participant" has the meaning assigned to such term in Section 7.8(b). "Prospectus" means the prospectus included in the registration statement on Form S-3 (File No. 333- _____) filed by America West relating to certain pass through certificates, as such Prospectus may be amended or supplemented. "Related Indemnitee" means, with respect to any Liquidity Indemnitee, its director, officer, employee, agent, affiliate or employer. "Required Amount" means, for any day, the sum of the aggregate amount of interest, calculated at the rate per annum equal to the Stated Interest Rate for the Class B Certificates, that would be payable on the Class B Certificates on each of the three successive semiannual Regular Distribution Dates immediately following such day or, if such day is a Regular Distribution Date, on such day and the succeeding two semiannual Regular Distribution Dates, in each case calculated on the basis of the Pool Balance of the Class B Certificates on such day and without regard to expected future payments of principal on the Class B Certificates. "Termination Date" means the earliest to occur of the following: (i) the Expiry Date; (ii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that all of 4 8 the Class B Certificates have been paid in full (or provision has been made for such payment in accordance with the Intercreditor Agreement and the Trust Agreements) or are otherwise no longer entitled to the benefits of this Agreement; (iii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that a Replacement Liquidity Facility has been substituted for this Agreement in full pursuant to Section 3.6(e) of the Intercreditor Agreement; (iv) the date on which the Liquidity Provider makes the Final Advance; and (v) the date on which no Advance is or may (including by reason of reinstatement as herein provided) become available for a Borrowing hereunder. "Unpaid Advance" has the meaning assigned to such term in Section 2.5. (b) Terms Defined in the Intercreditor Agreement. For all purposes of this Agreement, the following terms shall have the respective meanings assigned to such terms in the Intercreditor Agreement: "America West", "America West Bankruptcy Event", "Certificates", "Class A Certificates", "Class B Certificates", "Class B Certificateholders", "Class B Cash Collateral Account", "Class B Trust", "Class B Trust Agreement", "Class B Trustee", "Class C Certificates", "Class D Certificates", "Closing Date", "Controlling Party", "Distribution Date", "Dollars or $", "Equipment Notes", "Indenture", "Investment Earnings", "Lease", "Liquidity Facility", "Moody's", "Operative Agreements", "Performing Equipment Note", "Performing Note Deficiency", "Person", "Pool Balance", "Rating Agency", "Refunding Agreement", "Regular Distribution Date", "Replacement Liquidity Facility", "Responsible Officer", "Scheduled Payment", "Special Payment", "Standard & Poor's", "Stated Interest Rate", "Subordination Agent", "Taxes", "Threshold Rating", "Triggering Event", "Trust", "Trust Agreements", "Trustee", "Underwriters", "Underwriting Agreement", and "Written Notice". ARTICLE II AMOUNT AND TERMS OF THE COMMITMENT Section 2.1 The Advances. The Liquidity Provider hereby irrevocably agrees, on the terms and conditions hereinafter set forth, to make Advances to the Borrower from time to time on any Business Day during the period from the Effective Date until 12:00 Noon (New York City time) on the Expiry Date (unless the obligations of the Liquidity Provider shall be earlier terminated in accordance with the terms of Section 5 9 2.4(b)) in an aggregate amount at any time outstanding not to exceed the Commitment. Section 2.2 Making the Advances. (a) Interest Advances shall be made in one or more Borrowings by delivery to the Liquidity Provider of one or more written and completed Notices of Borrowing in substantially the form of Annex I attached hereto, signed by a Responsible Officer of the Borrower, in an amount not exceeding the Available Commitment at such time and shall be used solely for the payment when due of interest on the Class B Certificates at the Stated Interest Rate therefor in accordance with Section 3.6(a) of the Intercreditor Agreement. Each Interest Advance made hereunder shall automatically reduce the Available Commitment and the amount available to be borrowed hereunder by subsequent Advances by the amount of such Interest Advance (subject to reinstatement as provided in the next sentence). Upon repayment to the Liquidity Provider in full of the amount of any Interest Advance made pursuant to this Section 2.2(a), together with accrued interest thereon (as provided herein), the Available Commitment shall be reinstated by the amount of such repaid Interest Advance; provided, however, that the Available Commitment shall not be so reinstated at any time if (x) both (i) a Triggering Event shall have occurred and be continuing and (ii) a Performing Note Deficiency exists or (y) a Liquidity Event of Default shall have occurred and be continuing. (b) A Downgrade Advance shall be made in a single Borrowing upon a downgrading of the rating of the Liquidity Provider resulting in the Liquidity Provider's ratings not meeting the Threshold Rating (as provided for in Section 3.6(c) of the Intercreditor Agreement) unless a Replacement Liquidity Facility shall have been delivered to the Borrower in accordance with said Section 3.6(c), by delivery to the Liquidity Provider of a written and completed Notice of Borrowing in substantially the form of Annex II attached hereto, signed by a Responsible Officer of the Borrower, in an amount not exceeding the Available Commitment at such time, and shall be used to fund the Class B Cash Collateral Account in accordance with said Section 3.6(c). The Liquidity Provider shall promptly notify the Borrower of any downgrade of its unsecured debt rating by Moody's or Standard & Poor's below the applicable Threshold Rating. (c) A Final Advance shall be made by the Liquidity Provider without the necessity for a Notice of Borrowing at the option of the Liquidity Provider on the occurrence of an event described in Section 6.1(a) or 6.1(b) in an amount equal to the Available Commitment at such time, and shall be used to fund the Class B Cash Collateral Account. (d) Each Borrowing (other than under Section 2.2(c)) shall be made on notice in writing (a "Notice of Borrowing") in substantially the form required by Section 2.2(a) or 2.2(b), as 6 10 the case may be, given not later than 12:00 Noon (New York City time) on the Business Day prior to the day of the proposed Borrowing by the Borrower to the Liquidity Provider. Upon satisfaction of the conditions precedent set forth in Section 4.2 with respect to a requested Borrowing, the Liquidity Provider shall, before 12:00 Noon (New York City time) on the proposed date of such Borrowing or on such later Business Day specified by the Borrower in such Notice of Borrowing, make available to the Borrower, in U.S. dollars and in immediately available funds, the amount of such Borrowing to be paid to the Borrower in accordance with its payment instructions. If a Notice of Borrowing is delivered by the Borrower in respect of any Borrowing after 12:00 Noon (New York City time) on a Business Day, the Liquidity Provider shall, before 12:00 Noon (New York City time) on the second Business Day next following the day of receipt of such Notice of Borrowing or on such later Business Day specified by the Borrower in such Notice of Borrowing, make available to the Borrower, in Dollars and in immediately available funds, the amount of such Borrowing to be paid to the Borrower in accordance with its payment instructions. Payments of proceeds of a Borrowing shall be made by wire transfer of immediately available funds to the Borrower in accordance with such wire transfer instructions as the Borrower shall furnish from time to time to the Liquidity Provider for such purpose. Each Notice of Borrowing shall be irrevocable and binding on the Borrower. (e) Upon the making of any Advance requested pursuant to a Notice of Borrowing, in accordance with the Borrower's payment instructions, the Liquidity Provider shall be fully discharged of its obligation hereunder with respect to such Notice of Borrowing, and the Liquidity Provider shall not thereafter be obligated to make any further Advances hereunder in respect of such Notice of Borrowing to the Borrower or to any other person (including the holder of any Class B Certificate or the Class B Trustee) who makes to the Class B Trustee or the Borrower a demand for payment with respect to any Class B Certificate. By paying to the Borrower proceeds of Advances requested by the Borrower in accordance with the provisions of this Agreement, the Liquidity Provider makes no representation as to, and assumes no responsibility for, the correctness or sufficiency for any purpose of the amount of the Advances so made and requested. Section 2.3 Fees. (a) The Borrower agrees to pay to the Liquidity Provider a fee equal to 0.35% of the Commitment (as in effect on the Effective Date). Such fee shall be payable on the Effective Date. (b) The Borrower shall pay, or shall cause to be paid, to the Liquidity Provider, a fee equal to 0.40% per annum on the average Available Commitment from the Effective Date to the earlier of the date on which a Downgrade Advance is made and the 7 11 Termination Date. Such fee shall be payable in arrears on each Regular Distribution Date. Nothing contained in this Section 2.3 shall require the Borrower to pay any amount under this Section 2.3 other than to the extent the Borrower shall have funds available therefor. Section 2.4 Reduction or Termination of the Commitment. (a) Automatic Reductions. Promptly following each date on which the Required Amount is reduced as a result of a reduction in the Pool Balance of the Class B Certificates or otherwise, the Commitment shall automatically be reduced to an amount equal to such reduced Required Amount (as calculated by the Borrower). The Borrower shall give notice of any such automatic reduction of the Commitment (substantially in the form of Annex III hereto) to the Liquidity Provider (with a copy to America West) within two Business Days thereof. The failure by the Borrower to furnish any such notice shall not affect such automatic reduction of the Commitment. (b) Termination. Upon the making of any Downgrade Advance or Final Advance hereunder or the occurrence of the Termination Date, the obligation of the Liquidity Provider to make further Advances hereunder shall automatically and irrevocably terminate, and the Borrower shall not be entitled to request any further Borrowing hereunder. Section 2.5 Repayments of Interest Advances or the Final Advance. Subject to Sections 2.7 and 2.9, the Borrower hereby agrees to pay, or to cause to be paid, to the Liquidity Provider on each date on which the Liquidity Provider shall make an Interest Advance or the Final Advance, an amount equal to (a) the amount of such Interest Advance or the Final Advance (any such Interest Advance or the Final Advance, until repaid, is referred to herein as an "Unpaid Advance"), plus (b) interest on the amount of each such Unpaid Advance as provided in Section 3.7. Subject to Sections 2.6, 2.7 and 2.9, unless otherwise waived by the Liquidity Provider, the Borrower shall be obligated, without notice of an Advance or demand for repayment from the Liquidity Provider (which notice and demand are hereby waived by the Borrower), to repay the Liquidity Provider for all Interest Advances and Final Advances on the same day as made and all Applied Downgrade Advances on the same day they become Applied Downgrade Advances. The Borrower and the Liquidity Provider agree that the repayment in full of each Interest Advance and the Final Advance on the date such Interest Advance or the Final Advance is made and each Applied Downgrade Advance on the date it becomes an Applied Downgrade Advance is intended to be a contemporaneous exchange for new value given to the Borrower by the Liquidity Provider. Section 2.6 Repayments of Downgrade Advances. (a) Amounts advanced hereunder in respect of a Downgrade Advance 8 12 shall be deposited in the Class B Cash Collateral Account, and invested and withdrawn from the Class B Cash Collateral Account, as set forth in Sections 3.6(c), (e) and (f) of the Intercreditor Agreement. The Borrower agrees to pay to the Liquidity Provider, on each Regular Distribution Date, commencing on the first Regular Distribution Date after the making of a Downgrade Advance, interest on the principal amount of any such Downgrade Advance as provided in Section 3.7. Immediately upon the withdrawal of any amounts from the Class B Cash Collateral Account on account of a reduction in the Required Amount, the Borrower shall repay the Downgrade Advance in a principal amount equal to the amount of such reduction, plus interest on the principal amount repaid as provided in Section 3.7. (b) Upon the provision of a Replacement Liquidity Facility in replacement of this Agreement in accordance with Section 3.6(e) of the Intercreditor Agreement, and prior to the effectiveness of any Replacement Liquidity Facility, the Borrower agrees that all amounts owing to the Liquidity Provider shall be repaid in full, whether from advances made by the Replacement Liquidity Provider, from amounts remaining on deposit in the Class B Cash Collateral Account after giving effect to any application of funds therefrom to any payment of interest on the Class B Certificates on the date of such replacement, or otherwise. Section 2.7 Payments to the Liquidity Provider Under the Intercreditor Agreement. In order to provide for payment or repayment to the Liquidity Provider of any amounts hereunder, the Intercreditor Agreement provides that amounts available and referred to in Articles II and III of the Intercreditor Agreement, to the extent payable to the Liquidity Provider pursuant to the terms of the Intercreditor Agreement (including, without limitation, Section 3.6(f) of the Intercreditor Agreement), shall be paid to the Liquidity Provider in accordance with the terms thereof. Amounts so paid to the Liquidity Provider shall be applied by the Liquidity Provider in the order of priority required by the applicable provisions of Articles II and III of the Intercreditor Agreement. Section 2.8 Book Entries. The Liquidity Provider shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower resulting from Advances made from time to time and the amounts of principal and interest payable hereunder and paid from time to time in respect thereof; provided, however, that the failure by the Liquidity Provider to maintain such account or accounts shall not affect the obligations of the Borrower in respect of Advances. Section 2.9 Payments from Available Funds Only. All payments to be made by the Borrower under this Agreement shall be made only from amounts received by it that constitute Scheduled 9 13 Payments or Special Payments and only to the extent that the Borrower shall have sufficient income or proceeds therefrom to enable the Borrower to make payments in accordance with the terms hereof after giving effect to the priority of payments provisions set forth in the Intercreditor Agreement. The Liquidity Provider agrees that it will look solely to such amounts to the extent available for distribution to it as provided in the Intercreditor Agreement and this Agreement and that the Borrower, in its individual capacity, is not personally liable to it for any amounts payable or liability under this Agreement except as expressly provided in this Agreement, the Intercreditor Agreement or any Refunding Agreement. Amounts on deposit in the Class B Cash Collateral Account shall be available to make payments only to the extent and for the purposes expressly contemplated in Section 3.6(f) of the Intercreditor Agreement. ARTICLE III OBLIGATIONS OF THE BORROWER Section 3.1 Increased Costs. If the Liquidity Provider shall determine that (a) any change in any law or regulation or in the interpretation thereof by any court or administrative or governmental authority charged with the administration thereof or in the compliance by the Liquidity Provider (or its head office) with any applicable direction, request or requirement (whether or not having the force of law) of any central bank or competent governmental or other authority shall either (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets held by, or deposits in or for the account of, or loans made by, the Liquidity Provider, or (ii) impose on the Liquidity Provider any other condition regarding this Agreement or any Advance, or (iii) change the basis of taxation of any amounts payable to the Liquidity Provider (other than Taxes imposed on the overall net or gross income of the Liquidity Provider) and (b) the result of any event referred to in the preceding clause (i), (ii) or (iii) shall be to increase the cost to the Liquidity Provider of issuing or maintaining its commitment or funding or maintaining Advances (which increase in cost shall be determined by the Liquidity Provider's reasonable allocations of the aggregate of such cost increases resulting from such event) or to reduce the amount of any sum received or receivable by the Liquidity Provider under this Agreement with respect thereto, then, no later than 30 days after demand by the Liquidity Provider, the Borrower shall pay, or cause to be paid, to the Liquidity Provider, from time to time as specified by the Liquidity Provider, additional amounts which shall be sufficient to compensate the Liquidity Provider for such increased cost or reduction. A certificate as to such increased cost or reduction incurred by the Liquidity Provider as a result of any event mentioned in clause (i), (ii) or (iii) above, prepared in 10 14 reasonable detail and submitted by the Liquidity Provider to the Borrower, shall be conclusive, absent manifest error, as to the amount thereof. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section 3.1 that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous in any material respect to the Liquidity Provider. Section 3.2 Capital Adequacy. If the Liquidity Provider shall determine that the adoption after the date hereof of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change after the date hereof in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance after the date hereof by the Liquidity Provider (or its head office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, is generally applicable to all banks domiciled in Belgium with branches in the United States and not related to the financial condition of the Liquidity Provider and has the effect of reducing the rate of return on the Liquidity Provider's capital as a consequence of issuing or maintaining its commitment hereunder or its funding or maintaining Advances to a level below that which the Liquidity Provider could have achieved but for such adoption, change or compliance (taking into consideration the Liquidity Provider's policies with respect to capital adequacy) by an amount deemed by the Liquidity Provider to be material, then, no later than 30 days after demand by the Liquidity Provider, the Borrower shall pay to the Liquidity Provider, from time to time as specified by the Liquidity Provider, additional amounts which shall be sufficient to compensate the Liquidity Provider for such reduction in respect of issuing or maintaining its commitment hereunder or its funding or maintaining Advances. A certificate as to such additional amount describing the event which has the effect of reducing the rate of return on the Liquidity Provider's capital, prepared in reasonable detail and submitted by the Liquidity Provider to the Borrower, shall be conclusive, absent manifest error, as to the amount thereof. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section 3.2 that may thereafter accrue and would not, in the reasonable judgment of the Liquidity 11 15 Provider, be otherwise disadvantageous in any material respect to the Liquidity Provider. The Liquidity Provider further agrees that no amounts shall be payable under this Section 3.2 unless the Liquidity Provider is charging its other borrowers with whom it has agreements similar to this agreement the amounts that are payable to the Liquidity Provider under this Section 3.2. Section 3.3 Payments Free of Deductions. All payments made by the Borrower under this Agreement shall be made free and clear of, and without reduction for or on account of, any present or future stamp or other taxes, levies, imposts, duties, charges, fees, deductions, withholdings, restrictions or conditions of any nature whatsoever now or hereafter imposed, levied, collected, withheld or assessed, excluding any Taxes imposed on the overall net income of the Liquidity Provider and excluding United States federal income tax withholding to the extent such withholding is, or would be, actually imposed upon payments to the Liquidity Provider as of the date of this Agreement (such non- excluded taxes being referred to herein, collectively, as "Non-Excluded Taxes" and, individually, as a "Non-Excluded Tax"). If any Non-Excluded Taxes are required to be withheld from any amounts payable to the Liquidity Provider under this Agreement, the amounts so payable to the Liquidity Provider shall be increased to the extent necessary to yield to the Liquidity Provider (after payment of all Non-Excluded Taxes and taxes imposed on the receipt of such increase) interest or any other such amounts payable under this Agreement at the rates or in the amounts specified in this Agreement. Whenever any Non-Excluded Tax is payable by the Borrower, promptly thereafter the Borrower shall send the Liquidity Provider certified copies of tax receipts evidencing such payment by the Borrower. The Liquidity Provider agrees to provide to the Borrower on or prior to the Effective Date, and from time to time thereafter prior to the expiration of the effectiveness of and promptly upon the occurrence of any event requiring a change in the most recent form previously delivered by it (and prior to the immediately following due date of any payment by the Borrower hereunder), to the extent that the Liquidity Provider is legally entitled to do so, two original Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that the Liquidity Provider is completely exempt from United States withholding tax on payments pursuant to this Agreement. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section 3.3 that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous in any material respect to the Liquidity Provider. 12 16 Section 3.4 Payments. The Borrower shall make or cause to be made each payment to the Liquidity Provider under this Agreement so as to cause the same to be received by the Liquidity Provider not later than 1:00 P.M. (New York City time) on the day when due. The Borrower shall make all such payments in lawful money of the United States of America, to the Liquidity Provider in immediately available funds, by wire transfer to The Bank of New York, One Wall Street, New York, NY 10286, ABA No. 021-000-018, for the account of Kredietbank New York, Account No. [802- 3015618] (referencing America West Airlines 1997-1B Liquidity Facility). Section 3.5 Computations. All computations of interest based on the Base Rate shall be made on the basis of a year of 365 or 366 days, as the case may be, and all computations of (x) interest based on the LIBOR Rate and (y) fees payable to the Liquidity Provider, shall be made on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. Section 3.6 Payment on Non-Business Days. Whenever any payment to be made hereunder (other than a payment on LIBOR Advances) becomes due and payable on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and interest thereon shall be payable at the then applicable rate during such extension. If any payment on a LIBOR Advance becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. Section 3.7 Interest. (a) The Borrower shall pay, or shall cause to be paid, interest on (i) the unpaid principal amount of each Advance from and including the date of such Advance to but excluding the date such principal amount shall be paid in full and (ii) any other amount due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by law, installments of interest on Advances or any such other amount) which is not paid when due (whether at stated maturity, by acceleration or otherwise) from and including the due date thereof to but excluding the date such amount is paid in full, in each such case, at a fluctuating interest rate per annum for each day equal to the Applicable Liquidity Rate for such Advance for such day, but in no event at a rate per annum greater than the maximum rate permitted by applicable law; provided, however, that, if at any time the otherwise applicable interest rate as set forth in this Section 3.7 shall exceed the maximum rate permitted by applicable law, then any subsequent reduction in such interest rate will not reduce the rate of interest 13 17 payable pursuant to this Section 3.7 below the maximum rate permitted by applicable law until the total amount of interest accrued equals the amount of interest that would have accrued if such otherwise applicable interest rate as set forth in this Section 3.7 had at all times been in effect. Nothing contained in this Section 3.7 shall require the Borrower to pay any amount under this Section 3.7 other than to the extent the Borrower shall have funds available therefor. (b) Each Advance will be either a Base Rate Advance or a LIBOR Advance as provided in this Section. Each such Advance will be a Base Rate Advance for the period from the date of its borrowing to (but excluding) the third Business Day following the Liquidity Provider's receipt of the Notice of Borrowing for such Advance. Thereafter, such Advance shall be a LIBOR Advance; provided that the Final Advance shall, until repaid in full, be a Base Rate Advance and the Borrower may not convert the Final Advance into a LIBOR Advance. (c) Each Base Rate Advance shall bear interest at a per annum rate equal to the Base Rate plus the Applicable Margin for such Base Rate Advance, payable in arrears on each Regular Distribution Date and, in the event of the payment of principal of such Base Rate Advance on a day other than a Regular Distribution Date, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). (d) Each LIBOR Advance shall bear interest during each Interest Period at a per annum rate equal to the LIBOR Rate for such Interest Period plus the Applicable Margin for such LIBOR Advance, payable in arrears on the last day of such Interest Period and, in the event of the payment of principal of such LIBOR Advance on a day other than such last day, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). (e) Each amount not paid when due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by applicable law, installments of interest on Advances) shall bear interest at the Base Rate. (f) Each change in the Base Rate shall become effective immediately. Section 3.8 Replacement of Borrower. Subject to Section 5.2(b), from time to time, upon the effective date and time specified in a written and completed Notice of Replacement Borrower in substantially the form of Annex IV attached hereto (a "Notice of Replacement Borrower") delivered to the Liquidity Provider by the then Borrower, the successor Borrower designated therein shall be substituted for as the Borrower for all purposes hereunder. 14 18 Section 3.9 Funding Loss Indemnification. The Borrower shall pay to the Liquidity Provider, upon the request of the Liquidity Provider, such amount or amounts as shall be sufficient (in the reasonable opinion of the Liquidity Provider) to compensate it for any loss, cost, or expense incurred as a result of: (a) Any payment or prepayment of a LIBOR Advance on a date other than the last day of the Interest Period for such Advance; or (b) Any failure by the Borrower to borrow a LIBOR Advance on the date for borrowing specified in the relevant notice under Section 2.2 or 3.7. Section 3.10 Illegality. Notwithstanding any other provision in this Agreement, if any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Liquidity Provider (or its Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for the Liquidity Provider (or its Lending Office) to maintain or fund its LIBOR Advances, then upon notice to the Borrower by the Liquidity Provider, the outstanding principal amount of the LIBOR Advances shall be converted to Base Rate Advances (a) immediately upon demand of the Liquidity Provider, if such change or compliance with such request, in the judgment of the Liquidity Provider, requires immediate repayment; or (b) at the expiration of the last Interest Period to expire before the effective date of any such change or request. In the event any change of the nature described in the preceding sentence shall make it unlawful or impossible for the Liquidity Provider (or its Lending Office) to maintain or fund its Base Rate Advances, the Liquidity Provider shall have the right to cause a Replacement Liquidity Facility to be substituted for this Agreement, subject to (i) the satisfaction of the conditions precedent to the effectiveness of, and the other provisions regarding, a Replacement Liquidity Facility set forth in Section 3.6(e) of the Intercreditor Agreement and (ii) such Replacement Liquidity Facility and Replacement Liquidity Provider being reasonably acceptable to America West. ARTICLE IV CONDITIONS PRECEDENT Section 4.1 Conditions Precedent to Effectiveness of Section 2.1. Section 2.1 of this Agreement shall become effective on and as of the first date (the "Effective Date") on which the following conditions precedent have been satisfied or waived: 15 19 (a) The Liquidity Provider shall have received on or before the Closing Date each of the following, each dated such date (except for those documents delivered pursuant to paragraphs (v) and (vii) of this Section 4.1(a)), and each in form and substance satisfactory to the Liquidity Provider: (i) This Agreement duly executed on behalf of the Borrower; (ii) The Intercreditor Agreement duly executed on behalf of each of the parties thereto; (iii) Counterparts (or certified copies thereof) of each of the Operative Agreements (other than this Agreement and the Intercreditor Agreement) which, when taken together, bear the signatures of all of the respective parties thereto and which are in full force and effect in accordance with their respective terms; (iv) A copy of the Prospectus and specimen copies of the Class B Certificates; (v) Evidence that, on the Effective Date, the Class A Certificates, the Class B Certificates, the Class C Certificates and the Class D Certificates will receive long-term credit ratings from Moody's of not lower than A2, Baa2, Ba1 and Ba3, respectively, and from Standard & Poor's of not lower than AA-, A-, BBB- and BB, respectively; (vi) An executed or a certified copy of each document, instrument, certificate and opinion delivered pursuant to the Class B Trust Agreement, the Intercreditor Agreement, the Refunding Agreements and the other Operative Agreements (together with, in the case of each such opinion (unless such opinion is addressed to the Liquidity Provider), other than the opinion of counsel for the Underwriters, a letter from the counsel rendering such opinion to the effect that the Liquidity Provider is entitled to rely on such opinion as if it were addressed to the Liquidity Provider); (vii) Evidence that there shall have been made and shall be in full force and effect, all filings, recordings and/or registrations, and there shall have been given or taken any notice or other similar action as may be reasonably necessary or, to the extent reasonably requested by the Liquidity Provider, reasonably advisable, in order to establish, perfect, protect and preserve the right, title and interest, 16 20 remedies, powers, privileges, liens and security interests of, or for the benefit of, the Trustees and the Liquidity Provider created by the Operative Agreements; (viii) Copies of the appraisals included in the Prospectus; (ix) A letter from America West agreeing to provide to the Liquidity Provider the periodic financial reports referred to in Section 8.04(a) of the Trust Agreements; and (x) Such other documents, instruments, opinions and approvals (and, if requested by the Liquidity Provider, certified duplicates or executed copies thereof) as the Liquidity Provider shall have reasonably requested. (b) The following statements shall be true and shall be deemed to have been represented by each party (other than clause (ii) below, which shall be deemed to have been represented only by America West) to the Refunding Agreements as being true on and as of the Effective Date: (i) The representations and warranties of such Person contained in each Refunding Agreement are true and correct on and as of the Effective Date as though made on and as of the Effective Date; and (ii) No event has occurred and is continuing, or would result from the entering into of this Agreement or the making of any Advance, which constitutes a Liquidity Event of Default. (c) The Liquidity Provider shall have received payment in full of all fees and other sums required to be paid to or for the account of the Liquidity Provider on or prior to the Effective Date. (d) All conditions precedent to the issuance of the Certificates under the Trust Agreements shall have been satisfied, all conditions precedent to the effectiveness of the other Liquidity Facilities shall have been satisfied, and all conditions precedent to the purchase of the Certificates by the Underwriters under the Underwriting Agreement shall have been satisfied (except for any of such conditions precedent under the Underwriting Agreement that shall have been waived by the Underwriters). (e) The Borrower shall have received a certificate, dated the date hereof, signed by a duly authorized 17 21 representative of the Liquidity Provider, certifying that all conditions precedent to the effectiveness of Section 2.1 have been satisfied or waived (other than this Section 4.1(e)). Section 4.2 Conditions Precedent to Borrowing. The obligation of the Liquidity Provider to make an Advance on the occasion of each Borrowing shall be subject to the conditions precedent that the Effective Date shall have occurred and, except in the case of a Final Advance, prior to the date of such Borrowing, the Borrower shall have delivered a Notice of Borrowing which conforms to the terms and conditions of this Agreement and has been completed as may be required by the relevant form of the Notice of Borrowing for the type of Advance requested. ARTICLE V COVENANTS Section 5.1 Affirmative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will, unless the Liquidity Provider shall otherwise consent in writing: (a) Performance of This and Other Agreements. Punctually pay or cause to be paid all amounts payable by it under this Agreement and the other Operative Agreements and observe and perform in all material respects the conditions, covenants and requirements applicable to it contained in this Agreement and the other Operative Agreements. (b) Reporting Requirements. Furnish to the Liquidity Provider with reasonable promptness, such information and data with respect to the transactions contemplated by the Operative Agreements as from time to time may be reasonably requested by the Liquidity Provider; and permit the Liquidity Provider, upon reasonable notice, to inspect the Borrower's books and records with respect to such transactions and to meet with officers and employees of the Borrower to discuss such transactions. Section 5.2 Negative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will not, without the written consent of the Liquidity Provider: 18 22 (a) Amendments. Modify, amend or supplement, or give any consent to any modification, amendment, or supplement, or make any waiver with respect to, any provision of the Trust Agreements or the Intercreditor Agreement, except for any supplemental agreement to the Trust Agreements provided for in Section 9.01 thereof. (b) Borrower. Appoint or permit or suffer to be appointed any successor Borrower without the prior written approval of the Liquidity Provider (which approval shall not be unreasonably withheld). ARTICLE VI FINAL ADVANCE Section 6.1 Final Advance. If (a) both (i) a Triggering Event shall have occurred and be continuing and (ii) a Performing Note Deficiency exists or (b) a Liquidity Event of Default shall have occurred and be continuing, the Liquidity Provider may, in its discretion, make a Final Advance whereupon (i) the Liquidity Provider shall have no further obligation to make Advances hereunder, (ii) all other outstanding Advances shall be automatically converted into Final Advances for purposes of determining the Applicable Liquidity Rate for interest payable thereon, and (iii) subject to Sections 2.7 and 2.9, all Advances, any accrued interest thereon and any other amounts outstanding hereunder shall become immediately due and payable to the Liquidity Provider. ARTICLE VII MISCELLANEOUS Section 7.1 Amendments, Etc. No amendment or waiver of any provision of this Agreement, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Liquidity Provider, and, in the case of an amendment, the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Section 7.2 Notices, Etc. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telecopier and mailed or delivered or sent by telecopier): Borrower: Fleet National Bank 777 Main Street Hartford, CT 06115 Attention: Corporate Trust Administration 19 23 Telecopy: (860) 986-7920 Liquidity Provider: Kredietbank N.V. New York Branch 125 West 55th Street New York, NY 10019 Attention: General Manager Telecopy: (212) 956-5580 or, as to each of the foregoing, at such other address as shall be designated by such Person in a written notice to the others. All such notices and communications shall be effective (i) if given by telecopier, when transmitted to the telecopier number specified above, (ii) if given by mail, when deposited in the mails addressed as specified above, and (iii) if given by other means, when delivered at the address specified above, except that written notices to the Liquidity Provider pursuant to the provisions of Articles II and III hereof shall not be effective until received by the Liquidity Provider. A copy of all notices delivered hereunder to either party shall in addition be delivered to each of the parties to the Refunding Agreements at their respective addresses set forth therein. Section 7.3 No Waiver; Remedies. No failure on the part of the Liquidity Provider to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Agreement preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 7.4 Further Assurances. The Borrower agrees to do such further acts and things and to execute and deliver to the Liquidity Provider such additional assignments, agreements, powers and instruments as the Liquidity Provider may reasonably require or deem advisable to carry into effect the purposes of this Agreement and the other Operative Agreements or to better assure and confirm unto the Liquidity Provider its rights, powers and remedies hereunder and under the other Operative Agreements. Section 7.5 Indemnification; Survival of Certain Provisions. The Liquidity Provider shall be indemnified hereunder to the extent and in the manner described in Sections 10 and 13 of the Lease. In addition, the Borrower agrees to indemnify, protect, defend and hold harmless the Liquidity Provider from, against and in respect of, and shall pay on demand, all Expenses of any kind or nature whatsoever, whether arising before, on or after the date hereof, that may be imposed, incurred by or asserted against any Liquidity Indemnitee, in any 20 24 way relating to, resulting from, or arising out of or in connection with, this Agreement, the Intercreditor Agreement or the Refunding Agreements; provided, however, that the Borrower shall not be required to indemnify, protect, defend and hold harmless any Liquidity Indemnitee in respect of any Expense of such Liquidity Indemnitee (i) to the extent such Expense is attributable to the gross negligence or willful misconduct of such Liquidity Indemnitee or any Related Indemnitee, (ii) that is ordinary and usual operating overhead expense or (iii) to the extent such Expense is attributable to the failure by such Liquidity Indemnitee or its Related Indemnitee to perform or observe any agreement, covenant or condition on its part to be performed or observed in any Operative Agreement. The indemnities contained in such Sections 10 and 13 of the Lease, and the provisions of Sections 3.1, 3.2, 3.3, 7.5 and 7.7, shall survive the termination of this Agreement. Section 7.6 Liability of the Liquidity Provider. (a) Neither the Liquidity Provider nor any of its officers or directors shall be liable or responsible for: (i) the use which may be made of the Advances or any acts or omissions of the Borrower or any beneficiary or transferee in connection therewith; (ii) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; or (iii) the making of Advances by the Liquidity Provider against delivery of a Notice of Borrowing and other documents which do not comply with the terms hereof; provided, however, that the Borrower shall have a claim against the Liquidity Provider, and the Liquidity Provider shall be liable to the Borrower, to the extent of any damages suffered by the Borrower which were the result of (A) the Liquidity Provider's willful misconduct or negligence in determining whether documents presented hereunder comply with the terms hereof, or (B) any breach by the Liquidity Provider of any of the terms of this Agreement, including, but not limited to, the Liquidity Provider's failure to make lawful payment hereunder after the delivery to it by the Borrower of a Notice of Borrowing strictly complying with the terms and conditions hereof. (b) The Liquidity Provider shall not be liable or responsible in any respect for (i) any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with this Agreement or any Notice of Borrowing delivered hereunder, or (ii) any action, inaction or omission which may be taken by it in good faith, absent willful misconduct or negligence (in which event the extent of the Liquidity Provider's potential liability to the Borrower shall be limited as set forth in the immediately preceding paragraph), in connection with this Agreement or any Notice of Borrowing. 21 25 Section 7.7 Costs, Expenses and Taxes. The Borrower agrees to pay, or cause to be paid (A) on the Effective Date and on such later date or dates on which the Liquidity Provider shall make demand, all reasonable out-of- pocket costs and expenses of the Liquidity Provider in connection with the preparation, negotiation, execution, delivery, filing and recording of this Agreement, any other Operative Agreement and any other documents which may be delivered in connection with this Agreement, including, without limitation, the reasonable fees and expenses of outside counsel for the Liquidity Provider and (B) on demand, all reasonable costs and expenses of the Liquidity Provider (including reasonable counsel fees and expenses) in connection with (i) the enforcement of this Agreement or any other Operative Agreement, (ii) the modification or amendment of, or supplement to, this Agreement or any other Operative Agreement or such other documents which may be delivered in connection herewith or therewith (whether or not the same shall become effective) or (iii) any action or proceeding relating to any order, injunction, or other process or decree restraining or seeking to restrain the Liquidity Provider from paying any amount under this Agreement, the Intercreditor Agreement or any other Operative Agreement or otherwise affecting the application of funds in the Cash Collateral Accounts. In addition, the Borrower shall pay any and all recording, stamp and other similar taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement, any other Operative Agreement and such other documents, and agrees to save the Liquidity Provider harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes or fees. Section 7.8 Binding Effect; Participations. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower and the Liquidity Provider and their respective successors and assigns, except that neither the Liquidity Provider (except as otherwise provided in this Section 7.8) nor the Borrower shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the other party, subject to the requirement of Section 7.8(b). The Liquidity Provider may grant participations herein or in any of its rights or security hereunder and under the other Operative Agreements to such Persons as the Liquidity Provider may in its sole discretion select, subject to the requirement of Section 7.8(b). No such granting of participations by the Liquidity Provider, however, will relieve the Liquidity Provider of its obligations hereunder. In connection with any participation or any proposed participation, the Liquidity Provider may disclose to the participant or the proposed participant any information that the Borrower is required to deliver or to disclose to the Liquidity Provider pursuant to this Agreement. The Borrower acknowledges and agrees that the Liquidity Provider's source of funds may derive in part from its participants. Accordingly, 22 26 references in this Agreement and the other Operative Agreements to determinations, reserve and capital adequacy requirements, increased costs, reduced receipts and the like as they pertain to the Liquidity Provider shall be deemed also to include those of each of its participants (subject, in each case, to the maximum amount that would have been incurred by or attributable to the Liquidity Provider directly if the Liquidity Provider, rather than the participant, had held the interest participated). (b) If, pursuant to subsection (a) above, the Liquidity Provider sells any participation to any bank or other entity (each, a "Participant"), then, concurrently with the effectiveness of such participation, the Participant shall (i) represent to the Liquidity Provider (for the benefit of the Liquidity Provider and the Borrower) either (A) that it is incorporated under the laws of the United States or a state thereof or (B) that under applicable law and treaties, no taxes will be required to be withheld by the Borrower or the Liquidity Provider with respect to any payments to be made to such Participant in respect of this Agreement, (ii) furnish to the Liquidity Provider and the Borrower either (x) a statement that it is incorporated under the laws of the United States or a state thereof or (y) if it is not so incorporated, two copies of a properly completed United States Internal Revenue Service Form 4224 or Form 1001, as appropriate, or other applicable form, certificate or document prescribed by the Internal Revenue Service certifying, in each case, such Participant's entitlement to a complete exemption from United States federal withholding tax in respect to any and all payments to be made hereunder, and (iii) agree (for the benefit of the Liquidity Provider and the Borrower) to provide the Liquidity Provider and the Borrower a new Form 4224 or Form 1001, as appropriate, (A) on or before the date that any such form expires or becomes obsolete or (B) after the occurrence of any event requiring a change in the most recent form previously delivered by it and prior to the immediately following due date of any payment by the Borrower hereunder, certifying in the case of a Form 1001 or Form 4224 that such Participant is entitled to a complete exemption from United States federal withholding tax on payments under this Agreement. Unless the Borrower has received forms or other documents reasonably satisfactory to it indicating that payments hereunder are not subject to United States federal withholding tax, the Borrower will withhold taxes as required by law from such payments at the applicable statutory rate without any obligation to gross-up or indemnify pursuant to Section 3.3. (c) Notwithstanding the other provisions of this Section 7.8, the Liquidity Provider may assign and pledge all or any portion of the Advances owing to it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal 23 27 Reserve Bank, provided that any payment in respect of such assigned Advances made by the Borrower to the Liquidity Provider in accordance with the terms of this Agreement shall satisfy the Borrower's obligations hereunder in respect of such assigned Advance to the extent of such payment. No such assignment shall release the Liquidity Provider from its obligations hereunder. Section 7.9 Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. Section 7.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Section 7.11 Submission to Jurisdiction; Waiver of Jury Trial. (a) Each of the parties hereto hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement or any other Operative Agreement, or for recognition and enforcement of any judgment in respect hereof or thereof, to the nonexclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and the appellate courts from any thereof; (ii) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) if such party does not maintain an office for the transaction of its business in New York, agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to each party hereto at its address set forth in Section 7.2, or at such other address of which the Liquidity Provider shall have been notified pursuant thereto; and 24 28 (iv ) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. (b) THE BORROWER AND THE LIQUIDITY PROVIDER EACH HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED, including, without limitation, contract claims, tort claims, breach of duty claims and all other common law and statutory claims. The Borrower and the Liquidity Provider each warrant and represent that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with such legal counsel. THIS WAIVER CANNOT BE MODIFIED ORALLY. Section 7.12 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. Section 7.13 Entirety. This Agreement and the other Operative Agreements constitute the entire agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all prior understandings and agreements of such parties. Section 7.14 Headings; Section References. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Unless the context otherwise requires or otherwise indicated herein, all Section references in this Agreement are references to Sections hereof. Section 7.15 LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE OBLIGATIONS OF THE LIQUIDITY PROVIDER TO MAKE ADVANCES HEREUNDER, AND THE BORROWER'S RIGHTS TO DELIVER NOTICES OF BORROWING REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL BE UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED, IN EACH CASE STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. 25 29 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first set forth above. FLEET NATIONAL BANK, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class B Trust, as Borrower By ------------------------------- Name: Title: KREDIETBANK N.V., NEW YORK BRANCH, as Liquidity Provider By ------------------------------- Name: Title: By ------------------------------- Name: Title: 26 30 Annex I to Irrevocable Revolving Credit Agreement INTEREST ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned borrower (the "Borrower"), hereby certifies to KREDIETBANK N.V., acting through its New York Branch (the "Liquidity Provider"), with reference to the Irrevocable Revolving Credit Agreement, Class B Certificates dated as of June __, 1997, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of an Interest Advance by the Liquidity Provider to be used for the payment of interest on the Class B Certificates which was payable on the Distribution Date falling on _____________ in accordance with the terms and provisions of the Class B Trust Agreement and the Class B Certificates and has not been paid pursuant to clause fifth of Section 3.2 of the Intercreditor Agreement or clause seventh of Section 3.3 of the Intercreditor Agreement, which Advance is requested to be made on _____________. (3) The amount of the Interest Advance requested hereby (i) is $___________, to be applied in respect of the payment of interest which was due and payable on the Class B Certificates on such Distribution Date, (ii) does not include any amount with respect to the payment of the principal of, or premium on, the Class B Certificates, or principal of, or interest or premium on, the Class A Certificates, the Class C Certificates or the Class D Certificates, (iii) was computed in accordance with the provisions of the Class B Certificates, the Class B Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), (iv) does not exceed the Available Commitment on the date hereof, and (v) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will apply the same in accordance with the terms of Section 3.2 or 3.3 of the Intercreditor Agreement, as the case may be, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. 31 (5) The Borrower hereby requests that the Advance requested hereby be a Base Rate Advance and that such Base Rate Advance be converted into a LIBOR Rate Advance on the third Business Day following your receipt of this notice. The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, the making of the Interest Advance as requested by this Notice of Borrowing shall automatically reduce, subject to reinstatement in accordance with the terms of the Liquidity Agreement, the Available Commitment by an amount equal to the amount of the Interest Advance requested to be made hereby as set forth in clause (i) of paragraph (3) of this Certificate and such reduction shall automatically result in corresponding reductions in the amounts available to be borrowed pursuant to a subsequent Advance. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the _ day of ______________, ________. FLEET NATIONAL BANK, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class B Trust, as Borrower By -------------------------------- Name: Title: 2 32 SCHEDULE I TO INTEREST ADVANCE NOTICE OF BORROWING [Insert Copy of Computations in accordance with Interest Advance Notice of Borrowing] 3 33 Annex II to Irrevocable Revolving Credit Agreement DOWNGRADE ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned subordination agent (the "Borrower"), hereby certifies to KREDIETBANK, N.V., acting through its New York Branch (the "Liquidity Provider"), with reference to the Irrevocable Revolving Credit Agreement, Class B Certificates dated as of June __, 1997, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of the Downgrade Advance by the Liquidity Provider to be used for the funding of the Class B Cash Collateral Account in accordance with Section 3.6(c) of the Intercreditor Agreement by reason of the downgrading of the debt rating of the Liquidity Provider issued by either Rating Agency below the applicable Threshold Rating, which Advance is requested to be made on __________. (3) The amount of the Downgrade Advance requested hereby (i) is $___________, which equals the Available Commitment on the date hereof and is to be applied in respect of the funding of the Class B Cash Collateral Account in accordance with Section 3.6(c) of the Intercreditor Agreement, (ii) does not include any amount with respect to the payment of the principal of, or premium on, the Class B Certificates, or principal of, or interest or premium on, the Class A Certificates, the Class C Certificates or the Class D Certificates, (iii) was computed in accordance with the provisions of the Class B Certificates, the Class B Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), and (iv) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing under the Liquidity Agreement. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will deposit such amount in the Class B Cash Collateral Account and apply the same in accordance with the terms of Section 3.6(c) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. 34 (5) The Borrower hereby requests that the Advance requested hereby be a Base Rate Advance and that such Base Rate Advance be converted into a LIBOR Rate Advance on the third Business Day following your receipt of this notice. The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, (A) the making of the Downgrade Advance as requested by this Notice of Borrowing shall automatically and irrevocably terminate the obligation of the Liquidity Provider to make further Advances under the Liquidity Agreement; and (B) following the making by the Liquidity Provider of the Downgrade Advance requested by this Notice of Borrowing, the Borrower shall not be entitled to request any further Advances under the Liquidity Agreement. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the _ day of __________, _____. FLEET NATIONAL BANK, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class B Trust, as Borrower By ------------------------------------- Name: Title: 2 35 SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING [Insert Copy of computations in accordance with Downgrade Advance Notice of Borrowing] 36 Annex III to Irrevocable Revolving Credit Agreement NOTICE OF AUTOMATIC REDUCTION OF COMMITMENT [Date] Ladies and Gentlemen: The undersigned, a duly authorized signatory of the undersigned subordination agent (the "Borrower"), hereby notifies Kredietbank N.V., acting through its New York Branch (the "Liquidity Provider"), with reference to the Irrevocable Revolving Credit Agreement dated as of June __, 1997, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that, pursuant to Section 2.4(a) of the Liquidity Agreement, the Commitment has been automatically reduced to $_________. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the _ day of __________, _____. FLEET NATIONAL BANK, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class B Trust, as Borrower By --------------------------------- Name: Title: 37 Annex IV to Irrevocable Revolving Credit Agreement NOTICE OF REPLACEMENT BORROWER [Date] Ladies and Gentlemen: For value received, the undersigned beneficiary hereby irrevocably transfers to: [Name of Transferee] [Address of Transferee] all rights of the undersigned as Borrower under the Liquidity Agreement referred to above. The transferee has succeeded the undersigned as Subordination Agent under the Intercreditor Agreement referred to in the first paragraph of the Liquidity Agreement. By this transfer, all rights of the undersigned as Borrower under the Liquidity Agreement are transferred to the transferee and the transferee shall hereafter have the sole rights as Borrower thereunder. The undersigned shall pay any costs and expenses of such transfer, including, but not limited to, transfer taxes or governmental charges. We ask that this transfer be effective as of __________, ____. FLEET NATIONAL BANK, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class B Trust, as Borrower By ----------------------------------- Name: Title: EX-4.12 10 REVOLVING CREDIT AGREEMENT CLASS C CERTIF 1 Exhibit 4.12 IRREVOCABLE REVOLVING CREDIT AGREEMENT CLASS C CERTIFICATES Dated as of June __, 1997 between FLEET NATIONAL BANK, as Subordination Agent, as agent and trustee for the America West Airlines Pass Through Trust 1997-1C, as Borrower and KREDIETBANK N.V., NEW YORK BRANCH, as Liquidity Provider Relating to America West Airlines Pass Through Trust 1997-1C [_._]% America West Airlines Pass Through Certificates, Series 1997-1C 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II AMOUNT AND TERMS OF THE COMMITMENT . . . . . . . . . . . . . . . . . . . 5 Section 2.1 The Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 2.2 Making the Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 2.4 Reduction or Termination of the Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.5 Repayments of Interest Advances or the Final Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.6 Repayments of Downgrade Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.7 Payments to the Liquidity Provider Under the Intercreditor Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 2.8 Book Entries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 2.9 Payments from Available Funds Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE III OBLIGATIONS OF THE BORROWER . . . . . . . . . . . . . . . . . . . . . 10 Section 3.1 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 3.2 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 3.3 Payments Free of Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 3.4 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 3.5 Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 3.6 Payment on Non-Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 3.7 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 3.8 Replacement of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 3.9 Funding Loss Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 3.10 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE IV CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . 15 Section 4.1 Conditions Precedent to Effectiveness of Section 2.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 4.2 Conditions Precedent to Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
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Page ---- ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 5.1 Affirmative Covenants of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 5.2 Negative Covenants of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE VI FINAL ADVANCE . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 6.1 Final Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE VII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 7.1 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 7.2 Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 7.3 No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 7.4 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 7.5 Indemnification; Survival of Certain Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 7.6 Liability of the Liquidity Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 7.7 Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 7.8 Binding Effect; Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 7.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 7.10 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 7.11 Submission to Jurisdiction; Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 7.12 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 7.13 Entirety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 7.14 Headings; Section References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 7.15 LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Annex I - Interest Advance Notice of Borrowing Annex II - Downgrade Advance Notice of Borrowing Annex III - Notice of Automatic Reduction of Commitment Annex IV - Notice of Replacement Borrower ii 4 IRREVOCABLE REVOLVING CREDIT AGREEMENT CLASS C CERTIFICATES IRREVOCABLE REVOLVING CREDIT AGREEMENT, CLASS C CERTIFICATES dated as of June __, 1997 between FLEET NATIONAL BANK, a national banking association, not in its individual capacity but solely as Subordination Agent under the Intercreditor Agreement (each as defined below), as agent and trustee for the Class C Trust (as defined below) (the "Borrower"), and KREDIETBANK, N.V., acting through its New York Branch (the "Liquidity Provider"). W I T N E S S E T H WHEREAS, pursuant to the Class C Trust Agreement (such term and all other capitalized terms used in these recitals having the meanings set forth or referred to in Section 1.1), the Class C Trust is issuing the Class C Certificates; and WHEREAS, the Borrower, in order to support the timely payment of a portion of the interest on the Class C Certificates in accordance with their terms, has requested the Liquidity Provider to enter into this Agreement, providing in part for the Borrower to request in specified circumstances that advances be made hereunder. NOW, THEREFORE, in consideration of the premises, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.1 Certain Defined Terms. (a) Definitions. As used in this Agreement and unless otherwise expressly indicated, or unless the context clearly requires otherwise, the following capitalized terms shall have the following respective meanings for all purposes of this Agreement: "Advance" means an Interest Advance, a Final Advance or a Downgrade Advance, as the case may be. "Applicable Liquidity Rate" means the rates of interest specified in Section 3.7 with respect to any Advance. "Applicable Margin" means (x) with respect to any Downgrade Advance (other than an Applied Downgrade Advance) .40% (40 basis points) per annum and (y) with respect to any other Advance including an Applied Downgrade Advance 1.5% (150 basis points) per annum. "Applied Downgrade Advance" means any amount in respect of a Downgrade Advance withdrawn from the Class C Cash Collateral Account for the purpose of paying interest on the Class C 5 Certificates in accordance with Section 3.6(f) of the Intercreditor Agreement. "Available Commitment" means, at any time of determination, an amount equal to (i) the Commitment at such time less (ii) subject to the proviso contained in the third sentence of Section 2.2(a), the aggregate amount of each Advance outstanding at such time; provided that following a Downgrade Advance or a Final Advance, the Available Commitment shall be zero. "Base Rate" means a fluctuating interest rate per annum in effect from time to time, which rate per annum shall at all times be equal to the higher of (i) the base commercial lending rate announced from time to time by the Liquidity Provider, or (ii) the rate quoted by the Liquidity Provider, at approximately 11:00 A.M., New York City time, to dealers in the New York Federal funds market for overnight offering of dollars by the Liquidity Provider, for deposit plus .50 of 1 percent (.50%). "Base Rate Advance" means an Advance that bears interest at a rate based upon the Base Rate. "Borrower" has the meaning assigned to such term in the recital of parties to this Agreement. "Borrowing" means the making of Advances requested by delivery of a Notice of Borrowing or pursuant to Section 6.1. "Business Day" means any day other than a Saturday or Sunday or a day on which commercial banks are required or authorized to close in New York, New York or Hartford, Connecticut, and, if the applicable Business Day relates to any Advance or other amount bearing interest based on the LIBOR Rate, on which dealings are carried on in the London interbank market. "Commitment" means, initially, [$__,___,___] as the same may be reduced from time to time in accordance with Section 2.4(a). "Downgrade Advance" means an Advance made pursuant to Section 2.2(b). "Effective Date" has the meaning specified in Section 4.1. The delivery of the certificate of the Liquidity Provider contemplated by Section 4.1(e) shall be conclusive evidence that the Effective Date has occurred. "Expenses" means liabilities, obligations, damages, settlements, penalties, claims, actions, suits, costs, expenses and disbursements (including, without limitation, reasonable fees 2 6 and disbursements of legal counsel and costs of investigation), provided that Expenses shall not include any Taxes. "Expiry Date" means [__], [____]. "Final Advance" means an Advance made pursuant to Sections 2.2(c) and 6.1. "Intercreditor Agreement" means the Intercreditor Agreement dated as of the date hereof, among the Trustees, the Liquidity Provider, the liquidity provider under each Liquidity Facility (other than this Agreement) and the Subordination Agent, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Interest Advance" means an Advance made pursuant to Section 2.2(a). "Interest Period" means, with respect to any LIBOR Advance, each of the following periods: (i) the period beginning on the date such LIBOR Advance is made (or is converted from a Base Rate Advance) and ending on the next Regular Distribution Date; and (ii ) each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the next Regular Distribution Date. "Lending Office" means the lending office of the Liquidity Provider, presently located at 125 West 55th Street, New York, NY 10019, or such other lending office as the Liquidity Provider from time to time shall notify the Borrower as its lending office hereunder. "LIBOR Advance" means an Advance bearing interest at a rate based upon the LIBOR Rate. "LIBOR Rate" means, with respect to any Interest Period, the rate per annum at which deposits in Dollars are offered for the relevant Interest Period by the Liquidity Provider to prime banks in the London interbank market at approximately 11:00 A.M. (London time) two Business Days before the first day of such Interest Period in the principal amount of the Advance to which such Interest Period is to apply and for a period of time comparable to such Interest Period, as quoted by the Liquidity Provider to the Subordination Agent. "Liquidity Event of Default" means the occurrence of the following: all of the Equipment Notes shall have been either declared to be immediately due and payable or shall not have been paid at their final maturity. A Liquidity Event of Default shall 3 7 not occur upon an automatic acceleration of the Equipment Notes as a result of an America West Bankruptcy Event. "Liquidity Indemnitee" means (i) the Liquidity Provider, (ii) each affiliate of the Liquidity Provider, (iii) the respective directors, officers, employees, agents and servants of the Liquidity Provider and its affiliates, and (iv) the successors and permitted assigns of the persons described in clauses (i) through (iii), inclusive. "Liquidity Provider" has the meaning assigned to such term in the recital of parties to this Agreement. "Margin" means 0.40% per annum. "Non-Excluded Tax" has the meaning specified in Section 3.3. "Notice of Borrowing" has the meaning specified in Section 2.2(d). "Notice of Replacement Borrower" has the meaning specified in Section 3.8. "Participant" has the meaning assigned to such term in Section 7.8(b). "Prospectus" means the prospectus included in the registration statement on Form S-3 (File No. 333- _____) filed by America West relating to certain pass through certificates, as such Prospectus may be amended or supplemented. "Related Indemnitee" means, with respect to any Liquidity Indemnitee, its director, officer, employee, agent, affiliate or employer. "Required Amount" means, for any day, the sum of the aggregate amount of interest, calculated at the rate per annum equal to the Stated Interest Rate for the Class C Certificates, that would be payable on the Class C Certificates on each of the three successive semiannual Regular Distribution Dates immediately following such day or, if such day is a Regular Distribution Date, on such day and the succeeding two semiannual Regular Distribution Dates, in each case calculated on the basis of the Pool Balance of the Class C Certificates on such day and without regard to expected future payments of principal on the Class C Certificates. "Termination Date" means the earliest to occur of the following: (i) the Expiry Date; (ii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that all of 4 8 the Class C Certificates have been paid in full (or provision has been made for such payment in accordance with the Intercreditor Agreement and the Trust Agreements) or are otherwise no longer entitled to the benefits of this Agreement; (iii) the date on which the Borrower delivers to the Liquidity Provider a certificate, signed by a Responsible Officer of the Borrower, certifying that a Replacement Liquidity Facility has been substituted for this Agreement in full pursuant to Section 3.6(e) of the Intercreditor Agreement; (iv) the date on which the Liquidity Provider makes the Final Advance; and (v) the date on which no Advance is or may (including by reason of reinstatement as herein provided) become available for a Borrowing hereunder. "Unpaid Advance" has the meaning assigned to such term in Section 2.5. (b) Terms Defined in the Intercreditor Agreement. For all purposes of this Agreement, the following terms shall have the respective meanings assigned to such terms in the Intercreditor Agreement: "America West", "America West Bankruptcy Event", "Certificates", "Class A Certificates", "Class B Certificates", "Class C Certificates", "Class C Certificateholders", "Class C Cash Collateral Account", "Class C Trust", "Class C Trust Agreement", "Class C Trustee", "Class D Certificates", "Closing Date", "Controlling Party", "Distribution Date", "Dollars or $", "Equipment Notes", "Indenture", "Investment Earnings", "Lease", "Liquidity Facility", "Moody's", "Operative Agreements", "Performing Equipment Note", "Performing Note Deficiency", "Person", "Pool Balance", "Rating Agency", "Refunding Agreement", "Regular Distribution Date", "Replacement Liquidity Facility", "Responsible Officer", "Scheduled Payment", "Special Payment", "Standard & Poor's", "Stated Interest Rate", "Subordination Agent", "Taxes", "Threshold Rating", "Triggering Event", "Trust", "Trust Agreements", "Trustee", "Underwriters", "Underwriting Agreement", and "Written Notice". ARTICLE II AMOUNT AND TERMS OF THE COMMITMENT Section 2.1 The Advances. The Liquidity Provider hereby irrevocably agrees, on the terms and conditions hereinafter set forth, to make Advances to the Borrower from time to time on any Business Day during the period from the Effective Date until 12:00 Noon (New York City time) on the Expiry Date (unless the obligations of the Liquidity Provider shall be earlier terminated in accordance with the terms of Section 5 9 2.4(b)) in an aggregate amount at any time outstanding not to exceed the Commitment. Section 2.2 Making the Advances. (a) Interest Advances shall be made in one or more Borrowings by delivery to the Liquidity Provider of one or more written and completed Notices of Borrowing in substantially the form of Annex I attached hereto, signed by a Responsible Officer of the Borrower, in an amount not exceeding the Available Commitment at such time and shall be used solely for the payment when due of interest on the Class C Certificates at the Stated Interest Rate therefor in accordance with Section 3.6(a) of the Intercreditor Agreement. Each Interest Advance made hereunder shall automatically reduce the Available Commitment and the amount available to be borrowed hereunder by subsequent Advances by the amount of such Interest Advance (subject to reinstatement as provided in the next sentence). Upon repayment to the Liquidity Provider in full of the amount of any Interest Advance made pursuant to this Section 2.2(a), together with accrued interest thereon (as provided herein), the Available Commitment shall be reinstated by the amount of such repaid Interest Advance; provided, however, that the Available Commitment shall not be so reinstated at any time if (x) both (i) a Triggering Event shall have occurred and be continuing and (ii) a Performing Note Deficiency exists or (y) a Liquidity Event of Default shall have occurred and be continuing. (b) A Downgrade Advance shall be made in a single Borrowing upon a downgrading of the rating of the Liquidity Provider resulting in the Liquidity Provider's ratings not meeting the Threshold Rating (as provided for in Section 3.6(c) of the Intercreditor Agreement) unless a Replacement Liquidity Facility shall have been delivered to the Borrower in accordance with said Section 3.6(c), by delivery to the Liquidity Provider of a written and completed Notice of Borrowing in substantially the form of Annex II attached hereto, signed by a Responsible Officer of the Borrower, in an amount not exceeding the Available Commitment at such time, and shall be used to fund the Class C Cash Collateral Account in accordance with said Section 3.6(c). The Liquidity Provider shall promptly notify the Borrower of any downgrade of its unsecured debt rating by Moody's or Standard & Poor's below the applicable Threshold Rating. (c) A Final Advance shall be made by the Liquidity Provider without the necessity for a Notice of Borrowing at the option of the Liquidity Provider on the occurrence of an event described in Section 6.1(a) or 6.1(b) in an amount equal to the Available Commitment at such time, and shall be used to fund the Class C Cash Collateral Account. (d) Each Borrowing (other than under Section 2.2(c)) shall be made on notice in writing (a "Notice of Borrowing") in substantially the form required by Section 2.2(a) or 2.2(b), as 6 10 the case may be, given not later than 12:00 Noon (New York City time) on the Business Day prior to the day of the proposed Borrowing by the Borrower to the Liquidity Provider. Upon satisfaction of the conditions precedent set forth in Section 4.2 with respect to a requested Borrowing, the Liquidity Provider shall, before 12:00 Noon (New York City time) on the proposed date of such Borrowing or on such later Business Day specified by the Borrower in such Notice of Borrowing, make available to the Borrower, in U.S. dollars and in immediately available funds, the amount of such Borrowing to be paid to the Borrower in accordance with its payment instructions. If a Notice of Borrowing is delivered by the Borrower in respect of any Borrowing after 12:00 Noon (New York City time) on a Business Day, the Liquidity Provider shall, before 12:00 Noon (New York City time) on the second Business Day next following the day of receipt of such Notice of Borrowing or on such later Business Day specified by the Borrower in such Notice of Borrowing, make available to the Borrower, in Dollars and in immediately available funds, the amount of such Borrowing to be paid to the Borrower in accordance with its payment instructions. Payments of proceeds of a Borrowing shall be made by wire transfer of immediately available funds to the Borrower in accordance with such wire transfer instructions as the Borrower shall furnish from time to time to the Liquidity Provider for such purpose. Each Notice of Borrowing shall be irrevocable and binding on the Borrower. (e) Upon the making of any Advance requested pursuant to a Notice of Borrowing, in accordance with the Borrower's payment instructions, the Liquidity Provider shall be fully discharged of its obligation hereunder with respect to such Notice of Borrowing, and the Liquidity Provider shall not thereafter be obligated to make any further Advances hereunder in respect of such Notice of Borrowing to the Borrower or to any other person (including the holder of any Class C Certificate or the Class C Trustee) who makes to the Class C Trustee or the Borrower a demand for payment with respect to any Class C Certificate. By paying to the Borrower proceeds of Advances requested by the Borrower in accordance with the provisions of this Agreement, the Liquidity Provider makes no representation as to, and assumes no responsibility for, the correctness or sufficiency for any purpose of the amount of the Advances so made and requested. Section 2.3 Fees. (a) The Borrower agrees to pay to the Liquidity Provider a fee equal to 0.35% of the Commitment (as in effect on the Effective Date). Such fee shall be payable on the Effective Date. (b) The Borrower shall pay, or shall cause to be paid, to the Liquidity Provider, a fee equal to 0.40% per annum on the average Available Commitment from the Effective Date to the earlier of the date on which a Downgrade Advance is made and the 7 11 Termination Date. Such fee shall be payable in arrears on each Regular Distribution Date. Nothing contained in this Section 2.3 shall require the Borrower to pay any amount under this Section 2.3 other than to the extent the Borrower shall have funds available therefor. Section 2.4 Reduction or Termination of the Commitment. (a) Automatic Reductions. Promptly following each date on which the Required Amount is reduced as a result of a reduction in the Pool Balance of the Class C Certificates or otherwise, the Commitment shall automatically be reduced to an amount equal to such reduced Required Amount (as calculated by the Borrower). The Borrower shall give notice of any such automatic reduction of the Commitment (substantially in the form of Annex III hereto) to the Liquidity Provider (with a copy to America West) within two Business Days thereof. The failure by the Borrower to furnish any such notice shall not affect such automatic reduction of the Commitment. (b) Termination. Upon the making of any Downgrade Advance or Final Advance hereunder or the occurrence of the Termination Date, the obligation of the Liquidity Provider to make further Advances hereunder shall automatically and irrevocably terminate, and the Borrower shall not be entitled to request any further Borrowing hereunder. Section 2.5 Repayments of Interest Advances or the Final Advance. Subject to Sections 2.7 and 2.9, the Borrower hereby agrees to pay, or to cause to be paid, to the Liquidity Provider on each date on which the Liquidity Provider shall make an Interest Advance or the Final Advance, an amount equal to (a) the amount of such Interest Advance or the Final Advance (any such Interest Advance or the Final Advance, until repaid, is referred to herein as an "Unpaid Advance"), plus (b) interest on the amount of each such Unpaid Advance as provided in Section 3.7. Subject to Sections 2.6, 2.7 and 2.9, unless otherwise waived by the Liquidity Provider, the Borrower shall be obligated, without notice of an Advance or demand for repayment from the Liquidity Provider (which notice and demand are hereby waived by the Borrower), to repay the Liquidity Provider for all Interest Advances and Final Advances on the same day as made and all Applied Downgrade Advances on the same day they become Applied Downgrade Advances. The Borrower and the Liquidity Provider agree that the repayment in full of each Interest Advance and the Final Advance on the date such Interest Advance or the Final Advance is made and each Applied Downgrade Advance on the date it becomes an Applied Downgrade Advance is intended to be a contemporaneous exchange for new value given to the Borrower by the Liquidity Provider. Section 2.6 Repayments of Downgrade Advances. (a) Amounts advanced hereunder in respect of a Downgrade Advance 8 12 shall be deposited in the Class C Cash Collateral Account, and invested and withdrawn from the Class C Cash Collateral Account, as set forth in Sections 3.6(c), (e) and (f) of the Intercreditor Agreement. The Borrower agrees to pay to the Liquidity Provider, on each Regular Distribution Date, commencing on the first Regular Distribution Date after the making of a Downgrade Advance, interest on the principal amount of any such Downgrade Advance as provided in Section 3.7. Immediately upon the withdrawal of any amounts from the Class C Cash Collateral Account on account of a reduction in the Required Amount, the Borrower shall repay the Downgrade Advance in a principal amount equal to the amount of such reduction, plus interest on the principal amount repaid as provided in Section 3.7. (b) Upon the provision of a Replacement Liquidity Facility in replacement of this Agreement in accordance with Section 3.6(e) of the Intercreditor Agreement, and prior to the effectiveness of any Replacement Liquidity Facility, the Borrower agrees that all amounts owing to the Liquidity Provider shall be repaid in full, whether from advances made by the Replacement Liquidity Provider, from amounts remaining on deposit in the Class C Cash Collateral Account after giving effect to any application of funds therefrom to any payment of interest on the Class C Certificates on the date of such replacement, or otherwise. Section 2.7 Payments to the Liquidity Provider Under the Intercreditor Agreement. In order to provide for payment or repayment to the Liquidity Provider of any amounts hereunder, the Intercreditor Agreement provides that amounts available and referred to in Articles II and III of the Intercreditor Agreement, to the extent payable to the Liquidity Provider pursuant to the terms of the Intercreditor Agreement (including, without limitation, Section 3.6(f) of the Intercreditor Agreement), shall be paid to the Liquidity Provider in accordance with the terms thereof. Amounts so paid to the Liquidity Provider shall be applied by the Liquidity Provider in the order of priority required by the applicable provisions of Articles II and III of the Intercreditor Agreement. Section 2.8 Book Entries. The Liquidity Provider shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower resulting from Advances made from time to time and the amounts of principal and interest payable hereunder and paid from time to time in respect thereof; provided, however, that the failure by the Liquidity Provider to maintain such account or accounts shall not affect the obligations of the Borrower in respect of Advances. Section 2.9 Payments from Available Funds Only. All payments to be made by the Borrower under this Agreement shall be made only from amounts received by it that constitute Scheduled 9 13 Payments or Special Payments and only to the extent that the Borrower shall have sufficient income or proceeds therefrom to enable the Borrower to make payments in accordance with the terms hereof after giving effect to the priority of payments provisions set forth in the Intercreditor Agreement. The Liquidity Provider agrees that it will look solely to such amounts to the extent available for distribution to it as provided in the Intercreditor Agreement and this Agreement and that the Borrower, in its individual capacity, is not personally liable to it for any amounts payable or liability under this Agreement except as expressly provided in this Agreement, the Intercreditor Agreement or any Refunding Agreement. Amounts on deposit in the Class C Cash Collateral Account shall be available to make payments only to the extent and for the purposes expressly contemplated in Section 3.6(f) of the Intercreditor Agreement. ARTICLE III OBLIGATIONS OF THE BORROWER Section 3.1 Increased Costs. If the Liquidity Provider shall determine that (a) any change in any law or regulation or in the interpretation thereof by any court or administrative or governmental authority charged with the administration thereof or in the compliance by the Liquidity Provider (or its head office) with any applicable direction, request or requirement (whether or not having the force of law) of any central bank or competent governmental or other authority shall either (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets held by, or deposits in or for the account of, or loans made by, the Liquidity Provider, or (ii) impose on the Liquidity Provider any other condition regarding this Agreement or any Advance, or (iii) change the basis of taxation of any amounts payable to the Liquidity Provider (other than Taxes imposed on the overall net or gross income of the Liquidity Provider) and (b) the result of any event referred to in the preceding clause (i), (ii) or (iii) shall be to increase the cost to the Liquidity Provider of issuing or maintaining its commitment or funding or maintaining Advances (which increase in cost shall be determined by the Liquidity Provider's reasonable allocations of the aggregate of such cost increases resulting from such event) or to reduce the amount of any sum received or receivable by the Liquidity Provider under this Agreement with respect thereto, then, no later than 30 days after demand by the Liquidity Provider, the Borrower shall pay, or cause to be paid, to the Liquidity Provider, from time to time as specified by the Liquidity Provider, additional amounts which shall be sufficient to compensate the Liquidity Provider for such increased cost or reduction. A certificate as to such increased cost or reduction incurred by the Liquidity Provider as a result of any event mentioned in clause (i), (ii) or (iii) above, prepared in 10 14 reasonable detail and submitted by the Liquidity Provider to the Borrower, shall be conclusive, absent manifest error, as to the amount thereof. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section 3.1 that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous in any material respect to the Liquidity Provider. Section 3.2 Capital Adequacy. If the Liquidity Provider shall determine that the adoption after the date hereof of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change after the date hereof in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance after the date hereof by the Liquidity Provider (or its head office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, is generally applicable to all banks domiciled in Belgium with branches in the United States and not related to the financial condition of the Liquidity Provider and has the effect of reducing the rate of return on the Liquidity Provider's capital as a consequence of issuing or maintaining its commitment hereunder or its funding or maintaining Advances to a level below that which the Liquidity Provider could have achieved but for such adoption, change or compliance (taking into consideration the Liquidity Provider's policies with respect to capital adequacy) by an amount deemed by the Liquidity Provider to be material, then, no later than 30 days after demand by the Liquidity Provider, the Borrower shall pay to the Liquidity Provider, from time to time as specified by the Liquidity Provider, additional amounts which shall be sufficient to compensate the Liquidity Provider for such reduction in respect of issuing or maintaining its commitment hereunder or its funding or maintaining Advances. A certificate as to such additional amount describing the event which has the effect of reducing the rate of return on the Liquidity Provider's capital, prepared in reasonable detail and submitted by the Liquidity Provider to the Borrower, shall be conclusive, absent manifest error, as to the amount thereof. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section 3.2 that may thereafter accrue and would not, in the reasonable judgment of the Liquidity 11 15 Provider, be otherwise disadvantageous in any material respect to the Liquidity Provider. The Liquidity Provider further agrees that no amounts shall be payable under this Section 3.2 unless the Liquidity Provider is charging its other borrowers with whom it has agreements similar to this agreement the amounts that are payable to the Liquidity Provider under this Section 3.2. Section 3.3 Payments Free of Deductions. All payments made by the Borrower under this Agreement shall be made free and clear of, and without reduction for or on account of, any present or future stamp or other taxes, levies, imposts, duties, charges, fees, deductions, withholdings, restrictions or conditions of any nature whatsoever now or hereafter imposed, levied, collected, withheld or assessed, excluding any Taxes imposed on the overall net income of the Liquidity Provider and excluding United States federal income tax withholding to the extent such withholding is, or would be, actually imposed upon payments to the Liquidity Provider as of the date of this Agreement (such non-excluded taxes being referred to herein, collectively, as "Non-Excluded Taxes" and, individually, as a "Non-Excluded Tax"). If any Non-Excluded Taxes are required to be withheld from any amounts payable to the Liquidity Provider under this Agreement, the amounts so payable to the Liquidity Provider shall be increased to the extent necessary to yield to the Liquidity Provider (after payment of all Non-Excluded Taxes and taxes imposed on the receipt of such increase) interest or any other such amounts payable under this Agreement at the rates or in the amounts specified in this Agreement. Whenever any Non-Excluded Tax is payable by the Borrower, promptly thereafter the Borrower shall send the Liquidity Provider certified copies of tax receipts evidencing such payment by the Borrower. The Liquidity Provider agrees to provide to the Borrower on or prior to the Effective Date, and from time to time thereafter prior to the expiration of the effectiveness of and promptly upon the occurrence of any event requiring a change in the most recent form previously delivered by it (and prior to the immediately following due date of any payment by the Borrower hereunder), to the extent that the Liquidity Provider is legally entitled to do so, two original Internal Revenue Service Form 1001 or 4224, as appropriate, or any successor or other form prescribed by the Internal Revenue Service, certifying that the Liquidity Provider is completely exempt from United States withholding tax on payments pursuant to this Agreement. The Liquidity Provider agrees to use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Lending Office if making such change would avoid the need for, or reduce the amount of, any amount payable under this Section 3.3 that may thereafter accrue and would not, in the reasonable judgment of the Liquidity Provider, be otherwise disadvantageous in any material respect to the Liquidity Provider. 12 16 Section 3.4 Payments. The Borrower shall make or cause to be made each payment to the Liquidity Provider under this Agreement so as to cause the same to be received by the Liquidity Provider not later than 1:00 P.M. (New York City time) on the day when due. The Borrower shall make all such payments in lawful money of the United States of America, to the Liquidity Provider in immediately available funds, by wire transfer to The Bank of New York, One Wall Street, New York, NY 10286, ABA No. 021-000-018, for the account of Kredietbank New York, Account No. [802-3015618] (referencing America West Airlines 1997-1C Liquidity Facility). Section 3.5 Computations. All computations of interest based on the Base Rate shall be made on the basis of a year of 365 or 366 days, as the case may be, and all computations of (x) interest based on the LIBOR Rate and (y) fees payable to the Liquidity Provider, shall be made on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. Section 3.6 Payment on Non-Business Days. Whenever any payment to be made hereunder (other than a payment on LIBOR Advances) becomes due and payable on a day other than a Business Day, such payment shall be made on the next succeeding Business Day and interest thereon shall be payable at the then applicable rate during such extension. If any payment on a LIBOR Advance becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. Section 3.7 Interest. (a) The Borrower shall pay, or shall cause to be paid, interest on (i) the unpaid principal amount of each Advance from and including the date of such Advance to but excluding the date such principal amount shall be paid in full and (ii) any other amount due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by law, installments of interest on Advances or any such other amount) which is not paid when due (whether at stated maturity, by acceleration or otherwise) from and including the due date thereof to but excluding the date such amount is paid in full, in each such case, at a fluctuating interest rate per annum for each day equal to the Applicable Liquidity Rate for such Advance for such day, but in no event at a rate per annum greater than the maximum rate permitted by applicable law; provided, however, that, if at any time the otherwise applicable interest rate as set forth in this Section 3.7 shall exceed the maximum rate permitted by applicable law, then any subsequent reduction in such interest rate will not reduce the rate of interest 13 17 payable pursuant to this Section 3.7 below the maximum rate permitted by applicable law until the total amount of interest accrued equals the amount of interest that would have accrued if such otherwise applicable interest rate as set forth in this Section 3.7 had at all times been in effect. Nothing contained in this Section 3.7 shall require the Borrower to pay any amount under this Section 3.7 other than to the extent the Borrower shall have funds available therefor. (b) Each Advance will be either a Base Rate Advance or a LIBOR Advance as provided in this Section. Each such Advance will be a Base Rate Advance for the period from the date of its borrowing to (but excluding) the third Business Day following the Liquidity Provider's receipt of the Notice of Borrowing for such Advance. Thereafter, such Advance shall be a LIBOR Advance; provided that the Final Advance shall, until repaid in full, be a Base Rate Advance and the Borrower may not convert the Final Advance into a LIBOR Advance. (c) Each Base Rate Advance shall bear interest at a per annum rate equal to the Base Rate plus the Applicable Margin for such Base Rate Advance, payable in arrears on each Regular Distribution Date and, in the event of the payment of principal of such Base Rate Advance on a day other than a Regular Distribution Date, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). (d) Each LIBOR Advance shall bear interest during each Interest Period at a per annum rate equal to the LIBOR Rate for such Interest Period plus the Applicable Margin for such LIBOR Advance, payable in arrears on the last day of such Interest Period and, in the event of the payment of principal of such LIBOR Advance on a day other than such last day, on the date of such payment (to the extent of interest accrued on the amount of principal repaid). (e) Each amount not paid when due hereunder (whether fees, commissions, expenses or other amounts or, to the extent permitted by applicable law, installments of interest on Advances) shall bear interest at the Base Rate. (f) Each change in the Base Rate shall become effective immediately. Section 3.8 Replacement of Borrower. Subject to Section 5.2(b), from time to time, upon the effective date and time specified in a written and completed Notice of Replacement Borrower in substantially the form of Annex IV attached hereto (a "Notice of Replacement Borrower") delivered to the Liquidity Provider by the then Borrower, the successor Borrower designated therein shall be substituted for as the Borrower for all purposes hereunder. 14 18 Section 3.9 Funding Loss Indemnification. The Borrower shall pay to the Liquidity Provider, upon the request of the Liquidity Provider, such amount or amounts as shall be sufficient (in the reasonable opinion of the Liquidity Provider) to compensate it for any loss, cost, or expense incurred as a result of: (a) Any payment or prepayment of a LIBOR Advance on a date other than the last day of the Interest Period for such Advance; or (b) Any failure by the Borrower to borrow a LIBOR Advance on the date for borrowing specified in the relevant notice under Section 2.2 or 3.7. Section 3.10 Illegality. Notwithstanding any other provision in this Agreement, if any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Liquidity Provider (or its Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for the Liquidity Provider (or its Lending Office) to maintain or fund its LIBOR Advances, then upon notice to the Borrower by the Liquidity Provider, the outstanding principal amount of the LIBOR Advances shall be converted to Base Rate Advances (a) immediately upon demand of the Liquidity Provider, if such change or compliance with such request, in the judgment of the Liquidity Provider, requires immediate repayment; or (b) at the expiration of the last Interest Period to expire before the effective date of any such change or request. In the event any change of the nature described in the preceding sentence shall make it unlawful or impossible for the Liquidity Provider (or its Lending Office) to maintain or fund its Base Rate Advances, the Liquidity Provider shall have the right to cause a Replacement Liquidity Facility to be substituted for this Agreement, subject to (i) the satisfaction of the conditions precedent to the effectiveness of, and the other provisions regarding, a Replacement Liquidity Facility set forth in Section 3.6(e) of the Intercreditor Agreement and (ii) such Replacement Liquidity Facility and Replacement Liquidity Provider being reasonably acceptable to America West. ARTICLE IV CONDITIONS PRECEDENT Section 4.1 Conditions Precedent to Effectiveness of Section 2.1. Section 2.1 of this Agreement shall become effective on and as of the first date (the "Effective Date") on which the following conditions precedent have been satisfied or waived: 15 19 (a) The Liquidity Provider shall have received on or before the Closing Date each of the following, each dated such date (except for those documents delivered pursuant to paragraphs (v) and (vii) of this Section 4.1(a)), and each in form and substance satisfactory to the Liquidity Provider: (i) This Agreement duly executed on behalf of the borrower; (ii) The Intercreditor Agreement duly executed on behalf of each of the parties thereto; (iii) Counterparts (or certified copies thereof) of each of the Operative Agreements (other than this Agreement and the Intercreditor Agreement) which, when taken together, bear the signatures of all of the respective parties thereto and which are in full force and effect in accordance with their respective terms; (iv) A copy of the Prospectus and specimen copies of the Class C Certificates; (v) Evidence that, on the Effective Date, the Class A Certificates, the Class B Certificates, the Class C Certificates and the Class D Certificates will receive long-term credit ratings from Moody's of not lower than A2, Baa2, Ba1 and Ba3, respectively, and from Standard & Poor's of not lower than AA-, A-, BBB- and BB, respectively; (vi) An executed or a certified copy of each document, instrument, certificate and opinion delivered pursuant to the Class C Trust Agreement, the Intercreditor Agreement, the Refunding Agreements and the other Operative Agreements (together with, in the case of each such opinion (unless such opinion is addressed to the Liquidity Provider), other than the opinion of counsel for the Underwriters, a letter from the counsel rendering such opinion to the effect that the Liquidity Provider is entitled to rely on such opinion as if it were addressed to the Liquidity Provider); (vii) Evidence that there shall have been made and shall be in full force and effect, all filings, recordings and/or registrations, and there shall have been given or taken any notice or other similar action as may be reasonably necessary or, to the extent reasonably requested by the Liquidity Provider, reasonably advisable, in order to establish, perfect, protect and preserve the right, title and interest, 16 20 remedies, powers, privileges, liens and security interests of, or for the benefit of, the Trustees and the Liquidity Provider created by the Operative Agreements; (viii) Copies of the appraisals included in the Prospectus; (ix) A letter from America West agreeing to provide to the Liquidity Provider the periodic financial reports referred to in Section 8.04(a) of the Trust Agreements; and (x) Such other documents, instruments, opinions and approvals (and, if requested by the Liquidity Provider, certified duplicates or executed copies thereof) as the Liquidity Provider shall have reasonably requested. (b) The following statements shall be true and shall be deemed to have been represented by each party (other than clause (ii) below, which shall be deemed to have been represented only by America West) to the Refunding Agreements as being true on and as of the Effective Date: (i) The representations and warranties of such Person contained in each Refunding Agreement are true and correct on and as of the Effective Date as though made on and as of the Effective Date; and (ii) No event has occurred and is continuing, or would result from the entering into of this Agreement or the making of any Advance, which constitutes a Liquidity Event of Default. (c) The Liquidity Provider shall have received payment in full of all fees and other sums required to be paid to or for the account of the Liquidity Provider on or prior to the Effective Date. (d) All conditions precedent to the issuance of the Certificates under the Trust Agreements shall have been satisfied, all conditions precedent to the effectiveness of the other Liquidity Facilities shall have been satisfied, and all conditions precedent to the purchase of the Certificates by the Underwriters under the Underwriting Agreement shall have been satisfied (except for any of such conditions precedent under the Underwriting Agreement that shall have been waived by the Underwriters). (e) The Borrower shall have received a certificate, dated the date hereof, signed by a duly authorized 17 21 representative of the Liquidity Provider, certifying that all conditions precedent to the effectiveness of Section 2.1 have been satisfied or waived (other than this Section 4.1(e)). Section 4.2 Conditions Precedent to Borrowing. The obligation of the Liquidity Provider to make an Advance on the occasion of each Borrowing shall be subject to the conditions precedent that the Effective Date shall have occurred and, except in the case of a Final Advance, prior to the date of such Borrowing, the Borrower shall have delivered a Notice of Borrowing which conforms to the terms and conditions of this Agreement and has been completed as may be required by the relevant form of the Notice of Borrowing for the type of Advance requested. ARTICLE V COVENANTS Section 5.1 Affirmative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will, unless the Liquidity Provider shall otherwise consent in writing: (a) Performance of This and Other Agreements. Punctually pay or cause to be paid all amounts payable by it under this Agreement and the other Operative Agreements and observe and perform in all material respects the conditions, covenants and requirements applicable to it contained in this Agreement and the other Operative Agreements. (b) Reporting Requirements. Furnish to the Liquidity Provider with reasonable promptness, such information and data with respect to the transactions contemplated by the Operative Agreements as from time to time may be reasonably requested by the Liquidity Provider; and permit the Liquidity Provider, upon reasonable notice, to inspect the Borrower's books and records with respect to such transactions and to meet with officers and employees of the Borrower to discuss such transactions. Section 5.2 Negative Covenants of the Borrower. So long as any Advance shall remain unpaid or the Liquidity Provider shall have any Commitment hereunder or the Borrower shall have any obligation to pay any amount to the Liquidity Provider hereunder, the Borrower will not, without the written consent of the Liquidity Provider: 18 22 (a) Amendments. Modify, amend or supplement, or give any consent to any modification, amendment, or supplement, or make any waiver with respect to, any provision of the Trust Agreements or the Intercreditor Agreement, except for any supplemental agreement to the Trust Agreements provided for in Section 9.01 thereof. (b) Borrower. Appoint or permit or suffer to be appointed any successor Borrower without the prior written approval of the Liquidity Provider (which approval shall not be unreasonably withheld). ARTICLE VI FINAL ADVANCE Section 6.1 Final Advance. If (a) both (i) a Triggering Event shall have occurred and be continuing and (ii) a Performing Note Deficiency exists or (b) a Liquidity Event of Default shall have occurred and be continuing, the Liquidity Provider may, in its discretion, make a Final Advance whereupon (i) the Liquidity Provider shall have no further obligation to make Advances hereunder, (ii) all other outstanding Advances shall be automatically converted into Final Advances for purposes of determining the Applicable Liquidity Rate for interest payable thereon, and (iii) subject to Sections 2.7 and 2.9, all Advances, any accrued interest thereon and any other amounts outstanding hereunder shall become immediately due and payable to the Liquidity Provider. ARTICLE VII MISCELLANEOUS Section 7.1 Amendments, Etc. No amendment or waiver of any provision of this Agreement, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Liquidity Provider, and, in the case of an amendment, the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Section 7.2 Notices, Etc. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telecopier and mailed or delivered or sent by telecopier): Borrower: Fleet National Bank 777 Main Street Hartford, CT 06115 Attention: Corporate Trust Administration 19 23 Telecopy: (860) 986-7920 Liquidity Provider: Kredietbank N.V. New York Branch 125 West 55th Street New York, NY 10019 Attention: General Manager Telecopy: (212) 956-5580 or, as to each of the foregoing, at such other address as shall be designated by such Person in a written notice to the others. All such notices and communications shall be effective (i) if given by telecopier, when transmitted to the telecopier number specified above, (ii) if given by mail, when deposited in the mails addressed as specified above, and (iii) if given by other means, when delivered at the address specified above, except that written notices to the Liquidity Provider pursuant to the provisions of Articles II and III hereof shall not be effective until received by the Liquidity Provider. A copy of all notices delivered hereunder to either party shall in addition be delivered to each of the parties to the Refunding Agreements at their respective addresses set forth therein. Section 7.3 No Waiver; Remedies. No failure on the part of the Liquidity Provider to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise of any right under this Agreement preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 7.4 Further Assurances. The Borrower agrees to do such further acts and things and to execute and deliver to the Liquidity Provider such additional assignments, agreements, powers and instruments as the Liquidity Provider may reasonably require or deem advisable to carry into effect the purposes of this Agreement and the other Operative Agreements or to better assure and confirm unto the Liquidity Provider its rights, powers and remedies hereunder and under the other Operative Agreements. Section 7.5 Indemnification; Survival of Certain Provisions. The Liquidity Provider shall be indemnified hereunder to the extent and in the manner described in Sections 10 and 13 of the Lease. In addition, the Borrower agrees to indemnify, protect, defend and hold harmless the Liquidity Provider from, against and in respect of, and shall pay on demand, all Expenses of any kind or nature whatsoever, whether arising before, on or after the date hereof, that may be imposed, incurred by or asserted against any Liquidity Indemnitee, in any 20 24 way relating to, resulting from, or arising out of or in connection with, this Agreement, the Intercreditor Agreement or the Refunding Agreements; provided, however, that the Borrower shall not be required to indemnify, protect, defend and hold harmless any Liquidity Indemnitee in respect of any Expense of such Liquidity Indemnitee (i) to the extent such Expense is attributable to the gross negligence or willful misconduct of such Liquidity Indemnitee or any Related Indemnitee, (ii) that is ordinary and usual operating overhead expense or (iii) to the extent such Expense is attributable to the failure by such Liquidity Indemnitee or its Related Indemnitee to perform or observe any agreement, covenant or condition on its part to be performed or observed in any Operative Agreement. The indemnities contained in such Sections 10 and 13 of the Lease, and the provisions of Sections 3.1, 3.2, 3.3, 7.5 and 7.7, shall survive the termination of this Agreement. Section 7.6 Liability of the Liquidity Provider. (a) Neither the Liquidity Provider nor any of its officers or directors shall be liable or responsible for: (i) the use which may be made of the Advances or any acts or omissions of the Borrower or any beneficiary or transferee in connection therewith; (ii) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; or (iii) the making of Advances by the Liquidity Provider against delivery of a Notice of Borrowing and other documents which do not comply with the terms hereof; provided, however, that the Borrower shall have a claim against the Liquidity Provider, and the Liquidity Provider shall be liable to the Borrower, to the extent of any damages suffered by the Borrower which were the result of (A) the Liquidity Provider's willful misconduct or negligence in determining whether documents presented hereunder comply with the terms hereof, or (B) any breach by the Liquidity Provider of any of the terms of this Agreement, including, but not limited to, the Liquidity Provider's failure to make lawful payment hereunder after the delivery to it by the Borrower of a Notice of Borrowing strictly complying with the terms and conditions hereof. (b) The Liquidity Provider shall not be liable or responsible in any respect for (i) any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with this Agreement or any Notice of Borrowing delivered hereunder, or (ii) any action, inaction or omission which may be taken by it in good faith, absent willful misconduct or negligence (in which event the extent of the Liquidity Provider's potential liability to the Borrower shall be limited as set forth in the immediately preceding paragraph), in connection with this Agreement or any Notice of Borrowing. 21 25 Section 7.7 Costs, Expenses and Taxes. The Borrower agrees to pay, or cause to be paid (A) on the Effective Date and on such later date or dates on which the Liquidity Provider shall make demand, all reasonable out-of- pocket costs and expenses of the Liquidity Provider in connection with the preparation, negotiation, execution, delivery, filing and recording of this Agreement, any other Operative Agreement and any other documents which may be delivered in connection with this Agreement, including, without limitation, the reasonable fees and expenses of outside counsel for the Liquidity Provider and (B) on demand, all reasonable costs and expenses of the Liquidity Provider (including reasonable counsel fees and expenses) in connection with (i) the enforcement of this Agreement or any other Operative Agreement, (ii) the modification or amendment of, or supplement to, this Agreement or any other Operative Agreement or such other documents which may be delivered in connection herewith or therewith (whether or not the same shall become effective) or (iii) any action or proceeding relating to any order, injunction, or other process or decree restraining or seeking to restrain the Liquidity Provider from paying any amount under this Agreement, the Intercreditor Agreement or any other Operative Agreement or otherwise affecting the application of funds in the Cash Collateral Accounts. In addition, the Borrower shall pay any and all recording, stamp and other similar taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement, any other Operative Agreement and such other documents, and agrees to save the Liquidity Provider harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes or fees. Section 7.8 Binding Effect; Participations. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower and the Liquidity Provider and their respective successors and assigns, except that neither the Liquidity Provider (except as otherwise provided in this Section 7.8) nor the Borrower shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the other party, subject to the requirement of Section 7.8(b). The Liquidity Provider may grant participations herein or in any of its rights or security hereunder and under the other Operative Agreements to such Persons as the Liquidity Provider may in its sole discretion select, subject to the requirement of Section 7.8(b). No such granting of participations by the Liquidity Provider, however, will relieve the Liquidity Provider of its obligations hereunder. In connection with any participation or any proposed participation, the Liquidity Provider may disclose to the participant or the proposed participant any information that the Borrower is required to deliver or to disclose to the Liquidity Provider pursuant to this Agreement. The Borrower acknowledges and agrees that the Liquidity Provider's source of funds may derive in part from its participants. Accordingly, 22 26 references in this Agreement and the other Operative Agreements to determinations, reserve and capital adequacy requirements, increased costs, reduced receipts and the like as they pertain to the Liquidity Provider shall be deemed also to include those of each of its participants (subject, in each case, to the maximum amount that would have been incurred by or attributable to the Liquidity Provider directly if the Liquidity Provider, rather than the participant, had held the interest participated). (b) If, pursuant to subsection (a) above, the Liquidity Provider sells any participation to any bank or other entity (each, a "Participant"), then, concurrently with the effectiveness of such participation, the Participant shall (i) represent to the Liquidity Provider (for the benefit of the Liquidity Provider and the Borrower) either (A) that it is incorporated under the laws of the United States or a state thereof or (B) that under applicable law and treaties, no taxes will be required to be withheld by the Borrower or the Liquidity Provider with respect to any payments to be made to such Participant in respect of this Agreement, (ii) furnish to the Liquidity Provider and the Borrower either (x) a statement that it is incorporated under the laws of the United States or a state thereof or (y) if it is not so incorporated, two copies of a properly completed United States Internal Revenue Service Form 4224 or Form 1001, as appropriate, or other applicable form, certificate or document prescribed by the Internal Revenue Service certifying, in each case, such Participant's entitlement to a complete exemption from United States federal withholding tax in respect to any and all payments to be made hereunder, and (iii) agree (for the benefit of the Liquidity Provider and the Borrower) to provide the Liquidity Provider and the Borrower a new Form 4224 or Form 1001, as appropriate, (A) on or before the date that any such form expires or becomes obsolete or (B) after the occurrence of any event requiring a change in the most recent form previously delivered by it and prior to the immediately following due date of any payment by the Borrower hereunder, certifying in the case of a Form 1001 or Form 4224 that such Participant is entitled to a complete exemption from United States federal withholding tax on payments under this Agreement. Unless the Borrower has received forms or other documents reasonably satisfactory to it indicating that payments hereunder are not subject to United States federal withholding tax, the Borrower will withhold taxes as required by law from such payments at the applicable statutory rate without any obligation to gross-up or indemnify pursuant to Section 3.3. (c) Notwithstanding the other provisions of this Section 7.8, the Liquidity Provider may assign and pledge all or any portion of the Advances owing to it to any Federal Reserve Bank or the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal 23 27 Reserve Bank, provided that any payment in respect of such assigned Advances made by the Borrower to the Liquidity Provider in accordance with the terms of this Agreement shall satisfy the Borrower's obligations hereunder in respect of such assigned Advance to the extent of such payment. No such assignment shall release the Liquidity Provider from its obligations hereunder. Section 7.9 Severability. Any provision of this Agreement which is prohibited, unenforceable or not authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition, unenforceability or nonauthorization without invalidating the remaining provisions hereof or affecting the validity, enforceability or legality of such provision in any other jurisdiction. Section 7.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. Section 7.11 Submission to Jurisdiction; Waiver of Jury Trial. (a) Each of the parties hereto hereby irrevocably and unconditionally: (i) submits for itself and its property in any legal action or proceeding relating to this Agreement or any other Operative Agreement, or for recognition and enforcement of any judgment in respect hereof or thereof, to the nonexclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and the appellate courts from any thereof; (ii ) consents that any such action or proceeding may be brought in such courts, and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (iii) if such party does not maintain an office for the transaction of its business in New York, agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to each party hereto at its address set forth in Section 7.2, or at such other address of which the Liquidity Provider shall have been notified pursuant thereto; and 24 28 (iv ) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction. (b) THE BORROWER AND THE LIQUIDITY PROVIDER EACH HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING ESTABLISHED, including, without limitation, contract claims, tort claims, breach of duty claims and all other common law and statutory claims. The Borrower and the Liquidity Provider each warrant and represent that it has reviewed this waiver with its legal counsel, and that it knowingly and voluntarily waives its jury trial rights following consultation with such legal counsel. THIS WAIVER CANNOT BE MODIFIED ORALLY. Section 7.12 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. Section 7.13 Entirety. This Agreement and the other Operative Agreements constitute the entire agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all prior understandings and agreements of such parties. Section 7.14 Headings; Section References. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Unless the context otherwise requires or otherwise indicated herein, all Section references in this Agreement are references to Sections hereof. Section 7.15 LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE OBLIGATIONS OF THE LIQUIDITY PROVIDER TO MAKE ADVANCES HEREUNDER, AND THE BORROWER'S RIGHTS TO DELIVER NOTICES OF BORROWING REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL BE UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED, IN EACH CASE STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. 25 29 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first set forth above. FLEET NATIONAL BANK, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class C Trust, as Borrower By ------------------------------------- Name: Title: KREDIETBANK N.V., NEW YORK BRANCH, as Liquidity Provider By ------------------------------------- Name: Title: By ------------------------------------- Name: Title: 26 30 Annex I to Irrevocable Revolving Credit Agreement INTEREST ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned borrower (the "Borrower"), hereby certifies to KREDIETBANK N.V., acting through its New York Branch (the "Liquidity Provider"), with reference to the Irrevocable Revolving Credit Agreement, Class C Certificates dated as of June __, 1997, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of an Interest Advance by the Liquidity Provider to be used for the payment of interest on the Class C Certificates which was payable on the Distribution Date falling on _____________ in accordance with the terms and provisions of the Class C Trust Agreement and the Class C Certificates and has not been paid pursuant to clause sixth of Section 3.2 of the Intercreditor Agreement or clause eighth of Section 3.3 of the Intercreditor Agreement, which Advance is requested to be made on _____________. (3) The amount of the Interest Advance requested hereby (i) is $___________, to be applied in respect of the payment of interest which was due and payable on the Class C Certificates on such Distribution Date, (ii) does not include any amount with respect to the payment of the principal of, or premium on, the Class C Certificates, or principal of, or interest or premium on, the Class A Certificates, the Class B Certificates or the Class D Certificates, (iii) was computed in accordance with the provisions of the Class C Certificates, the Class C Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), (iv) does not exceed the Available Commitment on the date hereof, and (v) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will apply the same in accordance with the terms of Section 3.2 or 3.3 of the Intercreditor Agreement, as the case may be, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. 31 (5) The Borrower hereby requests that the Advance requested hereby be a Base Rate Advance and that such Base Rate Advance be converted into a LIBOR Rate Advance on the third Business Day following your receipt of this notice. The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, the making of the Interest Advance as requested by this Notice of Borrowing shall automatically reduce, subject to reinstatement in accordance with the terms of the Liquidity Agreement, the Available Commitment by an amount equal to the amount of the Interest Advance requested to be made hereby as set forth in clause (i) of paragraph (3) of this Certificate and such reduction shall automatically result in corresponding reductions in the amounts available to be borrowed pursuant to a subsequent Advance. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the _ day of ______________, ________. FLEET NATIONAL BANK, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class C Trust, as Borrower By ------------------------------------- Name: Title: 2 32 SCHEDULE I TO INTEREST ADVANCE NOTICE OF BORROWING [Insert Copy of Computations in accordance with Interest Advance Notice of Borrowing] 3 33 Annex II to Irrevocable Revolving Credit Agreement DOWNGRADE ADVANCE NOTICE OF BORROWING The undersigned, a duly authorized signatory of the undersigned subordination agent (the "Borrower"), hereby certifies to KREDIETBANK, N.V., acting through its New York Branch (the "Liquidity Provider"), with reference to the Irrevocable Revolving Credit Agreement, Class C Certificates dated as of June __, 1997, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that: (1) The Borrower is the Subordination Agent under the Intercreditor Agreement. (2) The Borrower is delivering this Notice of Borrowing for the making of the Downgrade Advance by the Liquidity Provider to be used for the funding of the Class C Cash Collateral Account in accordance with Section 3.6(c) of the Intercreditor Agreement by reason of the downgrading of the debt rating of the Liquidity Provider issued by either Rating Agency below the applicable Threshold Rating, which Advance is requested to be made on __________. (3) The amount of the Downgrade Advance requested hereby (i) is $___________, which equals the Available Commitment on the date hereof and is to be applied in respect of the funding of the Class C Cash Collateral Account in accordance with Section 3.6(c) of the Intercreditor Agreement, (ii) does not include any amount with respect to the payment of the principal of, or premium on, the Class C Certificates, or principal of, or interest or premium on, the Class A Certificates, the Class B Certificates or the Class D Certificates, (iii) was computed in accordance with the provisions of the Class C Certificates, the Class C Trust Agreement and the Intercreditor Agreement (a copy of which computation is attached hereto as Schedule I), and (iv) has not been and is not the subject of a prior or contemporaneous Notice of Borrowing under the Liquidity Agreement. (4) Upon receipt by or on behalf of the Borrower of the amount requested hereby, (a) the Borrower will deposit such amount in the Class C Cash Collateral Account and apply the same in accordance with the terms of Section 3.6(c) of the Intercreditor Agreement, (b) no portion of such amount shall be applied by the Borrower for any other purpose and (c) no portion of such amount until so applied shall be commingled with other funds held by the Borrower. 34 (5) The Borrower hereby requests that the Advance requested hereby be a Base Rate Advance and that such Base Rate Advance be converted into a LIBOR Rate Advance on the third Business Day following your receipt of this notice. The Borrower hereby acknowledges that, pursuant to the Liquidity Agreement, (A) the making of the Downgrade Advance as requested by this Notice of Borrowing shall automatically and irrevocably terminate the obligation of the Liquidity Provider to make further Advances under the Liquidity Agreement; and (B) following the making by the Liquidity Provider of the Downgrade Advance requested by this Notice of Borrowing, the Borrower shall not be entitled to request any further Advances under the Liquidity Agreement. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the _ day of __________, _____. FLEET NATIONAL BANK, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class C Trust, as Borrower By ------------------------------------- Name: Title: 2 35 SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING [Insert Copy of computations in accordance with Downgrade Advance Notice of Borrowing] 36 Annex III to Irrevocable Revolving Credit Agreement NOTICE OF AUTOMATIC REDUCTION OF COMMITMENT [Date] Ladies and Gentlemen: The undersigned, a duly authorized signatory of the undersigned subordination agent (the "Borrower"), hereby notifies Kredietbank N.V., acting through its New York Branch (the "Liquidity Provider"), with reference to the Irrevocable Revolving Credit Agreement dated as of June __, 1997, between the Borrower and the Liquidity Provider (the "Liquidity Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined or referenced), that, pursuant to Section 2.4(a) of the Liquidity Agreement, the Commitment has been automatically reduced to $_________. IN WITNESS WHEREOF, the Borrower has executed and delivered this Notice of Borrowing as of the _ day of __________, _____. FLEET NATIONAL BANK, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class C Trust, as Borrower By ------------------------------------- Name: Title: 37 Annex IV to Irrevocable Revolving Credit Agreement NOTICE OF REPLACEMENT BORROWER [Date] Ladies and Gentlemen: For value received, the undersigned beneficiary hereby irrevocably transfers to: [Name of Transferee] [Address of Transferee] all rights of the undersigned as Borrower under the Liquidity Agreement referred to above. The transferee has succeeded the undersigned as Subordination Agent under the Intercreditor Agreement referred to in the first paragraph of the Liquidity Agreement. By this transfer, all rights of the undersigned as Borrower under the Liquidity Agreement are transferred to the transferee and the transferee shall hereafter have the sole rights as Borrower thereunder. The undersigned shall pay any costs and expenses of such transfer, including, but not limited to, transfer taxes or governmental charges. We ask that this transfer be effective as of __________, ____. FLEET NATIONAL BANK, not in its individual capacity but solely as Subordination Agent, as agent and trustee for the Class C Trust, as Borrower By ------------------------------------- Name: Title: EX-4.13 11 INTERCREDITOR AGREEMENT 1 EXHIBIT 4.13 INTERCREDITOR AGREEMENT Dated as of June __, 1997 AMONG FLEET NATIONAL BANK, not in its individual capacity but solely as Trustee under the America West Airlines Pass Through Trust 1997-1A, America West Airlines Pass Through Trust 1997-1B, America West Airlines Pass Through Trust 1997-1C and America West Airlines Pass Through Trust 1997-1D KREDIETBANK N.V., NEW YORK BRANCH, as Class A Liquidity Provider, Class B Liquidity Provider and Class C Liquidity Provider, AND FLEET NATIONAL BANK, not in its individual capacity except as expressly set forth herein but solely as Subordination Agent and trustee hereunder 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 2 SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II TRUST ACCOUNTS; CONTROLLING PARTY . . . . . . . . . . . . . . . . . . . 21 SECTION 2.1 Agreement to Terms of Subordination; Payments from Monies Received Only . . . . . . . . . . . . 21 SECTION 2.2 Trust Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 2.3 Deposits to the Collection Account and Special Payments Account . . . . . . . . . . . . . . . . 23 SECTION 2.4 Distributions of Special Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 2.5 Designated Representatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 2.6 Controlling Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 ARTICLE III RECEIPT, DISTRIBUTION AND APPLICATION OF AMOUNTS RECEIVED . . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 3.1 Written Notice of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 3.2 Distribution of Amounts on Deposit in the Collection Account . . . . . . . . . . . . . . . . . 31 SECTION 3.3 Distribution of Amounts on Deposit Following a Triggering Event . . . . . . . . . . . . . . . 33 SECTION 3.4 Other Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 SECTION 3.5 Payments to the Trustees and the Liquidity Providers . . . . . . . . . . . . . . . . . . . . . 35 SECTION 3.6 Liquidity Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE IV EXERCISE OF REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 42 SECTION 4.1 Directions from the Controlling Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 SECTION 4.2 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 SECTION 4.3 Discontinuance of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 SECTION 4.4 Right of Certificateholders and Liquidity Providers to Receive Payments Not to Be Impaired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 SECTION 4.5 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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Page ---- ARTICLE V DUTIES OF THE SUBORDINATION AGENT; AGREEMENTS OF TRUSTEES, ETC. . . . . . . . . . . . . . . . . . . . . . 45 SECTION 5.1 Notice of Indenture Default or Triggering Event, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 SECTION 5.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 SECTION 5.3 No Duties Except as Specified in Intercreditor Agreement . . . . . . . . . . . . . . . . . . . 46 SECTION 5.4 Notice from the Liquidity Providers and Trustees . . . . . . . . . . . . . . . . . . . . . . . 46 ARTICLE VI THE SUBORDINATION AGENT . . . . . . . . . . . . . . . . . . . . . . 46 SECTION 6.1 Authorization; Acceptance of Trusts and Duties . . . . . . . . . . . . . . . . . . . . . . . . 46 SECTION 6.2 Absence of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 6.3 No Representations or Warranties as to Documents . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 6.4 No Segregation of Monies; No Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 6.5 Reliance; Agents; Advice of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 6.6 Capacity in Which Acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 6.7 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 6.8 May Become Certificateholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 6.9 Subordination Agent Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 6.10 Money to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 ARTICLE VII INDEMNIFICATION AND REIMBURSEMENT OF SUBORDINATION AGENT . . . . . . . . . . . . . . 50 SECTION 7.1 Scope of Indemnification and Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . 50 ARTICLE VIII SUCCESSOR SUBORDINATION AGENT . . . . . . . . . . . . . . . . . . . . 50 SECTION 8.1 Replacement of Subordination Agent;Appointment of Successor . . . . . . . . . . . . . . . . . . 50
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Page ---- ARTICLE IX SUPPLEMENTS AND AMENDMENTS . . . . . . . . . . . . . . . . . . . . . 52 SECTION 9.1 Amendments, Waivers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 SECTION 9.2 Subordination Agent Protected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 9.3 Effect of Supplemental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 9.4 Notice to Rating Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 10.1 Termination of Intercreditor Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 10.2 Intercreditor Agreement for Benefit of Trustees, Liquidity Providers and Subordination Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 10.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 10.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 10.5 No Oral Modifications or Continuing Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 10.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 10.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 10.8 Counterpart Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 10.9 Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 10.10 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Schedule 1 Indentures Schedule 2 Refunding Agreements iii 5 INTERCREDITOR AGREEMENT INTERCREDITOR AGREEMENT (as amended, modified and supplemented from time to time, this "Agreement") dated as of June __, 1997, among FLEET NATIONAL BANK, a national banking association ("Fleet"), not in its individual capacity but solely as Trustee of each Trust (each as defined below), KREDIETBANK N.V., acting through its New York Branch ("Kredietbank"), as Class A Liquidity Provider, Class B Liquidity Provider and Class C Liquidity Provider, and FLEET NATIONAL BANK, a national banking association, not in its individual capacity except as expressly set forth herein, but solely as Subordination Agent and trustee hereunder (in such capacity, together with any successor appointed pursuant to Article VIII hereof, the "Subordination Agent"). WHEREAS, all capitalized terms used herein shall have the respective meanings referred to in Article I hereof; WHEREAS, pursuant to each Indenture, the related Owner Trustee proposes to issue on a nonrecourse basis up to four series of Equipment Notes to refinance the current indebtedness of such Owner Trustee originally incurred to finance the purchase of the Aircraft referred to in such Indenture which has been leased to America West pursuant to the related Lease; WHEREAS, pursuant to the Refunding Agreements, each Trust will acquire those Equipment Notes having an interest rate equal to the interest rate applicable to the Certificates to be issued by such Trust; WHEREAS, pursuant to each Trust Agreement, the Trust created thereby proposes to issue a single series of Certificates (a "Class") bearing the interest rate and having the final distribution date described in such Trust Agreement on the terms and subject to the conditions set forth therein; WHEREAS, pursuant to the Underwriting Agreement, the Underwriter proposes to purchase the Certificates issued by each Trust in the aggregate face amount set forth under the name of such Trust on Schedule I thereto on the terms and subject to the conditions set forth therein; WHEREAS, each Liquidity Provider proposes to enter into a revolving credit agreement (each, a "Liquidity Facility") with the Subordination Agent, as agent for the respective Trustee of each Trust (other than the Class D Trust), for the benefit of the Certificateholders of such Trust; and WHEREAS, it is a condition precedent to the obligations of the Underwriter under the Underwriting Agreement that the Subordination Agent, the Trustees and the Liquidity Providers agree to the terms of subordination set forth in this Agreement 6 in respect of each Class of Certificates, and the Subordination Agent, the Trustees and the Liquidity Providers, by entering into this Agreement, hereby acknowledge and agree to such terms of subordination and the other provisions of this Agreement. NOW, THEREFORE, in consideration of the mutual agreements herein contained, and of other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 Definitions. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms used herein that are defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (2) all references in this Agreement to designated "Articles", "Sections" and other subdivisions are to the designated Articles, Sections and other subdivisions of this Agreement; (3) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision; and (4) the term "including" shall mean "including without limitation". "Acceleration" means, with respect to the amounts payable in respect of the Equipment Notes issued under any Indenture, the declaration or deemed declaration (pursuant to Section 4.04(b) or (c) of such Indenture) of such amounts to be immediately due and payable. "Accelerate" and "Accelerated" have meanings correlative to the foregoing. "Adjusted Expected Distributions" means, with respect to the Certificates of any Class on any Current Distribution Date, the sum of (x) the amount of accrued and unpaid interest on such Certificates plus (y) the greater of: -2- 7 (A) the difference between (x) the Pool Balance of such Certificates as of the immediately preceding Distribution Date and (y) the Pool Balance of such Certificates as of the Current Distribution Date, calculated on the basis that (i) the principal of the Non-Performing Equipment Notes held in such Trust has been paid in full and such payments have been distributed to the holders of such Certificates and (ii) the principal of the Performing Equipment Notes has been paid when due (but without giving effect to any acceleration of Performing Equipment Notes) and has been distributed to the holders of such Certificates; and (B) the amount if any by which (i) the Pool Balance of such Class of Certificates as of the immediately preceding Distribution Date exceeds (ii) the Aggregate LTV Collateral Amount for such Class of Certificates for the Current Distribution Date; provided that, until the date of the initial LTV Appraisals, clause (B) above shall not be applicable. "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" means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person whether through the ownership of voting securities or by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Aggregate LTV Collateral Amount" means, for any Class of Certificates for any Distribution Date, the sum of the applicable LTV Collateral Amounts for each Aircraft minus the Pool Balance for each Class of Certificates, if any, senior to such Class after giving effect to any distribution of principal on such Distribution Date on such senior Class or Classes, but in no event an amount less than zero. "Agreement" has the meaning assigned to such term in the preamble hereto. "Aircraft" means, with respect to each Indenture, the "Aircraft" referred to therein. "America West" means America West Airlines, Inc., a Delaware corporation, and its successors and assigns. -3- 8 "America West Bankruptcy Event" means the occurrence and continuation of any of the following: (a) the commencement of an involuntary case or other proceeding in respect of America West in an involuntary case under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law in the United States or seeking the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of America West or for all or substantially all of its property, or seeking the winding-up or liquidation of its affairs and the continuation of any such case or other proceeding undismissed and unstayed for a period of ninety (90) consecutive days or an order, judgment or decree shall be entered in any proceeding by any court of competent jurisdiction appointing, without the consent of America West, a receiver, trustee or liquidator of America West, or of substantially all of its property, or sequestering substantially all of the property of America West and any such order, judgment or decree or appointment or sequestration shall be final or shall remain in force undismissed, unstayed or unvacated for a period of ninety (90) days after the date of entry thereof; or (b) the commencement by America West of a voluntary case under the federal bankruptcy laws, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy, insolvency or other similar law in the United States, or the consent by America West to the appointment of or taking, possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of America West or for all or substantially all of its property, or the making by America West of any assignment for the benefit of creditors generally or the taking by America West of any corporate action to authorize any of the foregoing. "Appraised Current Market Value" of any Aircraft means the lower of the average or the median of the most recent three LTV Appraisals of such Aircraft obtained pursuant to Section 4.1(a)(iv). "Appraisers" means BK Associates, Inc., Aircraft Information Services, Inc. and Morton Beyer and Associates. -4- 9 "Available Amount" means, with respect to any Liquidity Facility on any drawing date, an amount equal to (a) the Stated Amount of such Liquidity Facility, less (b) the aggregate amount of each Interest Drawing honored by the Liquidity Provider under such Liquidity Facility on or prior to such date which has not been reimbursed or reinstated as of such date; provided that, following a Downgrade Drawing or a Final Drawing under such Liquidity Facility, the Available Amount of such Liquidity Facility shall be zero. "Bankruptcy Code" has the meaning assigned to such term in the definition hereof of "Performing Equipment Note". "Business Day" means any day other than a Saturday or Sunday or a day on which commercial banks are required or authorized to close in New York, New York or Hartford, Connecticut. "Cash Collateral Account" means the Class A Cash Collateral Account, the Class B Cash Collateral Account or the Class C Cash Collateral Account, as applicable. "Certificate" means a Class A Certificate, a Class B Certificate, a Class C Certificate or a Class D Certificate, as applicable. "Certificateholder" means any holder of one or more Certificates. "Class" has the meaning assigned to such term in the preliminary statements to this Agreement. "Class A Cash Collateral Account" means an Eligible Deposit Account in the name of the Subordination Agent maintained at the Subordination Agent, into which all amounts drawn under the Class A Liquidity Facility pursuant to Section 3.6(c) or 3.6(i) shall be deposited. "Class A Certificateholder" means, at any time, any holder of one or more Class A Certificates. "Class A Certificates" means the certificates issued by the Class A Trust, substantially in the form of Exhibit A to the Class A Trust Agreement, and authenticated by the Class A Trustee, representing fractional undivided interests in the Class A Trust, and any certificates issued in exchange therefor or replacement thereof pursuant to the terms of the Class A Trust Agreement. -5- 10 "Class A Liquidity Facility" means, initially, the Irrevocable Revolving Credit Agreement dated as of June __, 1997, between the Subordination Agent, as agent and trustee for the Class A Trust, and the Class A Liquidity Provider, and, from and after the replacement of such Agreement pursuant hereto, the Replacement Liquidity Facility therefor, if any, in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class A Liquidity Provider" means Kredietbank N.V., acting through its New York Branch, together with any Replacement Liquidity Provider which has issued a Replacement Liquidity Facility to replace the Class A Liquidity Facility pursuant to Section 3.6(e). "Class A Trust" means America West Airlines 1997-1A Pass Through Trust created and administered pursuant to the Class A Trust Agreement. "Class A Trust Agreement" means the Pass Through Trust Agreement dated as of June __, 1997 between America West and the Class A Trustee, as supplemented by the Supplement No. 1997-1A thereto dated June __, 1997, governing the creation and administration of the Class A Trust and the issuance of the Class A Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class A Trustee" means Fleet, not in its individual capacity except as expressly set forth in the Class A Trust Agreement, but solely as trustee under the Class A Trust Agreement, together with any successor trustee appointed pursuant thereto. "Class B Cash Collateral Account" means an Eligible Deposit Account in the name of the Subordination Agent maintained at the Subordination Agent, into which all amounts drawn under the Class B Liquidity Facility pursuant to Section 3.6(c) or 3.6(i) shall be deposited. "Class B Certificateholder" means, at any time, any holder of one or more Class B Certificates. "Class B Certificates" means the certificates issued by the Class B Trust, substantially in the form of Exhibit A to the Class B Trust Agreement, and authenticated by the Class B Trustee, representing fractional undivided interests in the Class B Trust, and any certificates issued in exchange therefor -6- 11 or replacement thereof pursuant to the terms of the Class B Trust Agreement. "Class B Liquidity Facility" means, initially, the Irrevocable Revolving Credit Agreement dated as of June __, 1997, between the Subordination Agent, as agent and trustee for the Class B Trust, and the Class B Liquidity Provider, and, from and after the replacement of such Agreement pursuant hereto, the Replacement Liquidity Facility therefor, if any, in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class B Liquidity Provider" means Kredietbank N.V., acting through its New York Branch, together with any Replacement Liquidity Provider which has issued a Replacement Liquidity Facility to replace the Class B Liquidity Facility pursuant to Section 3.6(e). "Class B Trust" means America West Airlines 1997-1B Pass Through Trust created and administered pursuant to the Class B Trust Agreement. "Class B Trust Agreement" means the Pass Through Trust Agreement dated as of June __, 1997, between America West and the Class B Trustee, as supplemented by the Supplement No. 1997-1B thereto dated June __, 1997, governing the creation and administration of the Class B Trust and the issuance of the Class B Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class B Trustee" means Fleet, not in its individual capacity except as expressly set forth in the Class B Trust Agreement, but solely as trustee under the Class B Trust Agreement, together with any successor trustee appointed pursuant thereto. "Class C Cash Collateral Account" means an Eligible Deposit Account in the name of the Subordination Agent maintained at the Subordination Agent, into which all amounts drawn under the Class C Liquidity Facility pursuant to Section 3.6(c) or 3.6(i) shall be deposited. "Class C Certificateholder" means, at any time, any holder of one or more Class C Certificates. "Class C Certificates" means the certificates issued by the Class C Trust, substantially in the form of Exhibit A to the Class C Trust Agreement, and authenticated by the Class C -7- 12 Trustee, representing fractional undivided interests in the Class C Trust, and any certificates issued in exchange therefor or in replacement thereof pursuant to the terms of the Class C Trust Agreement. "Class C Liquidity Facility" means, initially, the Irrevocable Revolving Credit Agreement dated as of June __, 1997, between the Subordination Agent, as agent and trustee for the Class C Trust, and the Class C Liquidity Provider and, from and after the replacement of such Agreement pursuant hereto, the Replacement Liquidity Facility therefor, if any, in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class C Liquidity Provider" means Kredietbank N.V., acting through its New York Branch, together with any Replacement Liquidity Provider which has issued a Replacement Liquidity Facility to replace the Class C Liquidity Facility pursuant to Section 3.6(e). "Class C Trust" means America West Airlines 1997-1C Pass Through Trust created and administered pursuant to the Class C Trust Agreement. "Class C Trust Agreement" means the Pass Through Trust Agreement dated as of June __, 1997, between America West and the Class C Trustee, as supplemented by the Supplement No. 1997-1C thereto dated June __, 1997, governing the creation and administration of the Class C Trust and the issuance of the Class C Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class C Trustee" means Fleet, not in its individual capacity except as expressly set forth in the Class C Trust Agreement, but solely as trustee under the Class C Trust Agreement, together with any successor trustee appointed pursuant thereto. "Class D Certificateholder" means, at any time, any holder of one or more Class D Certificates. "Class D Certificates" means the certificates issued by the Class D Trust, substantially in the form of Exhibit A to the Class D Trust Agreement, and authenticated by the Class D Trustee, representing fractional undivided interests in the Class D Trust, and any certificates issued in exchange therefor or in replacement thereof pursuant to the terms of the Class D Trust Agreement. -8- 13 "Class D Trust" means America West Airlines 1997-1D Pass Through Trust created and administered pursuant to the Class D Trust Agreement. "Class D Trust Agreement" means the Pass Through Trust Agreement dated as of June __, 1997, between America West and the Class D Trustee, as supplemented by the Supplement No. 1997-1D thereto dated June __, 1997, governing the creation and administration of the Class D Trust and the issuance of the Class D Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Class D Trustee" means Fleet, not in its individual capacity except as expressly set forth in the Class D Trust Agreement, but solely as trustee under the Class D Trust Agreement, together with any successor trustee appointed pursuant thereto. "Closing Date" means June __, 1997. "Code" means the Internal Revenue Code of 1986, as amended from time to time, and Treasury Regulations promulgated thereunder. "Collection Account" means the Eligible Deposit Account established by the Subordination Agent pursuant to Section 2.2 which the Subordination Agent shall make deposits in and withdrawals from in accordance with this Agreement. "Controlling Party" means the Person entitled to act as such pursuant to the terms of Section 2.6. "Current Distribution Date" means a Distribution Date specified as a reference date for calculating the Adjusted Expected Distributions or Expected Distributions with respect to the Certificates of any Trust as of such Distribution Date. "Designated Representatives" means the Subordination Agent Representatives, the Trustee Representatives and the LP Representatives identified under Section 2.5. "Distribution Date" means a Regular Distribution Date or a Special Distribution Date. "Dollars" or "$" means United States dollars. "Downgrade Drawing" has the meaning assigned to such term in Section 3.6(c). -9- 14 "Downgraded Facility" has the meaning assigned to such term in Section 3.6(c). "Drawing" means an Interest Drawing, a Final Drawing or a Downgrade Drawing, as the case may be. "Eligible Deposit Account" means either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any U.S. branch of a foreign bank), having corporate trust powers and acting as trustee for funds deposited in such account, so long as any of the securities of such depository institution has a long-term unsecured debt rating from each Rating Agency of at least A-3 or its equivalent. An Eligible Deposit Account may be maintained with a Liquidity Provider so long as such Liquidity Provider is an Eligible Institution; provided that such Liquidity Provider shall have waived all rights of setoff and counterclaim with respect to such account. "Eligible Institution" means (a) the corporate trust department of the Subordination Agent or any Trustee, as applicable, or (b) a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any U.S. branch of a foreign bank), which has a long-term unsecured debt rating from each Rating Agency of at least A-3 or its equivalent. "Eligible Investments" means (a) investments in obligations of, or guaranteed by, the United States Government having maturities no later than 90 days following the date of such investment, (b) investments in open market commercial paper of any corporation incorporated under the laws of the United States of America or any state thereof with a short-term unsecured debt rating issued by Moody's and Standard & Poor's of at least A-1 and P-1, respectively, having maturities no later than 90 days following the date of such investment, (c) investments in negotiable certificates of deposit, time deposits, banker's acceptances, commercial paper or other direct obligations of, or obligations guaranteed by, commercial banks organized under the laws of the United States or of any political subdivision thereof (or any U.S. branch of a foreign bank) with issuer ratings of at least B/C by Thomson BankWatch, Inc., having maturities no later than 90 days following the date of such investment or (d) investments in any U.S. money market fund registered under the Investment Company Act of 1940, as amended, which has been issued the highest rating in its category by Moody's and Standard & Poor's that invests solely in obligations described in clause (a) above; -10- 15 provided, however, that (x) all Eligible Investments that are bank obligations shall be denominated in U.S. dollars; and (y) the aggregate amount of Eligible Investments at any one time that are bank obligations issued by any one bank shall not be in excess of 5% of such bank's capital surplus; provided further that (1) any investment of the types described in clauses (a), (b), (c) and (d) above may be made through a repurchase agreement in commercially reasonable form with a bank or other financial institution qualifying as an Eligible Institution so long as such investment is held by a third party custodian also qualifying as an Eligible Institution, and (2) all such investments set forth in clauses (a), (b), (c) and (d) above mature no later than the Business Day immediately preceding the next Regular Distribution Date; provided further, however, that in the case of any Eligible Investment issued by a domestic branch of a foreign bank, the income from such investment shall be from sources within the United States for purposes of the Code. Notwithstanding the foregoing, no investment of the types described in clause (b), (c) or (d) above which is issued or guaranteed by a Liquidity Provider or America West or any of their respective Affiliates shall be an Eligible Investment. "Equipment Notes" means, at any time, the Series A Equipment Notes, the Series B Equipment Notes, the Series C Equipment Notes and the Series D Equipment Notes, collectively, and in each case, any Equipment Notes issued in exchange therefor or replacement thereof pursuant to the terms of the Indentures. "Expected Distributions" means, with respect to the Certificates of any Trust on any Current Distribution Date, the sum of (x) accrued and unpaid interest on such Certificates and (y) the difference between (A) the Pool Balance of such Certificates as of the immediately preceding Distribution Date and (B) the Pool Balance of such Certificates as of the Current Distribution Date, calculated on the basis that the principal of the Equipment Notes held in such Trust has been paid when due (whether at stated maturity, upon redemption, prepayment, purchase or acceleration or otherwise) and such payments have been distributed to the holders of such Certificates. "Final Distributions" means, with respect to the Certificates of any Trust on any Distribution Date, the sum of (a) the aggregate amount of all accrued and unpaid interest on such Certificates and (b) the Pool Balance of such Certificates as of the immediately preceding Distribution Date. "Final Drawing" means, in respect of a Liquidity Facility, a borrowing or drawing of all available and undrawn -11- 16 amounts under such Liquidity Facility in accordance with the provisions thereof other than a Downgrade Drawing. "Final Legal Distribution Date" means, for the Class A Certificates, _______________, for the Class B Certificates, _______________, for the Class C Certificates, _______________ and for the Class D Certificates, ____________. "Fleet" has the meaning assigned to such term in the preamble to this Agreement. "Indenture" means each Trust Indenture and Security Agreement listed on Schedule 1 hereto, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Indenture Default" means, with respect to any Indenture, any Indenture Event of Default (as such term is defined in such Indenture) thereunder. "Indenture Documents" means the "Indenture Documents" under and as defined in each Indenture. "Indenture Trustee" means, with respect to any Indenture, the indenture trustee thereunder. "Interest Drawing" has the meaning assigned to such term in Section 3.6(a). "Investment Earnings" means investment earnings on funds on deposit in the Trust Accounts net of losses and investment expenses of the Subordination Agent in making such investments. "Lease" means, with respect to each Indenture, the "Lease" referred to therein. "Lending Office" means the lending office of the Liquidity Provider, presently located at 125 West 55th Street, New York, NY 10019, or such other lending office as the Liquidity Provider from time to time shall notify the Subordination Agent and the Trustee as its lending office hereunder. "Lien" means any mortgage, pledge, lien, charge, claim, disposition of title, encumbrance or security interest of any kind, including, without limitation, any thereof arising under any conditional sales or other title retention agreement. -12- 17 "Liquidity Event of Default" with respect to any Liquidity Facility, has the meaning assigned to such term in such Liquidity Facility. "Liquidity Expenses" means all Liquidity Obligations other than (i) the principal amount of any Drawings under the Liquidity Facilities and (ii) any interest accrued on any Liquidity Obligations. "Liquidity Facility" means, at any time, the Class A Liquidity Facility, the Class B Liquidity Facility or the Class C Liquidity Facility, as applicable. "Liquidity Obligations" means all principal, interest, fees and other amounts owing to the Liquidity Providers under the Liquidity Facilities, Sections 10 and 13 of the Leases and Section 21 of the Refunding Agreements. "Liquidity Provider" means, at any time, the Class A Liquidity Provider, the Class B Liquidity Provider or the Class C Liquidity Provider, as applicable. "LP Incumbency Certificate" has the meaning assigned to such term in Section 2.5(c). "LP Representatives" has the meaning assigned to such term in Section 2.5(c). "LTV Appraisal" means a current fair market appraisal (which may be a "desktop" appraisal) performed by any Appraiser or any other nationally recognized appraiser on the basis of 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, both parties having knowledge of all relevant facts. "LTV Collateral Amount" of any Aircraft for any Class of Certificates on any Distribution Date means the lesser of (i) the LTV Ratio for such Class of Certificates multiplied by the Appraised Current Market Value of such Aircraft and (ii) the outstanding principal amount of the Equipment Notes secured by such Aircraft after giving effect to any principal payments of such Equipment Notes on or before such Distribution Date. "LTV Ratio" means for the Class A Certificates ____%, for the Class B Certificates ____%, for the Class C Certificates ____% and for the Class D Certificates ____%. -13- 18 "Margin" has the meaning assigned thereto in each of the Liquidity Facilities. "Minimum Sale Price" means, with respect to any Aircraft or the Equipment Notes issued in respect of such Aircraft, at any time, the lesser of (a) 75% of the Appraised Current Market Value of such Aircraft based upon the most recent LTV Appraisal and (b) the aggregate outstanding principal amount of such Equipment Notes, plus accrued and unpaid interest thereon. "Moody's" means Moody's Investors Service, Inc. "Non-Controlling Party" means, at any time, any Trustee or Liquidity Provider which is not the Controlling Party at such time. "Non-Performing Equipment Notes" means Equipment Notes issued pursuant to an Indenture other than Performing Equipment Notes. "Operative Agreements" means this Agreement, the Liquidity Facilities, the Indentures, the Trust Agreements, the Underwriting Agreement, the Refunding Agreements, the Leases, the Equipment Notes and the Certificates, together with all exhibits and schedules included with any of the foregoing and each of the other documents and instruments referred to in the definition of "Operative Documents" contained in the Leases. "Outstanding" means, when used with respect to each Class of Certificates, as of the date of determination, all Certificates of such Class theretofore authenticated and delivered under the related Trust Agreement, except: (i) Certificates of such Class theretofore cancelled by the Registrar (as defined in such Trust Agreement) or delivered to the Trustee thereunder or such Registrar for cancellation; (ii ) Certificates of such Class for which money in the full amount required to make the final distribution with respect to such Certificates pursuant to Section 11.01 of such Trust Agreement has been theretofore deposited with the related Trustee in trust for the holders of such Certificates as provided in Section 4.01 of such Trust Agreement pending distribution of such money to such Certificateholders pursuant to such final distribution payment; and -14- 19 (iii) Certificates of such Class in exchange for or in lieu of which other Certificates have been authenticated and delivered pursuant to such Trust Agreement; provided, however, that in determining whether the holders of the requisite outstanding amount of such Certificates have given any request, demand, authorization, direction, notice, consent or waiver hereunder, any Certificates owned by America West, any related Owner Trustee, any related Owner Participant or any Affiliate of such Person shall be disregarded and deemed not to be outstanding (provided that if any such Person or Affiliate thereof owns 100% of the Certificates of any Class, such Certificates shall not be so disregarded), except that, in determining whether such Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Certificates that a Responsible Officer of the Trustee knows to be so owned shall be so disregarded. Certificates so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the applicable Trustee the pledgee's right to so act with respect to such Certificates and that the pledgee is not America West or any of its Affiliates. "Overdue Scheduled Payment" means any Scheduled Payment which is not in fact received by the Subordination Agent within five days of the Scheduled Payment Date relating thereto. "Owner Participant" means, with respect to any Refunding Agreement, the Owner Participant (as defined therein). "Owner Trustee" means, with respect to any Indenture, the Owner Trustee (as defined therein) not in its individual capacity but solely as trustee under the related owner trust agreement, together with any successor trustee appointed pursuant to such owner trust agreement. "Performing Equipment Note" means an Equipment Note issued pursuant to an Indenture with respect to which no payment default has occurred and is continuing (without giving effect to any acceleration thereof); provided that in the event of a bankruptcy proceeding involving America West under Title 11 of the United States Code (the "Bankruptcy Code"), (i) any payment default existing during 60-day period under Section 1110(a)(1)(A) of the Bankruptcy Code (or such longer period as may apply under Section 1110(b) of the Bankruptcy Code) (the "Section 1110 Period") shall not be taken into consideration, unless during such period the trustee in such proceeding or America West refuses to assume or agree to perform its obligations under the Lease related to such Equipment Notes and (ii) any payment -15- 20 default occurring after the date of the order of relief in such proceeding shall not be taken into consideration if such payment default is cured under Section 1110(a)(1)(B) of the Bankruptcy Code before the later of (A) 30 days after the date of such default or (B) the expiration of the Section 1110 Period. "Performing Note Deficiency" means any time that less than 65% of the then aggregate outstanding principal amount of all Equipment Notes are Performing Equipment Notes. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, trustee, unincorporated organization or government or any agency or political subdivision thereof. "Pool Balance" means, with respect to each Trust or the Certificates issued by any Trust, as of any date, (i) the original aggregate face amount of the Certificates of such Trust less (ii) the aggregate amount of all payments made in respect of the Certificates of such Trust other than payments made in respect of interest or premium thereon or reimbursement of any costs and expenses in connection therewith. The Pool Balance for each Trust or the Certificates issued by any Trust as of any Distribution Date shall be computed after giving effect to any payment of principal, if any, on the Equipment Notes or other Trust Property (as defined in the applicable Trust Agreement) held in such Trust and the distribution thereof to be made on such Distribution Date. "Proceeding" means any suit in equity, action at law or other judicial or administrative proceeding. "PTC Event of Default" means, with respect to each Trust Agreement, the failure to pay within 10 Business Days of the due date thereof: (i) the outstanding Pool Balance of the applicable Class of Certificates on the Final Legal Distribution Date for such Class or (ii) interest due on such Certificates on any Distribution Date (unless, in the case of the Class A, Class B or Class C Certificates, the Subordination Agent shall have made an Interest Drawing with respect thereto in an amount sufficient to pay such interest and shall have distributed such amount to the holders of the Certificates entitled thereto). "Rating Agencies" means, collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Certificates and which shall then be rating the Certificates. Initially, the Rating Agencies shall consist of Moody's and Standard & Poor's. -16- 21 "Ratings Confirmation" means, with respect to any action proposed to be taken, a written confirmation from each of the Rating Agencies that such action would not result in (i) a reduction of the rating for any Class of Certificates below the then current rating for such Class of Certificates or (ii) a withdrawal or suspension of the rating of any Class of Certificates. "Refunding Agreements" means each of the Refunding Agreements listed on Schedule 2 hereto, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Regular Distribution Dates" means each January 2 and July 2, commencing on July 2, 1997; provided, however, that, if any such day shall not be a Business Day, the regular distribution shall be made on the next succeeding Business Day without additional interest. "Replacement Liquidity Facility" means, for any Trust, an irrevocable revolving credit agreement in substantially the form of the initial Liquidity Facility for such Trust, including reinstatement provisions or in such other form (which may include a letter of credit) as shall permit the Rating Agencies to confirm in writing their respective ratings then in effect for the Certificates (before downgrading of such ratings, if any, as a result of the downgrading of the Liquidity Provider), in a face amount equal to the Required Amount for such Liquidity Facility and issued by a Replacement Liquidity Provider, provided that, if a form of Liquidity Facility that is not substantially in the form of the replaced Liquidity Facility is to be used, America West shall have received a satisfactory opinion of tax counsel satisfactory to America West with respect to such form of Replacement Liquidity Facility and to the effect that the related Trust continues to be a "grantor trust" (and a copy of such opinion shall be furnished to the Subordination Agent). "Replacement Liquidity Provider" means a Person having unsecured debt ratings which are equal to or higher than the Threshold Rating, who issues a Replacement Liquidity Facility. "Required Amount" means, with respect to each Liquidity Facility and each Cash Collateral Account related thereto, for any day, the sum of the aggregate amount of interest, calculated at the rate per annum equal to the Stated Interest Rate for the related Class of Certificates, that would be payable on such Class of Certificates on each of the three successive Regular Distribution Dates immediately following such day or, if such day is a Regular Distribution Date, on such day and the succeeding -17- 22 two Regular Distribution Dates, in each case calculated on the basis of the Pool Balance of such Class of Certificates on such date and without regard to expected future payments of principal on such Class of Certificates. "Responsible Officer" means (i) with respect to the Subordination Agent and each of the Trustees, any officer in the corporate trust administration department of the Subordination Agent or such Trustee or any other officer customarily performing functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of his knowledge of and familiarity with a particular subject and (ii) with respect to each Liquidity Provider, any authorized officer of such Liquidity Provider. "Scheduled Payment" means, with respect to any Equipment Note, (i) any payment of principal and interest on such Equipment Note (other than an Overdue Scheduled Payment) due from the obligor thereon or (ii) any payment of interest on the corresponding Class of Certificates with funds drawn under any Liquidity Facility, which payment represents the installment of principal at the stated maturity of such installment of principal on such Equipment Note, the payment of regularly scheduled interest accrued on the unpaid principal amount of such Equipment Note, or both; provided that any payment of principal of, premium, if any, or interest resulting from the redemption or purchase of any Equipment Note shall not constitute a Scheduled Payment. "Scheduled Payment Date" means, with respect to any Scheduled Payment, the date on which such Scheduled Payment is scheduled to be made. "Series A Equipment Notes" means the [____%] Series A Equipment Notes issued pursuant to each Indenture by the related Owner Trustee and authenticated by the Indenture Trustee thereunder, and any such Equipment Notes issued in exchange therefor or replacement thereof pursuant to the terms of such Indenture. "Series B Equipment Notes" means the [____%] Series B Equipment Notes issued pursuant to each Indenture by the related Owner Trustee and authenticated by the Indenture Trustee thereunder, and any such Equipment Notes issued in exchange therefor or replacement thereof pursuant to the terms of such Indenture. -18- 23 "Series C Equipment Notes" means the [____%] Series C Equipment Notes issued pursuant to each Indenture by the related Owner Trustee and authenticated by the Indenture Trustee thereunder, and any such Equipment Notes issued in exchange therefor or replacement thereof pursuant to the terms of such Indenture. "Series D Equipment Notes" means the [____%] Series D Equipment Notes issued pursuant to each Indenture by the related Owner Trustee and authenticated by the Indenture Trustee thereunder, and any such Equipment Notes issued in exchange therefor or replacement thereof pursuant to the terms of such Indenture. "Special Distribution Date" means, with respect to any Special Payment, the date chosen by the Subordination Agent pursuant to Section 2.4(a) for the distribution of such Special Payment in accordance with this Agreement; provided, however, that, if any such day shall not be a Business Day, the related distribution shall be made on the next succeeding Business Day without additional interest. "Special Payment" means any payment (other than a Scheduled Payment) in respect of, or any proceeds of, any Equipment Note or Trust Indenture Estate (as defined in each Indenture), including Overdue Scheduled Payments, payments in respect of the redemption or repurchase of any Equipment Note and payments in respect of the sale of any Equipment Note to the related Owner Trustee, Owner Participant or any other Person. "Special Payments Account" means the Eligible Deposit Account created pursuant to Section 2.2 as a sub- account to the Collection Account. "Standard & Poor's" means Standard & Poor's Ratings Group, a division of McGraw-Hill Inc. "Stated Amount" with respect to any Liquidity Facility, means the Commitment (as defined in such Liquidity Facility) of the applicable Liquidity Provider thereunder. "Stated Interest Rate" means (i) with respect to the Class A Certificates, [____%] per annum, (ii) with respect to the Class B Certificates, [____%] per annum, and (iii) with respect to the Class C Certificates, [____%] per annum. "Subordination Agent" has the meaning assigned to it in the preamble to this Agreement. -19- 24 "Subordination Agent Incumbency Certificate" has the meaning assigned to such term in Section 2.5(a). "Subordination Agent Representatives" has the meaning assigned to such term in Section 2.5(a). "Tax" and "Taxes" mean any and all taxes, fees, levies, duties, tariffs, imposts, and other charges of any kind (together with any and all interest, penalties, loss, damage, liability, expense, additions to tax and additional amounts or costs incurred or imposed with respect thereto) imposed or otherwise assessed by the United States or by any state, local or foreign government (or any subdivision or agency thereof) or other taxing authority, including, without limitation: taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers' compensation, unemployment compensation, or net worth and similar charges, taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added, taxes on goods and services, gains taxes, license, registration and documentation fees, customs duties, tariffs, and similar charges. "Threshold Rating" means the short-term unsecured debt rating of P-1 by Moody's and A-1 by Standard & Poor's, provided that, in the event a person's short-term unsecured debt is not rated by either Moody's or Standard & Poor's, the long-term unsecured debt rating by Moody's and Standard & Poor's at least equal to the initial rating by each of Moody's and Standard & Poor's on the Class A Certificates. "Treasury Regulations" means regulations, including proposed or temporary regulations, promulgated under the Code. References herein to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations. "Triggering Event" means (x) the occurrence of an Indenture Default under all of the Indentures resulting in a PTC Event of Default with respect to the most senior Class of Certificates then Outstanding, (y) the Acceleration of, or a failure to pay at final maturity, all of the outstanding Equipment Notes or (z) the occurrence of an America West Bankruptcy Event. "Trust" means any of the Class A Trust, the Class B Trust, the Class C Trust or the Class D Trust. -20- 25 "Trust Accounts" has the meaning assigned to such term in Section 2.2(a). "Trust Agreement" means any of the Class A Trust Agreement, Class B Trust Agreement, Class C Trust Agreement or Class D Trust Agreement. "Trustee" means any of the Class A Trustee, the Class B Trustee, the Class C Trustee or the Class D Trustee. "Trustee Incumbency Certificate" has the meaning assigned to such term in Section 2.5(b). "Trustee Representatives" has the meaning assigned to such term in Section 2.5(b). "Underwriter" means Morgan Stanley & Co. Incorporated. "Underwriting Agreement" means the Underwriting Agreement dated _________ __, 1997, among the Underwriter, America West, GPA Group plc and GPA Leasing USA Sub I, Inc. relating to the purchase of the Certificates by the Underwriter, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Written Notice" means, from the Subordination Agent, any Trustee or any Liquidity Provider, a written instrument executed by the Designated Representative of such Person. An invoice delivered by a Liquidity Provider pursuant to Section 3.1 in accordance with its normal invoicing procedures shall constitute Written Notice under such Section. ARTICLE II TRUST ACCOUNTS; CONTROLLING PARTY SECTION 2.1 Agreement to Terms of Subordination; Payments from Monies Received Only. (a) Each Trustee hereby acknowledges and agrees to the terms of subordination set forth in this Agreement in respect of each Class of Certificates and agrees to enforce such provisions and cause all payments in respect of the Equipment Notes and the Liquidity Facilities to be applied in accordance with the terms of this Agreement. In addition, each Trustee hereby agrees to cause the Equipment Notes purchased by the related Trust to be registered in the name of the Subordination Agent, as agent and trustee for such Trustee, to be held in trust by the Subordination Agent solely for the -21- 26 purpose of facilitating the enforcement of the subordination and other provisions of this Agreement. (b) Except as otherwise expressly provided in the next succeeding sentence of this Section 2.1(b), all payments to be made by the Subordination Agent hereunder shall be made only from amounts received by it that constitute Scheduled Payments, Special Payments or payments under Section 10 or 13 of the Leases or Section 21 of the Refunding Agreements, and only to the extent that the Subordination Agent shall have received sufficient income or proceeds therefrom to enable it to make such payments in accordance with the terms hereof. Each of the Trustees and the Subordination Agent hereby agrees and, as provided in each Trust Agreement, each Certificateholder, by its acceptance of a Certificate, and each Liquidity Provider, by entering into the Liquidity Facility to which it is a party, has agreed to look solely to such amounts to the extent available for distribution to it as provided in this Agreement and that none of the Trustees, Owner Trustees, Indenture Trustees, Owner Participants nor the Subordination Agent is personally liable to any of them for any amounts payable or any liability under this Agreement, any Trust Agreement, any Liquidity Facility or such Certificate, except (in the case of the Subordination Agent) as expressly provided herein or (in the case of the Trustees) as expressly provided in each Trust Agreement or (in the case of the Owner Trustees and the Indenture Trustees) as expressly provided in any Operative Agreement. SECTION 2.2 Trust Accounts. (a) Upon the execution of this Agreement, the Subordination Agent shall establish and maintain in its name (i) the Collection Account as an Eligible Deposit Account, bearing a designation clearly indicating that the funds deposited therein are held in trust for the benefit of the Trustees, the Certificateholders and the Liquidity Providers and (ii) as a sub-account in the Collection Account, the Special Payments Account as an Eligible Deposit Account, bearing a designation clearly indicating that the funds deposited therein are held in trust for the benefit of the Trustees, the Certificateholders and the Liquidity Providers. The Subordination Agent shall establish and maintain the Cash Collateral Accounts pursuant to and under the circumstances set forth in Section 3.6(f) hereof. Upon such establishment and maintenance under Section 3.6(f) hereof, the Cash Collateral Accounts shall, together with the Collection Account, constitute the "Trust Accounts" hereunder. (b) Funds on deposit in the Trust Accounts shall be invested and reinvested by the Subordination Agent in Eligible Investments selected by the Subordination Agent if such -22- 27 investments are reasonably available and have maturities no later than the earlier of (i) 90 days following the date of such investment and (ii) the Business Day immediately preceding the Regular Distribution Date or any then specified Special Distribution Date pursuant to Section 2.4 hereof, as the case may be, next following the date of such investment; provided, however, that following the making of a Downgrade Drawing, (i) the Subordination Agent shall invest and reinvest such amounts at the direction of the Liquidity Provider funding such Drawing and (ii) the Liquidity Provider funding such Drawing shall use reasonable efforts to cause such amounts to be invested in Eligible Investments which yield at least an amount equal to the interest (excluding Margin) that is payable to such Liquidity Provider in respect of such amounts pursuant to Section 3.7 of the relevant Liquidity Facility (it being understood that it may not be feasible to obtain such a yield). Any Investment Earnings shall be deposited in the Collection Account when received by the Subordination Agent and shall be applied by the Subordination Agent in the same manner as the principal amount of such investment is to be applied and any losses shall be charged against the principal amount invested, in each case net of the Subordination Agent's reasonable fees and expenses in making such investments. The Subordination Agent shall not be liable for any loss resulting from any investment, reinvestment or liquidation required to be made under this Agreement other than by reason of its willful misconduct or gross negligence. Eligible Investments and any other investment required to be made hereunder shall be held to their maturities except that any such investment may be sold (without regard to its maturity) by the Subordination Agent without instructions whenever such sale is necessary to make a distribution required under this Agreement. Uninvested funds held hereunder shall not earn or accrue interest. (c) The Subordination Agent shall possess all right, title and interest in all funds on deposit from time to time in the Trust Accounts and in all proceeds thereof (including all income thereon, except as otherwise provided herein with respect to Investment Earnings). The Trust Accounts shall be held in trust by the Subordination Agent under the sole dominion and control of the Subordination Agent for the benefit of the Trustees, the Certificateholders and the Liquidity Providers, as the case may be. If, at any time, any of the Trust Accounts ceases to be an Eligible Deposit Account, the Subordination Agent shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, to which each Rating Agency may consent) establish a new Collection Account, Special Payments Account or Cash Collateral Account, as the case may be, as an Eligible Deposit Account and shall transfer any cash and/or any investments to such new Collection Account, Special Payments -23- 28 Account or Cash Collateral Account, as the case may be. Initially, the Trust Accounts shall be maintained with Fleet as Eligible Deposit Accounts. SECTION 2.3 Deposits to the Collection Account and Special Payments Account. (a) The Subordination Agent shall, upon receipt thereof, deposit in the Collection Account all Scheduled Payments received by it. (b) The Subordination Agent shall, on each date when one or more Special Payments are made to the Subordination Agent as holder of the Equipment Notes, deposit in the Special Payments Account the aggregate amount of such Special Payments. SECTION 2.4 Distributions of Special Payments. (a) Notice of Special Payment. Upon receipt by the Subordination Agent, as registered holder of the Equipment Notes, of any notice of a Special Payment (or, in the absence of any such notice, upon receipt by the Subordination Agent of a Special Payment), the Subordination Agent shall promptly give notice thereof to each Trustee and the Liquidity Providers. The Subordination Agent shall promptly calculate the amount of the redemption or purchase of Equipment Notes or the amount of any Overdue Scheduled Payment, as the case may be, comprising such Special Payment under the applicable Indenture or Indentures and shall promptly send to each Trustee a Written Notice of such amount and the amount allocable to each Trust. Such Written Notice shall also set the distribution date for such Special Payment (a "Special Distribution Date"), which shall be the first Business Day which follows the later to occur of (x) the 22nd day after the date such Written Notice is received by the Trustees or (y) the date the Subordination Agent receives or expects to receive such Special Payment. Amounts on deposit in the Special Payments Account shall be distributed in accordance with Sections 2.4(b) and 2.4(c) hereof, as applicable. (b) (i) Redemptions and Purchases of Equipment Notes. So long as no Triggering Event shall have occurred (whether or not continuing), the Subordination Agent shall make distributions pursuant to this Section 2.4(b) of amounts on deposit in the Special Payments Account on account of the redemption or purchase of all of the Equipment Notes issued pursuant to an Indenture on the Special Distribution Date for such Special Payment in the following order of priority: first, such amount as shall be required to pay (A) all accrued and unpaid Liquidity Expenses then in arrears plus (B) the product of (x) the aggregate amount of all accrued and unpaid Liquidity Expenses not -24- 29 in arrears to such Special Payment Date multiplied by (y) a fraction, the numerator of which is the aggregate outstanding principal amount of Equipment Notes being redeemed or purchased on such Special Payment Date and the denominator of which is the aggregate outstanding principal amount of all Equipment Notes, shall be distributed to the Liquidity Providers pari passu on the basis of the amount of Liquidity Expenses owed to each Liquidity Provider; second, such amount as shall be required to pay (A) all accrued and unpaid interest then in arrears on all Liquidity Obligations plus (B) the product of (x) the aggregate amount of all accrued and unpaid interest on all Liquidity Obligations not in arrears to such Special Payment Date (at the rate provided in the applicable Liquidity Facility) multiplied by (y) a fraction, the numerator of which is the aggregate outstanding principal amount of Equipment Notes being redeemed or purchased on such Special Payment Date and the denominator of which is the aggregate outstanding principal amount of all Equipment Notes, shall be distributed to the Liquidity Providers pari passu on the basis of the amount of Liquidity Obligations owed to each Liquidity Provider; third, such amount as shall be required (A) to pay or reimburse the Liquidity Providers in an amount equal to the amount of any unreimbursed Interest Drawings under the Liquidity Facilities shall be distributed to the Liquidity Providers or (B) if any Cash Collateral Account had previously been funded as provided in Section 3.6(f), to replenish such Cash Collateral Account up to its Required Amount shall be deposited in such Cash Collateral Account, in each such case, pari passu on the basis of the amounts of such unreimbursed Interest Drawings and/or deficiencies; fourth, such amount as shall be required to pay in full Expected Distributions to the holders of Class A Certificates on such Special Distribution Date shall be distributed to the Class A Trustee; fifth, such amount as shall be required to pay in full Expected Distributions to the holders of Class B Certificates on such Special Distribution Date shall be distributed to the Class B Trustee; sixth, such amount as shall be required to pay in full Expected Distributions to the holders of Class C -25- 30 Certificates on such Special Distribution Date shall be distributed to the Class C Trustee; seventh, such amount as shall be required to pay in full Expected Distributions to the holders of Class D Certificates on such Special Distribution Date shall be distributed to the Class D Trustee; and eighth, the balance, if any, of such Special Payment shall be transferred to the Collection Account for distribution in accordance with Section 3.2 hereof. (ii) Upon the occurrence of a Triggering Event (whether or not continuing), the Subordination Agent shall make distributions pursuant to this Section 2.4(b) of amounts on deposit in the Special Payments Account on account of the redemption or purchase of all of the Equipment Notes issued pursuant to an Indenture on the Special Distribution Date for such Special Payment in accordance with Section 3.3 hereof. (c) Other Special Payments. Any amounts on deposit in the Special Payments Account other than in respect of amounts to be distributed pursuant to Section 2.4(b) shall be distributed on the Special Distribution Date therefor in accordance with Article III hereof. (d) Investment of Amounts in Special Payments Account. Any amounts on deposit in the Special Payments Account prior to the distribution thereof pursuant to Section 2.4(b) or (c) shall be invested in accordance with Section 2.2(b). Investment Earnings on such investments shall be distributed in accordance with Section 2.4(b) or (c), as the case may be. SECTION 2.5 Designated Representatives. (a) With the delivery of this Agreement, the Subordination Agent shall furnish to each Liquidity Provider and each Trustee, and from time to time thereafter may furnish to each Liquidity Provider and each Trustee, at the Subordination Agent's discretion, or upon any Liquidity Provider's or Trustee's request (which request shall not be made more than one time in any 12-month period), a certificate (a "Subordination Agent Incumbency Certificate") of a Responsible Officer of the Subordination Agent certifying as to the incumbency and specimen signatures of the officers of the Subordination Agent and the attorney-in-fact and agents of the Subordination Agent (the "Subordination Agent Representatives") authorized to give Written Notices on behalf of the Subordination Agent hereunder. Until each Liquidity Provider and Trustee receives a subsequent Subordination Agent Incumbency Certificate, -26- 31 it shall be entitled to rely on the last Subordination Agent Incumbency Certificate delivered to it hereunder. (b) With the delivery of this Agreement, each Trustee shall furnish to the Subordination Agent, and from time to time thereafter may furnish to the Subordination Agent, at such Trustee's discretion, or upon the Subordination Agent's request (which request shall not be made more than one time in any 12-month period), a certificate (a "Trustee Incumbency Certificate") of a Responsible Officer of such Trustee certifying as to the incumbency and specimen signatures of the officers of such Trustee and the attorney-in-fact and agents of such Trustee (the "Trustee Representatives") authorized to give Written Notices on behalf of such Trustee hereunder. Until the Subordination Agent receives a subsequent Trustee Incumbency Certificate, it shall be entitled to rely on the last Trustee Incumbency Certificate delivered to it hereunder. (c) With the delivery of this Agreement, each Liquidity Provider shall furnish to the Subordination Agent, and from time to time thereafter may furnish to the Subordination Agent, at such Liquidity Provider's discretion, or upon the Subordination Agent's request (which request shall not be made more than one time in any 12-month period), a certificate (an "LP Incumbency Certificate") of any authorized signatory of such Liquidity Provider certifying as to the incumbency and specimen signatures of any officer, attorney-in-fact, agent or other designated representative of such Liquidity Provider (the "LP Representatives" and, together with the Trustee Representatives and the Subordination Agent Representatives, the "Designated Representatives") authorized to give Written Notices on behalf of such Liquidity Provider hereunder. Until the Subordination Agent receives a subsequent LP Incumbency Certificate, it shall be entitled to rely on the last LP Incumbency Certificate delivered to it hereunder. SECTION 2.6 Controlling Party. (a) The Trustees and the Liquidity Providers hereby agree that, with respect to any Indenture at any given time, the Indenture Trustee thereunder will be directed (i) in taking, or refraining from taking, any action with respect to such Indenture or the Equipment Notes issued thereunder, so long as no Indenture Default has occurred and is continuing thereunder, by the holders of at least a majority of the outstanding principal amount of such Equipment Notes (provided that, for so long as the Subordination Agent is the registered holder of the Equipment Notes, the Subordination Agent shall act with respect to this clause (i) in accordance with the directions of the Trustees representing holders of Certificates representing an undivided interest in such principal -27- 32 amount of Equipment Notes), and (ii) after the occurrence and during the continuance of an Indenture Default thereunder (which has not been cured by the applicable Owner Trustee or the applicable Owner Participant pursuant to Section 4.03 of such Indenture), in taking, or refraining from taking, any action with respect to such Indenture or such Equipment Notes, including exercising remedies thereunder (including accelerating the Equipment Notes issued thereunder or foreclosing the Lien on the Aircraft securing such Equipment Notes), by the Controlling Party. (b) The Person who shall be the "Controlling Party" with respect to any Indenture shall be: (w) the Class A Trustee; (x) upon payment of Final Distributions to the holders of Class A Certificates, the Class B Trustee; (y) upon payment of Final Distributions to the holders of Class B Certificates, the Class C Trustee; and (z) upon payment of Final Distributions to the holders of Class C Certificates, the Class D Trustee. For purposes of giving effect to the foregoing, the Trustees (other than the Controlling Party) irrevocably agree (and the Certificateholders (other than the Certificateholders represented by the Controlling Party) shall be deemed to agree by virtue of their purchase of Certificates) that the Subordination Agent, as record holder of the Equipment Notes, shall exercise its voting rights in respect of the Equipment Notes as directed by the Controlling Party and any vote so exercised shall be binding upon the Trustees and all Certificateholders. The Subordination Agent shall give written notice to all of the other parties to this Agreement promptly upon a change in the identity of the Controlling Party. Each of the parties hereto agrees that it shall not exercise any of the rights of the Controlling Party at such time as it is not the Controlling Party hereunder; provided, however, that nothing herein contained shall prevent or prohibit any Non-Controlling Party from exercising such rights as shall be specifically granted to such Non-Controlling Party hereunder and under the other Operative Agreements. (c) Notwithstanding the foregoing, the Liquidity Provider with the then greatest amount of unreimbursed Liquidity Obligations payable to it under the Liquidity Facilities shall have the right to elect, by Written Notice to the Subordination Agent and each of the Trustees, to become the Controlling Party hereunder with respect to any Indenture at any time from and including the date which is 18 months after the earlier of (i) the Acceleration of the Equipment Notes under such Indenture and (ii) a Final Drawing with respect to the Liquidity Facilities, if, in the case of clause (i) or (ii) above, at the time of -28- 33 such election, all Liquidity Obligations owed to such Liquidity Provider under the Liquidity Facilities have not been paid in full. (d) The exercise of remedies by the Controlling Party under this Agreement shall be expressly limited by Section 4.1(a)(ii) hereof. (e) The Controlling Party shall not be entitled to require or obligate any Non-Controlling Party to provide funds necessary to exercise any right or remedy hereunder. ARTICLE III RECEIPT, DISTRIBUTION AND APPLICATION OF AMOUNTS RECEIVED SECTION 3.1 Written Notice of Distribution. (a) No later than 3:00 P.M. (New York City time) on the Business Day immediately preceding each Distribution Date (or Special Distribution Date for purposes of Section 2.4(b) hereof, as the case may be), each of the following Persons shall deliver to the Subordination Agent a Written Notice setting forth the following information as at the close of business on such Business Day: (i) With respect to the Class A Certificates, the Class A Trustee shall separately set forth the amounts to be paid in accordance with clause "fourth" of Section 3.2 or Section 2.4(b), as the case may be, hereof; (ii) With respect to the Class B Certificates, the Class B Trustee shall separately set forth the amounts to be paid in accordance with clause "fifth" of Section 3.2 or Section 2.4(b), as the case may be, hereof; (iii) With respect to the Class C Certificates, the Class C Trustee shall separately set forth the amounts to be paid in accordance with clause "sixth" of Section 3.2 or Section 2.4(b), as the case may be, hereof; (iv) With respect to the Class D Certificates, the Class D Trustee shall separately set forth the amounts to be paid in accordance with clause "seventh" of Section 3.2 or Section 2.4(b), as the case may be, hereof; and (v) With respect to each Liquidity Facility, the Liquidity Provider thereunder shall separately set forth the -29- 34 amounts to be paid in accordance with clauses "first", "second" and "third" of Section 3.2 or Section 2.4(b), as the case may be, hereof. The notices required under this Section 3.1(a) may be in the form of a schedule or similar document provided to the Subordination Agent by the parties referenced therein or by any one of them, which schedule or similar document may state that, unless there has been a prepayment of the Certificates, such schedule or similar document is to remain in effect until any substitute notice or amendment shall be given to the Subordination Agent by the party providing such notice. (b) Following the occurrence of a Triggering Event, the Subordination Agent shall request the following information from the following Persons, and each of the following Persons shall, upon the request of the Subordination Agent, deliver a Written Notice to the Subordination Agent setting forth for such Person the following information: (i) With respect to the Class A Certificates, the Class A Trustee shall separately set forth the amounts to be paid in accordance with clauses "first" (relating to indemnity payments made by the Class A Certificateholders), "fifth" and "sixth" of Section 3.3 hereof; (ii) With respect to the Class B Certificates, the Class B Trustee shall separately set forth the amounts to be paid in accordance with clauses "first" (relating to indemnity payments made by the Class B Certificateholders), "fifth" and "seventh" of Section 3.3 hereof; (iii) With respect to the Class C Certificates, the Class C Trustee shall separately set forth the amounts to be paid in accordance with clauses "first" (relating to indemnity payments made by the Class C Certificateholders), "fifth" and "eighth" of Section 3.3 hereof; (iv) With respect to the Class D Certificates, the Class D Trustee shall separately set forth the amounts to be paid in accordance with clauses "first" (relating to indemnity payments made by the Class D Certificateholders), "fifth" and "ninth" of Section 3.3 hereof; and (v) With respect to each Liquidity Facility, the Liquidity Provider thereunder shall separately set forth the amounts to be paid in accordance with clauses "second", "third" and "fourth" of Section 3.3 hereof. -30- 35 (c) At such time as a Trustee or a Liquidity Provider shall have received all amounts owing to it (and, in the case of a Trustee, the Certificateholders for which it is acting) pursuant to Section 2.4, 3.2 or 3.3 hereof, as applicable, and, in the case of a Liquidity Provider, its commitment under the related Liquidity Facility shall have terminated or expired, such Person shall, by a Written Notice, so inform the Subordination Agent and each other party to this Agreement. (d) As provided in Section 6.5 hereof, the Subordination Agent shall be fully protected in relying on any of the information set forth in a Written Notice provided by any Trustee or any Liquidity Provider pursuant to paragraphs (a) through (c) above and shall have no independent obligation to verify, calculate or recalculate any amount set forth in any Written Notice delivered in accordance with such paragraphs. (e) Any Written Notice delivered by a Trustee or a Liquidity Provider, as applicable, pursuant to Section 3.1(a), 3.1(b) or 3.1(c) hereof, if made prior to 10:00 A.M. (New York City time) shall be effective on the date delivered (or if delivered later on a given date shall be effective as of the next Business Day). Subject to the terms of this Agreement, the Subordination Agent shall as promptly as practicable comply with any such instructions; provided, however, that any transfer of funds pursuant to any instruction received after 10:00 A.M. (New York City time) on any Business Day may be made on the next succeeding Business Day. (f) In the event the Subordination Agent shall not receive from any Person any information set forth in paragraphs (a) or (b) above which is required to enable the Subordination Agent to make a distribution to such Person pursuant to Section 2.4(b), 3.2 or 3.3 hereof, the Subordination Agent shall request such information and, failing to receive any such information, the Subordination Agent shall not make such distribution(s) to such Person. In such event, the Subordination Agent shall make distributions pursuant to clauses "first" through "seventh" of Section 2.4(b), clauses "first" through "eighth" of Section 3.2 and clauses "first" through "ninth" of Section 3.3 to the extent it shall have sufficient information to enable it to make such distributions, and shall continue to hold any funds remaining, after making such distributions, until the Subordination Agent shall receive all necessary information to enable it to distribute any funds so withheld. (g) On such dates (but not more frequently than monthly) as any Liquidity Provider or any Trustee shall request, the Subordination Agent shall send to such party a written -31- 36 statement reflecting all amounts on deposit with the Subordination Agent pursuant to Section 3.1(f) hereof. SECTION 3.2 Distribution of Amounts on Deposit in the Collection Account. Except as otherwise provided in Sections 2.4, 3.1(f), 3.3, 3.4 and 3.6(b), amounts on deposit in the Collection Account (or, in the case of any amount described in Section 2.4(c), on deposit in the Special Payments Account) shall be promptly distributed on each Distribution Date in the following order of priority and in accordance with the information provided to the Subordination Agent pursuant to Section 3.1(a) hereof: first, such amount as shall be required to pay all accrued and unpaid Liquidity Expenses owed to each Liquidity Provider shall be distributed to the Liquidity Providers pari passu on the basis of the amount of Liquidity Expenses owed to each Liquidity Provider; second, such amount as shall be required to pay in full the aggregate amount of interest accrued on all Liquidity Obligations (at the rate provided in the applicable Liquidity Facility) shall be distributed to the Liquidity Providers pari passu on the basis of the amount of Liquidity Obligations owed to each Liquidity Provider; third, such amount as shall be required (A) to pay or reimburse the Liquidity Providers in an amount equal to the amount of all Liquidity Obligations then due (other than amounts payable pursuant to clause "first" or "second" of this Section 3.2) shall be distributed to the Liquidity Providers, and (B) if any Cash Collateral Account had previously been funded as provided in Section 3.6(f), to replenish such Cash Collateral Account up to its Required Amount shall be deposited in such Cash Collateral Account, in each such case, pari passu on the basis of the amounts of such unreimbursed Liquidity Obligations and/or deficiencies; fourth, such amount as shall be required to pay in full Expected Distributions to the holders of the Class A Certificates on such Distribution Date shall be distributed to the Class A Trustee; fifth, such amount as shall be required to pay in full Expected Distributions to the holders of the Class B Certificates on such Distribution Date shall be distributed to the Class B Trustee; -32- 37 sixth, such amount as shall be required to pay in full Expected Distributions to the holders of the Class C Certificates on such Distribution Date shall be distributed to the Class C Trustee; seventh, such amount as shall be required to pay in full Expected Distributions to the holders of the Class D Certificates on such Distribution Date shall be distributed to the Class D Trustee; and eighth, such amount as shall be required to pay in full the aggregate unpaid amount of fees and expenses payable as of such Distribution Date to the Subordination Agent and each Trustee pursuant to the terms of this Agreement and the Trust Agreements, as the case may be, shall be distributed to the Subordination Agent and such Trustee. SECTION 3.3 Distribution of Amounts on Deposit Following a Triggering Event. (a) Except as otherwise provided in Sections 3.1(f) and 3.6(b) hereof, upon the occurrence of a Triggering Event and at all times thereafter, all funds in the Collection Account or the Special Payments Account shall be promptly distributed by the Subordination Agent in the following order of priority: first, such amount as shall be required to reimburse (i) the Subordination Agent for any out-of-pocket costs and expenses actually incurred by it (to the extent not previously reimbursed) in the protection of, or the realization of the value of, the Equipment Notes or any Trust Indenture Estate (as defined in the relevant Indenture), shall be applied by the Subordination Agent in reimbursement of such costs and expenses, (ii) each Trustee for any amounts of the nature described in clause (i) above actually incurred by it under the applicable Trust Agreement (to the extent not previously reimbursed), shall be distributed to such Trustee and (iii) any Liquidity Provider or Certificateholder for payments, if any, made by it to the Subordination Agent or any Trustee in respect of amounts described in clause (i) above, shall be distributed to such Liquidity Provider or to the applicable Trustee for the account of such Certificateholder, in each such case, pari passu on the basis of all amounts described in clauses (i) through (iii) above; second, such amount remaining as shall be required to pay all accrued and unpaid Liquidity Expenses shall be distributed to each Liquidity Provider pari passu on -33- 38 the basis of the amount of Liquidity Expenses owed to each Liquidity Provider; third, such amount remaining as shall be required to pay accrued and unpaid interest on the Liquidity Obligations as provided in the Liquidity Facilities shall be distributed to each Liquidity Provider pari passu on the basis of the amount of such accrued and unpaid interest owed to each Liquidity Provider; fourth, such amount remaining as shall be required (A) to pay in full the outstanding amount of all Liquidity Obligations, whether or not then due (other than amounts payable pursuant to clause "second" or "third" of this Section 3.3) shall be distributed to each Liquidity Provider that has not funded a Cash Collateral Account in accordance with Section 3.6(c) or 3.6(i) hereof, and/or (B) if applicable, so long as no Performing Note Deficiency exists and no Liquidity Event of Default has occurred and is continuing, to replenish the Cash Collateral Accounts up to their respective Required Amounts shall be deposited in the Cash Collateral Accounts, in each case, pari passu on the basis of the amount of Liquidity Obligations owed to each Liquidity Provider and/or such deficiencies; fifth, such amount as shall be required to reimburse or pay (i) the Subordination Agent for any Tax (other than Taxes imposed on compensation paid hereunder), expense, fee, charge or other loss incurred by or any other amount payable to the Subordination Agent in connection with the transactions contemplated hereby (to the extent not previously reimbursed), shall be applied by the Subordination Agent in reimbursement of such amount, (ii) each Trustee for any Tax (other than Taxes imposed on compensation paid under the applicable Trust Agreement), expense, fee, charge, loss or any other amount payable to such Trustee under the applicable Trust Agreements (to the extent not previously reimbursed), shall be distributed to such Trustee and (iii) each Certificateholder for payments, if any, made by it pursuant to Section 5.2 hereof in respect of amounts described in clause (i) above, shall be distributed to the applicable Trustee for the account of such Certificateholder, in each such case, pari passu on the basis of all amounts described in clauses (i) through (iii) above; sixth, such amount remaining as shall be required to pay in full Adjusted Expected Distributions on the Class A Certificates shall be distributed to the Class A Trustee; -34- 39 seventh, such amount remaining as shall be required to pay in full Adjusted Expected Distributions on the Class B Certificates shall be distributed to the Class B Trustee; eighth, such amount remaining as shall be required to pay in full Adjusted Expected Distributions on the Class C Certificates shall be distributed to the Class C Trustee; and ninth, such amount remaining as shall be required to pay in full Adjusted Expected Distributions on the Class D Certificates shall be distributed to the Class D Trustee. SECTION 3.4 Other Payments. Any payments received by the Subordination Agent for which no provision as to the application thereof is made in this Agreement shall be distributed by the Subordination Agent in the order of priority specified in Section 3.3 hereof. SECTION 3.5 Payments to the Trustees and the Liquidity Providers. Any amounts distributed hereunder to any Liquidity Provider shall be paid to such Liquidity Provider by wire transfer of funds to the address such Liquidity Provider shall provide to the Subordination Agent. The Subordination Agent shall provide a Written Notice of any such transfer to the applicable Liquidity Provider, as the case may be, at the time of such transfer. Any amounts distributed hereunder by the Subordination Agent to any Trustee which shall not be the same institution as the Subordination Agent shall be paid to such Trustee by wire transfer of funds at the address such Trustee shall provide to the Subordination Agent. SECTION 3.6 Liquidity Facilities. (a) Interest Drawings. If on any Distribution Date, after giving effect to the subordination provisions of this Agreement, the Subordination Agent shall not have sufficient funds for the payment of any amounts due and owing in respect of accrued interest on the Class A Certificates, the Class B Certificates or the Class C Certificates (at the Stated Interest Rate for such Class of Certificates), then, prior to 12:00 noon (New York City time) on the Business Day following such Distribution Date, the Subordination Agent shall request a drawing (each such drawing, an "Interest Drawing") under the Liquidity Facility with respect to such Class of Certificates in an amount equal to the lesser of (i) an amount sufficient to pay the amount of such accrued interest (at the Stated Interest Rate for such Class of Certificates) and (ii) the Available Amount under such Liquidity Facility, and shall pay such amount to the Trustee with respect -35- 40 to such Class of Certificates in payment of such accrued interest. (b) Application of Interest Drawings. Notwithstanding anything to the contrary contained in this Agreement, (i) all payments received by the Subordination Agent in respect of an Interest Drawing under the Class A Liquidity Facility and all amounts withdrawn by the Subordination Agent from the Class A Cash Collateral Account, and payable in each case to the Class A Certificateholders, shall be promptly distributed to the Class A Trustee, (ii) all payments received by the Subordination Agent in respect of an Interest Drawing under the Class B Liquidity Facility and all amounts withdrawn by the Subordination Agent from the Class B Cash Collateral Account, and payable in each case to the Class B Certificateholders, shall be promptly distributed to the Class B Trustee and (iii) all payments received by the Subordination Agent in respect of an Interest Drawing under the Class C Liquidity Facility and all amounts withdrawn by the Subordination Agent from the Class C Cash Collateral Account, and payable in each case to the Class C Certificateholders, shall be promptly distributed to the Class C Trustee. (c) Downgrade Drawings. If at any time the debt rating of any Liquidity Provider issued by either Rating Agency is lower than the applicable Threshold Rating, within 30 days after receiving notice of such downgrading (but no later than the expiration date of the Liquidity Facility issued by the downgraded Liquidity Provider (the "Downgraded Facility")), such Liquidity Provider may arrange, or the Subordination Agent (in consultation with America West (whose recommendations the Subordination Agent will accept)) may arrange, for a Replacement Liquidity Provider to issue and deliver a Replacement Liquidity Facility to the Subordination Agent. If a Downgraded Facility has not been replaced in accordance with the terms of this paragraph, the Subordination Agent shall, on such 30th day (or if such 30th day is not a Business Day, on the next succeeding Business Day) (or, if earlier, the expiration date of such Downgraded Facility), request a drawing in accordance with and to the extent permitted by such Downgraded Facility (such drawing, a "Downgrade Drawing") of all available and undrawn amounts thereunder. Amounts drawn pursuant to a Downgrade Drawing shall be maintained and invested as provided in Section 3.6(f) hereof. (d) [Reserved.] -36- 41 (e) Issuance of Replacement Liquidity Facility. At any time, the Subordination Agent may, at its option, in consultation with America West (whose recommendations the Subordination Agent will accept), arrange for a Replacement Liquidity Facility to replace the Liquidity Facility for any Class of Certificates; provided that the initial Liquidity Provider may not be replaced pursuant to this paragraph unless (i) there shall have become due to the initial Liquidity Provider amounts pursuant to Section 3.1, 3.2 or 3.3 of the Liquidity Facilities and the replacement of the initial Liquidity Provider would reduce or eliminate the obligation to pay such amounts, (ii) it shall become unlawful or impossible for the initial Liquidity Provider (or its Lending Office) to maintain or fund its LIBOR Advances as described in Section 3.10 of each Liquidity Facility or (iii) a Downgrade Drawing shall have occurred under any Liquidity Facility. In any such consultation, the Subordination Agent shall accept the recommendations of America West in the absence of a good faith reason not to do so. In addition to any such replacement by the Subordination Agent, the Liquidity Provider with respect to any Liquidity Facility may arrange for a Replacement Liquidity Facility to replace such Liquidity Facility under the circumstances set forth in Section 3.10 of such Liquidity Facility. If a Replacement Liquidity Facility is provided at any time after a Downgrade Drawing has been made, all funds on deposit in the relevant Cash Collateral Account will be returned to the Liquidity Provider being replaced. No Replacement Liquidity Facility shall become effective and no Replacement Liquidity Facility shall be deemed a "Liquidity Facility" under the Operative Agreements, unless and until (i) the conditions referred to in the immediately following paragraph shall have been satisfied and (ii) if such Replacement Liquidity Facility shall materially adversely affect the rights, remedies, interests or obligations of the Class A Certificateholders, the Class B Certificateholders or the Class C Certificateholders under any of the Operative Agreements, the applicable Trustee shall have consented, in writing, to the execution and issuance of such Replacement Liquidity Facility. In connection with the issuance of each Replacement Liquidity Facility, the Subordination Agent (or, in the case of clause (z) below if a Liquidity Provider is replacing a Liquidity Facility in accordance with Section 3.10 of such Liquidity Facility, such Liquidity Provider) shall (x) prior to the issuance of such Replacement Liquidity Facility, receive written confirmation from each Rating Agency that such Replacement Liquidity Facility will not cause a reduction, withdrawal or suspension of the rating then in effect for any Class of Certificates by such Rating Agency (without regard to the ratings of any Liquidity Provider being replaced pursuant to Section -37- 42 3.6(c) hereof), (y) pay all Liquidity Obligations then owing to the replaced Liquidity Provider (which payment shall be made first from available funds in the Cash Collateral Account as described in clause (vii) of Section 3.6(f) hereof and thereafter from any other available source, including, without limitation, a drawing under the Replacement Liquidity Facility, it being understood that no Replacement Liquidity Facility shall become effective (other than insofar as necessary to permit the repayment of amounts owed to the replaced Liquidity Provider) until all amounts owed to the replaced Liquidity Provider have been paid) and (z) cause the issuer of the Replacement Liquidity Facility to deliver the Replacement Liquidity Facility to the Subordination Agent, together with a legal opinion opining that such Replacement Liquidity Facility is an enforceable obligation of such Replacement Liquidity Provider. Upon satisfaction of the conditions set forth in this Section 3.6(e), (i) the replaced Liquidity Facility shall terminate and (ii) such Replacement Liquidity Provider shall be deemed to be a Liquidity Provider with the rights and obligations of a Liquidity Provider hereunder and under the other Operative Agreements and such Replacement Liquidity Facility shall be deemed to be a Liquidity Facility hereunder and under the other Operative Agreements. (f) Cash Collateral Accounts; Withdrawals; Investments. In the event the Subordination Agent shall draw all available amounts under the Class A Liquidity Facility, the Class B Liquidity Facility or the Class C Liquidity Facility pursuant to Section 3.6(c) or a Final Drawing shall be made as provided in the Liquidity Facility, amounts so drawn shall be deposited by the Subordination Agent in the Class A Cash Collateral Account, the Class B Cash Collateral Account or the Class C Cash Collateral Account, respectively. Amounts so deposited shall be invested in Eligible Investments in accordance with Section 2.2(b) hereof. Investment Earnings on amounts on deposit in the Cash Collateral Accounts shall be deposited in the Collection Account. In addition, from and after the date funds are so deposited, the Subordination Agent shall make withdrawals from such account as follows: (i) on each Distribution Date, the Subordination Agent shall, to the extent it shall not have received funds to pay accrued and unpaid interest on the Class A Certificates (at the Stated Interest Rate for the Class A Certificates) from any other source, withdraw from the Class A Cash Collateral Account, and pay to the Class A Trustee an amount equal to the lesser of (x) an amount necessary to pay accrued and unpaid interest (at the Stated Interest Rate for the Class A Certificates) on such Class A Certificates -38- 43 and (y) the amount on deposit in the Class A Cash Collateral Account; (ii ) on each Distribution Date, the Subordination Agent shall, to the extent it shall not have received funds to pay accrued and unpaid interest on the Class B Certificates (at the Stated Interest Rate for the Class B Certificates) from any other source, withdraw from the Class B Cash Collateral Account, and pay to the Class B Trustee an amount equal to the lesser of (x) an amount necessary to pay accrued and unpaid interest (at the Stated Interest Rate for the Class B Certificates) on such Class B Certificates and (y) the amount on deposit in the Class B Cash Collateral Account; (iii) on each Distribution Date, the Subordination Agent shall, to the extent it shall not have received funds to pay accrued and unpaid interest on the Class C Certificates (at the Stated Interest Rate for the Class C Certificates) from any other source, withdraw from the Class C Cash Collateral Account, and pay to the Class C Trustee an amount equal to the lesser of (x) an amount necessary to pay accrued and unpaid interest (at the Stated Interest Rate for the Class C Certificates) on such Class C Certificates and (y) the amount on deposit in the Class C Cash Collateral Account; (iv ) on each date on which the Pool Balance of the Class A Trust shall have been reduced by payments made to the Class A Certificateholders pursuant to Section 2.4, 3.2 or 3.3 hereof, the Subordination Agent shall withdraw from the Class A Cash Collateral Account such amount as is necessary so that, after giving effect to the reduction of the Pool Balance on such date (including any such reduction resulting from a prior withdrawal of amounts on deposit in the Class A Cash Collateral Account on such date), the Required Amount (with respect to the Class A Liquidity Facility) will be on deposit in the Class A Cash Collateral Account and shall first, pay such amount to the Class A Liquidity Provider until the Liquidity Obligations (with respect to the Class A Certificates) shall have been paid in full, and second, deposit any remaining amount in the Collection Account; (v) on each date on which the Pool Balance of the Class B Trust shall have been reduced by payments made to the Class B Certificateholders pursuant to -39- 44 Section 2.4, 3.2 or 3.3 hereof, the Subordination Agent shall withdraw from the Class B Cash Collateral Account such amount as is necessary so that, after giving effect to the reduction of the Pool Balance on such date (including any such reduction resulting from a prior withdrawal of amounts on deposit in the Class B Cash Collateral Account on such date), the Required Amount (with respect to the Class B Liquidity Facility) will be on deposit in the Class B Cash Collateral Account and shall first, pay such amount to the Class B Liquidity Provider until the Liquidity Obligations (with respect to the Class B Certificates) shall have been paid in full, and second, deposit any remaining amount in the Collection Account; (vi) on each date on which the Pool Balance of the Class C Trust shall have been reduced by payments made of the Class C Certificateholders pursuant to Section 2.4, 3.2 or 3.3 hereof, the Subordination Agent shall withdraw from the Class C Cash Collateral Account such amount as is necessary so that, after giving effect to the reduction of the Pool Balance on such date (including any such reduction resulting from a prior withdrawal of amounts on deposit in the Class C Cash Collateral Account on such date), the Required Amount (with respect to the Class C Liquidity Facility) will be on deposit in the Class C Cash Collateral Account and shall first, pay such amount to the Class C Liquidity Provider until the Liquidity Obligations (with respect to the Class C Certificates) shall have been paid in full, and second, deposit any remaining amount in the Collection Account; (vii) if a Replacement Liquidity Facility for any Class of Certificates shall be delivered to the Subordination Agent following the date on which funds have been deposited into the Cash Collateral Account for such Class of Certificates, the Subordination Agent shall withdraw all amounts on deposit in such Cash Collateral Account and shall pay such amounts to the replaced Liquidity Provider until all Liquidity Obligations owed to such Person shall have been paid in full, and shall deposit any remaining amount in the Collection Account; and (viii) following the payment of Final Distributions with respect to any Class of Certificates (other than the Class D Certificates), on the date on which the Subordination Agent shall have been notified -40- 45 by the Liquidity Provider for such Class of Certificates that the Liquidity Obligations owed to such Liquidity Provider have been paid in full, the Subordination Agent shall withdraw all amounts on deposit in the Cash Collateral Account in respect of such Class of Certificates and shall deposit such amount in the Collection Account. (g) Reinstatement. With respect to any Interest Drawing under the Liquidity Facility for any Trust, upon the reimbursement of the applicable Liquidity Provider for all or any part of the amount of such Interest Drawing, together with any accrued interest thereon, the Available Amount of such Liquidity Facility shall be reinstated by an amount equal to the amount of such Interest Drawing so reimbursed to the applicable Liquidity Provider; provided, however, that such Liquidity Facility shall not be so reinstated in part or in full at any time if (x) both (i) a Triggering Event shall have occurred and (ii) a Performing Note Deficiency exists or (y) a Liquidity Event of Default shall have occurred and be continuing under such Liquidity Facility. In the event that at any time prior to both the occurrence of a Triggering Event and the existence of a Performing Note Deficiency funds are withdrawn from any Cash Collateral Account pursuant to clauses (i), (ii) or (iii) of Section 3.6(f) hereof, then funds received by the Subordination Agent prior to both the occurrence of a Triggering Event and the existence of a Performing Note Deficiency shall be deposited in such Cash Collateral Account as provided in clause "third" of Section 2.4(b)(i), clause "third" of Section 3.2 or clause "fourth" of Section 3.3, as applicable, and applied in accordance with Section 3.6(f) hereof. (h) Reimbursement. The amount of each drawing under the Liquidity Facilities shall be due and payable, together with interest thereon, on the dates and at the rates, respectively, provided in the Liquidity Facilities. (i) Final Drawing. If any action is expressly required under a Liquidity Facility to be taken by the Subordination Agent in order to make a Final Drawing thereunder, the Subordination Agent shall not fail to take such action. Upon receipt of the proceeds of a Final Drawing under the related Liquidity Facility, the Subordination Agent shall maintain and invest such proceeds in accordance with Section 3.6(f) hereof. (j) Reduction of Stated Amount. Promptly following each date on which the Required Amount of the Liquidity Facility for a Class of Certificates is reduced as a result of a distribution to the Certificateholders of such Class of -41- 46 Certificates, the Subordination Agent shall, if such Liquidity Facility provides for reductions of the Stated Amount of such Liquidity Facility and if such reductions are not automatic, request the Liquidity Provider for such Class of Certificates to reduce such Stated Amount to an amount equal to the Required Amount with respect to such Liquidity Facility (as calculated by the Subordination Agent after giving effect to such payment). Each such request shall be made in accordance with the provisions of the applicable Liquidity Facility. (k) Relation to Subordination Provisions. Interest Drawings under the Liquidity Facilities and withdrawals from the Cash Collateral Accounts, in each case, in respect of interest on the Certificates of any Class, will be distributed to the Trustee for such Class of Certificates, notwithstanding Sections 2.4(b), 3.2, and 3.3 hereof. ARTICLE IV EXERCISE OF REMEDIES SECTION 4.1 Directions from the Controlling Party. (a) (i) Following the occurrence and during the continuation of an Indenture Default under any Indenture, the Controlling Party shall direct the Indenture Trustee under such Indenture in the exercise of remedies available to the holders of the Equipment Notes issued pursuant to such Indenture, including, without limitation, the ability to vote all such Equipment Notes in favor of declaring all of the unpaid principal amount of such Equipment Notes and accrued interest thereon to be due and payable under, and in accordance with, the provisions of such Indenture. Subject to the Owner Trustees' and the Owner Participants' rights set forth in the Indentures to purchase the Equipment Notes, if the Equipment Notes issued pursuant to any Indenture have been Accelerated following an Indenture Default with respect thereto, the Controlling Party may, on the terms and conditions set forth in such Indenture, direct the related Trustee to sell, assign, contract to sell or otherwise dispose of and deliver all (but not less than all) of such Equipment Notes to any Person at public or private sale, at any location at the option of the Controlling Party, all upon such terms and conditions as it may reasonably deem advisable in accordance with applicable law. (ii) Subject to the Owner Trustees' and the Owner Participants' rights set forth in the Indentures to purchase the Equipment Notes, and notwithstanding the foregoing, so long as any Certificates remain Outstanding, during the period ending on the date which is nine months after the earlier of (x) the -42- 47 Acceleration of the Equipment Notes issued pursuant to any Indenture or (y) the occurrence of an America West Bankruptcy Event, without the consent of each Trustee, (A) no Aircraft subject to the Lien of such Indenture or such Equipment Notes may be sold if the net proceeds from such sale would be less than the Minimum Sale Price for such Aircraft or such Equipment Notes, and (B) the amount and payment dates of rentals payable by America West under the Lease for such Aircraft may not be adjusted if, as a result of such adjustment, the discounted present value of all such rentals would be less than 75% of the discounted present value of the rentals payable by America West under such Lease before giving effect to such adjustment, in each case, using the weighted average interest rate of the Equipment Notes then outstanding pursuant to such Indenture as the discount rate. (iii) At the request of the Controlling Party, the Subordination Agent may from time to time during the continuance of an Indenture Default (and before the occurrence of a Triggering Event) commission LTV Appraisals with respect to the related Aircraft. (iv) After a Triggering Event occurs and any Equipment Note becomes a Non-Performing Equipment Note, the Subordination Agent shall obtain LTV Appraisals for each Aircraft as soon as practicable and additional LTV Appraisals on or prior to each anniversary of the date of such initial LTV Appraisals; provided that, if the Controlling Party reasonably objects to the appraised value of the Aircraft shown in any such LTV Appraisals, the Controlling Party shall have the right to obtain or cause to be obtained substitute LTV Appraisals (including any LTV Appraisals based upon physical inspection of the Aircraft). (b) The Controlling Party shall take such actions as it may reasonably deem most effectual to complete the sale or other disposition of such Aircraft or Equipment Notes. In addition, in lieu of any sale, assignment, contract to sell or other disposition, the Subordination Agent, on behalf of the Controlling Party, may maintain possession of such Equipment Notes and continue to apply monies received in respect of such Equipment Notes in accordance with Article III hereof. In addition, in lieu of such sale, assignment, contract to sell or other disposition, or in lieu of such maintenance of possession, the Controlling Party may instruct the Indenture Trustee under such Indenture to foreclose on the Lien on the related Aircraft or to take any other remedial action permitted under such Indenture or applicable law. SECTION 4.2 Remedies Cumulative. Each and every right power and remedy given to the Trustees, the Controlling Party or -43- 48 the Subordination Agent specifically or otherwise in this Agreement shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may, subject always to the terms and conditions hereof, be exercised from time to time and as often and in such order as may be deemed expedient by any Trustee, the Controlling Party or the Subordination Agent, as appropriate, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. No delay or omission by any Trustee, the Controlling Party or the Subordination Agent in the exercise of any right, remedy or power or in the pursuit of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default or to be an acquiescence therein. SECTION 4.3 Discontinuance of Proceedings. In case any party to this Agreement (including the Controlling Party in such capacity) shall have instituted any Proceeding to enforce any right, power or remedy under this Agreement by foreclosure, entry or otherwise, and such Proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Person instituting such Proceeding, then and in every such case each such party shall, subject to any determination in such proceedings, be restored to its former position and rights hereunder, and all rights, remedies and powers of such party shall continue as if no such Proceeding had been instituted. SECTION 4.4 Right of Certificateholders and Liquidity Providers to Receive Payments Not to Be Impaired. Anything in this Agreement to the contrary notwithstanding but subject to each Trust Agreement, the right of any Certificateholder or any Liquidity Provider, respectively, to receive payments pursuant to Section 2.4, 3.2 or 3.3 hereof when due, or to institute suit for the enforcement of any such payment on or after the applicable Distribution Date, shall not be impaired or affected without the consent of such Certificateholder or such Liquidity Provider, respectively. SECTION 4.5 Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Agreement or in any suit against any Controlling Party or the Subordination Agent for any action taken or omitted by it as Controlling Party or Subordination Agent, as the case may be, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the -44- 49 court in its discretion may assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. The provisions of this Section do not apply to a suit instituted by the Subordination Agent, a Liquidity Provider or a Trustee or a suit by Certificateholders holding more than 10% of the original principal amount of any Class of Certificates. SECTION 4.6 No Action Contrary to America West's Rights Under the Lease. Notwithstanding any of the provisions of this Agreement to the contrary, each of the parties hereto agrees for the benefit of America West that it will not take any action contrary to America West's rights under any Lease, including the right of America West to possession and use and quiet enjoyment of the Aircraft subject to such Lease, except in accordance with the provisions of such Lease. ARTICLE V DUTIES OF THE SUBORDINATION AGENT; AGREEMENTS OF TRUSTEES, ETC. SECTION 5.1 Notice of Indenture Default or Triggering Event, Etc. (a) In the event the Subordination Agent shall have actual knowledge of the occurrence of an Indenture Default or a Triggering Event, as promptly as practicable, and in any event within 10 days after obtaining knowledge thereof, the Subordination Agent shall transmit by mail to the Rating Agencies, the Liquidity Providers and the Trustees notice of such Indenture Default or Triggering Event, unless such Indenture Default or Triggering Event shall have been cured or waived. For all purposes of this Agreement, in the absence of actual knowledge on the part of a Responsible Officer, the Subordination Agent shall not be deemed to have knowledge of any Indenture Default or Triggering Event unless notified in writing by one or more Trustees, one or more Liquidity Providers or one or more Certificateholders. (b) Other Notices. The Subordination Agent will furnish to each Liquidity Provider and Trustee, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and other instruments furnished to the Subordination Agent as registered holder of the Equipment Notes or otherwise in its capacity as Subordination Agent to the extent the same shall not have been required to be directly distributed to such Liquidity Provider or -45- 50 Trustee, as applicable, pursuant to the express provision of any other Operative Agreement. (c) Determinations and Notice. The Subordination Agent agrees to make the determinations and notifications required to be made by it pursuant to Section 2.02 of each Indenture. SECTION 5.2 Indemnification. The Subordination Agent shall not be required to take any action or refrain from taking any action under Section 5.1 (other than the first sentence thereof) or Article IV hereof unless the Subordination Agent shall have been indemnified (to the extent and in the manner reasonably satisfactory to the Subordination Agent) against any liability, cost or expense (including counsel fees and expenses) which may be incurred in connection therewith. The Subordination Agent shall not be under any obligation to take any action under this Agreement and nothing contained in this Agreement shall require the Subordination Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. The Subordination Agent shall not be required to take any action under Section 5.1 (other than the first sentence of subsection (a) thereof) or Article IV hereof, nor shall any other provision of this Agreement be deemed to impose a duty on the Subordination Agent to take any action, if the Subordination Agent shall have been advised by counsel that such action is contrary to the terms hereof or is otherwise contrary to law. SECTION 5.3 No Duties Except as Specified in Intercreditor Agreement. The Subordination Agent shall not have any duty or obligation to take or refrain from taking any action under, or in connection with, this Agreement, except as expressly provided by the terms of this Agreement; and no implied duties or obligations shall be read into this Agreement against the Subordination Agent. The Subordination Agent 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 Section 7.1 hereof) promptly take such action as may be necessary to discharge duly all Liens on any of the Trust Accounts or any monies deposited therein which result from claims against it in its individual capacity not related to its activities hereunder or any other Operative Agreement. SECTION 5.4 Notice from the Liquidity Providers and Trustees. If a Responsible Officer of any Liquidity Provider or -46- 51 Trustee has notice of an Indenture Default or a Triggering Event, such Liquidity Provider or Trustee, as the case may be, shall promptly give notice thereof to all other Liquidity Providers and Trustees and to the Subordination Agent, provided, however, that no such Person shall have any liability hereunder as a result of its failure to deliver any such notice. ARTICLE VI THE SUBORDINATION AGENT SECTION 6.1 Authorization; Acceptance of Trusts and Duties. Each of the Class A Trustee, Class B Trustee and Class C Trustee hereby designates and appoints the Subordination Agent as the agent and trustee of such Trustee under the applicable Liquidity Facility and authorizes the Subordination Agent to enter into the applicable Liquidity Facility as agent and trustee for such Trustee. Each of the Liquidity Providers and the Trustees hereby designates and appoints the Subordination Agent as the Subordination Agent under this Agreement. Fleet hereby accepts the duties hereby created and applicable to it as the Subordination Agent and agrees to perform the same but only upon the terms of this Agreement and agrees to receive and disburse all monies received by it in accordance with the terms hereof. The Subordination Agent shall not be answerable or accountable under any circumstances, except (a) for its own willful misconduct or gross negligence (other than for the handling of funds, for which the standard of accountability shall be negligence) and (b) for liabilities that may result from the material inaccuracy of any representation or warranty of the Subordination Agent made in its individual capacity in any Operative Agreement. The Subordination Agent shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Subordination Agent, unless it is proved that the Subordination Agent was grossly negligent in ascertaining the pertinent facts. SECTION 6.2 Absence of Duties. The Subordination Agent shall have no duty to see to any recording or filing of this Agreement or any other document, or to see to the maintenance of any such recording or filing. SECTION 6.3 No Representations or Warranties as to Documents. The Subordination Agent in its individual capacity does not make nor shall be deemed to have made any representation or warranty as to the validity, legality or enforceability of this Agreement or any other Operative Agreement or as to the -47- 52 correctness of any statement contained in any thereof, except for the representations and warranties of the Subordination Agent, made in its individual capacity, under any Operative Agreement to which it is a party. The Certificateholders, the Trustees and the Liquidity Providers make no representation or warranty hereunder whatsoever. SECTION 6.4 No Segregation of Monies; No Interest. Any monies paid to or retained by the Subordination Agent pursuant to any provision hereof and not then required to be distributed to any Trustee or any Liquidity Provider as provided in Articles II and III hereof need not be segregated in any manner except to the extent required by such Articles II and III and by law, and the Subordination Agent shall not (except as otherwise provided in Section 2.2 hereof) be liable for any interest thereon; provided, however, that any payments received or applied hereunder by the Subordination Agent shall be accounted for by the Subordination Agent so that any portion thereof paid or applied pursuant hereto shall be identifiable as to the source thereof. SECTION 6.5 Reliance; Agents; Advice of Counsel. The Subordination Agent shall not incur liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper believed by it to be genuine and believed by it to be signed by the proper party or parties. As to the Pool Balance of any Trust as of any date, the Subordination Agent may for all purposes hereof rely on a certificate signed by any Responsible Officer of the applicable Trustee, and such certificate shall constitute full protection to the Subordination Agent for any action taken or omitted to be taken by it in good faith in reliance thereon. As to any fact or matter relating to the Liquidity Providers or the Trustees the manner of ascertainment of which is not specifically described herein, the Subordination Agent may for all purposes hereof rely on a certificate, signed by any Responsible Officer of the applicable Liquidity Provider or Trustee, as the case may be, as to such fact or matter, and such certificate shall constitute full protection to the Subordination Agent for any action taken or omitted to be taken by it in good faith in reliance thereon. The Subordination Agent shall assume, and shall be fully protected in assuming, that each of the Liquidity Providers and each of the Trustees are authorized to enter into this Agreement and to take all action to be taken by them pursuant to the provisions hereof, and shall not inquire into the authorization of each of the Liquidity Providers and each of the Trustees with respect thereto. In the administration of the trusts hereunder, the Subordination Agent may execute any of the trusts or powers -48- 53 hereof and perform its powers and duties hereunder directly or through agents or attorneys and may consult with counsel, accountants and other skilled persons to be selected and retained by it, and the Subordination Agent shall not be liable for the acts or omissions of any agent appointed with due care or for anything done, suffered or omitted in good faith by it in accordance with the advice or written opinion of any such counsel, accountants or other skilled persons. SECTION 6.6 Capacity in Which Acting. The Subordination Agent acts hereunder solely as agent and trustee herein and not in its individual capacity, except as otherwise expressly provided in the Operative Agreements. SECTION 6.7 Compensation. The Subordination Agent shall be entitled to reasonable compensation, including expenses and disbursements, for all services rendered hereunder and shall have a priority claim to the extent set forth in Article III hereof on all monies collected hereunder for the payment of such compensation, to the extent that such compensation shall not be paid by others. The Subordination Agent agrees that it shall have no right against any Trustee or Liquidity Provider for any fee as compensation for its services as agent under this Agreement. The provisions of this Section 6.7 shall survive the termination of this Agreement. SECTION 6.8 May Become Certificateholder. The institution acting as Subordination Agent hereunder may become a Certificateholder and have all rights and benefits of a Certificateholder to the same extent as if it were not the institution acting as the Subordination Agent. SECTION 6.9 Subordination Agent Required; Eligibility. There shall at all times be a Subordination Agent hereunder which shall be a corporation organized and doing business under the laws of the United States of America or of any State thereof or of the District of Columbia having a combined capital and surplus of at least $100,000,000 (or the obligations of which, whether now in existence or hereafter incurred, are fully and unconditionally guaranteed by a corporation organized and doing business under the laws of the United States, any State thereof or of the District of Columbia and having a combined capital and surplus of at least $100,000,000), if there is such an institution willing and able to perform the duties of the Subordination Agent hereunder upon reasonable or customary terms. Such corporation shall be a citizen of the United States and shall be authorized under the laws of the United States or any State thereof or of the District of Columbia to exercise corporate trust powers and shall be subject to supervision or -49- 54 examination by federal, state or District of Columbia authorities. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of any of the aforesaid supervising or examining authorities, then, for the purposes of this Section 6.9, 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 Subordination Agent shall cease to be eligible in accordance with the provisions of this Section, the Subordination Agent shall resign immediately in the manner and with the effect specified in Section 8.1. SECTION 6.10 Money to Be Held in Trust. All Equipment Notes, monies and other property deposited with or held by the Subordination Agent pursuant to this Agreement shall be held in trust for the benefit of the parties entitled to such Equipment Notes, monies and other property. All such Equipment Notes, monies or other property shall be held in the trust department of the institution acting as Subordination Agent hereunder. ARTICLE VII INDEMNIFICATION AND REIMBURSEMENT OF SUBORDINATION AGENT SECTION 7.1 Scope of Indemnification and Reimbursement. The Subordination Agent shall be indemnified hereunder to the extent and in the manner described in Sections 10 and 13 of the Leases and shall be reimbursed for expenses to the extent and in the manner described in Section 21 of the Refunding Agreements. The indemnities or rights to reimbursement for expenses contained in such Sections of the Leases and the Refunding Agreements shall survive the termination of this Agreement. ARTICLE VIII SUCCESSOR SUBORDINATION AGENT SECTION 8.1 Replacement of Subordination Agent; Appointment of Successor. The Subordination Agent may resign at any time by so notifying the Trustees and the Liquidity Providers. The Liquidity Providers or the Controlling Party (or, prior to the occurrence of a Triggering Event, the Person who would be the Controlling Party if a Triggering Event had occurred) may remove the Subordination Agent for cause by so -50- 55 notifying the Subordination Agent and may appoint a successor Subordination Agent. The Controlling Party (or, prior to the occurrence of a Triggering Event, the Person who would be the Controlling Party if a Triggering Event had occurred) shall remove the Subordination Agent if: (1) the Subordination Agent fails to comply with Section 6.9 hereof; (2) the Subordination Agent is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Subordination Agent or its property; or (4) the Subordination Agent otherwise becomes incapable of acting. If the Subordination Agent resigns or is removed or if a vacancy exists in the office of Subordination Agent for any reason (the Subordination Agent in such event being referred to herein as the retiring Subordination Agent), the Controlling Party (or, prior to the occurrence of a Triggering Event, the Person who would be the Controlling Party if a Triggering Event had occurred) shall promptly appoint a successor Subordination Agent. A successor Subordination Agent shall deliver a written acceptance of its appointment as Subordination Agent hereunder to the retiring Subordination Agent, upon which the resignation or removal of the retiring Subordination Agent shall become effective, and the successor Subordination Agent shall have all the rights, powers and duties of the Subordination Agent under this Agreement. The successor Subordination Agent shall mail a notice of its succession to the Liquidity Providers and the Trustees. The retiring Subordination Agent shall promptly transfer its rights under each of the Liquidity Facilities and all of the property held by it as Subordination Agent to the successor Subordination Agent. If a successor Subordination Agent does not take office within 60 days after the retiring Subordination Agent resigns or is removed, the retiring Subordination Agent or one or more of the Trustees may petition any court of competent jurisdiction for the appointment of a successor Subordination Agent. If the Subordination Agent fails to comply with Section 6.9 hereof (to the extent applicable), one or more of the Trustees or one or more of the Liquidity Providers may petition -51- 56 any court of competent jurisdiction for the removal of the Subordination Agent and the appointment of a successor Subordination Agent. Notwithstanding the foregoing, no resignation or removal of the Subordination Agent shall be effective unless and until a successor has been appointed. No appointment of a successor Subordination Agent shall be effective unless and until the Rating Agencies shall have delivered a Ratings Confirmation. Notwithstanding the foregoing, any corporation into which the Subordination Agent 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 Subordination Agent shall be a party, or any corporation to which substantially all the corporate trust business of the Subordination Agent may be transferred (including the corporate trust business in respect of this Agreement), shall, subject to the terms of Section 6.9 hereof, be the Subordination Agent hereunder and under the other Operative Agreements to which the Subordination Agent is a party without further act, except that such Person shall give prompt subsequent notice of such transaction to the Liquidity Provider and each Trustee. The parties hereto acknowledge that Fleet intends to sell its corporate trust business (including the corporate trust business in respect of this Agreement) to State Street Bank and Trust Company or an affiliate thereof in 1997. Upon such sale, and subject to the terms of Section 6.9 hereof, such purchaser shall be the Subordination Agent hereunder and under the other Operative Agreements to which the Subordination Agent is a party without further act, except that such Purchaser shall give prompt subsequent notice of such transaction to the Liquidity Provider and each Trustee. ARTICLE IX SUPPLEMENTS AND AMENDMENTS SECTION 9.1 Amendments, Waivers, Etc. (a) This Agreement may not be supplemented, amended or modified without the consent of each Trustee (acting with the consent of holders of Certificates of the related Class evidencing interests in the related Trust aggregating not less than a majority in interest in such Trust), the Subordination Agent and each Liquidity Provider; provided, however, that this Agreement may be supplemented, amended or modified without the consent of any Trustee if such supplement or amendment cures an ambiguity or inconsistency or does not materially adversely affect such Trustee or the holders -52- 57 of the related Class of Certificates. Notwithstanding the foregoing, without the consent of each Certificateholder and each Liquidity Provider, no supplement, amendment or modification of this Agreement may (i) reduce the percentage of the interest in any Trust evidenced by the Certificates issued by such Trust necessary to consent to modify or amend any provision of this Agreement or to waive compliance therewith or (ii) modify Section 2.4, 3.2 or 3.3 hereof, relating to the distribution of monies received by the Subordination Agent hereunder from the Equipment Notes or pursuant to the Liquidity Facilities. Nothing contained in this Section shall require the consent of a Trustee at any time following the payment of Final Distributions with respect to the related Class of Certificates. (b) In the event that the Subordination Agent, as the registered holder of any Equipment Notes, receives a request for its consent to any amendment, modification or waiver under such Equipment Notes, the Indenture pursuant to which such Equipment Notes were issued, or the Lease, Refunding Agreement or other related document, (i) if no Indenture Default shall have occurred and be continuing, the Subordination Agent shall request instructions with respect to each Series of Equipment Notes from the Trustee of the Trust which holds such Equipment Notes and shall vote or consent in accordance with the instructions of such Trustee and (ii) if any Indenture Default (which has not been cured by the applicable Owner Trustee or the applicable Owner Participant pursuant to such Indenture) shall have occurred and be continuing with respect to such Indenture, the Subordination Agent will exercise its voting rights as directed by the Controlling Party; provided that no such amendment, modification or waiver shall, without the consent of each Liquidity Provider, reduce the amount of rent, supplemental rent or stipulated loss values payable by the lessee under the Lease; and provided further that no amendment of or supplement to the Indenture, the Lease, the Refunding Agreement or any other Indenture Document or waiver or modification of the terms of, or consent under, any thereof, shall without the consent of each Liquidity Provider, have any of the effects listed in the proviso to Section 9.01(b) of the Indenture. SECTION 9.2 Subordination Agent Protected. If, in the reasonable opinion of the institution acting as the Subordination Agent hereunder, any document required to be executed pursuant to the terms of Section 9.1 affects any right, duty, immunity or indemnity with respect to it under this Agreement or any Liquidity Facility, the Subordination Agent may in its discretion decline to execute such document. -53- 58 SECTION 9.3 Effect of Supplemental Agreements. Upon the execution of any amendment or supplement hereto pursuant to the provisions hereof, this Agreement shall be deemed to be and shall be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Agreement of the parties hereto and beneficiaries hereof 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 agreement shall be deemed to be and shall be part of the terms and conditions of this Agreement for any and all purposes. In executing or accepting any supplemental agreement permitted by this Article IX, the Subordination Agent shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel (as defined in the Trust Agreements) stating that the execution of such supplemental agreement is authorized or permitted by this Agreement. SECTION 9.4 Notice to Rating Agencies. Promptly following its receipt of each amendment, consent, modification, supplement or waiver contemplated by this Article IX, the Subordination Agent shall send a copy thereof to each Rating Agency. ARTICLE X MISCELLANEOUS SECTION 10.1 Termination of Intercreditor Agreement. Following payment of Final Distributions with respect to each Class of Certificates and the payment in full of all Liquidity Obligations to the Liquidity Providers and provided that there shall then be no other amounts due to the Certificateholders, the Trustees, the Liquidity Providers and the Subordination Agent hereunder or under the Trust Agreements, and that the commitment of the Liquidity Providers under the Liquidity Facilities shall have expired or been terminated, this Agreement and the trusts created hereby shall terminate and this Agreement shall be of no further force or effect. Except as aforesaid or otherwise provided, this Agreement and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. SECTION 10.2 Intercreditor Agreement for Benefit of Trustees, Liquidity Providers and Subordination Agent. Nothing in this Agreement, whether express or implied, shall be construed to give to any Person other than the Trustees, the Liquidity -54- 59 Providers and the Subordination Agent any legal or equitable right, remedy or claim under or in respect of this Agreement. SECTION 10.3 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 Agreement to be made, given, furnished or filed shall be in writing, mailed by certified mail, postage prepaid, or by confirmed telecopy and (i) if to the Subordination Agent, addressed to it at its office at: Fleet National Bank 777 Main Street Hartford, CT 06115 Attention: Corporate Trust Administration Telecopy: (860) 986-7920 (ii) if to any Trustee, addressed to it at its office at: Fleet National Bank 777 Main Street Hartford, CT 06115 Attention: Corporate Trust Administration Telecopy: (860) 986-7920 (iii) if to any Liquidity Provider, addressed to it at its office at: Kredietbank N.V. New York Branch 125 West 55th Street New York, NY 10019 Attention: General Manager Telecopy: (212) 956-5580 Whenever any notice in writing is required to be given by any Trustee or Liquidity Provider or the Subordination Agent to any of the other of them, such notice shall be deemed given and such requirement satisfied when such notice is received. 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 Agreement. SECTION 10.4 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to -55- 60 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 10.5 No Oral Modifications or Continuing Waivers. No terms or provisions of this Agreement 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 other party or other Person whose consent is required pursuant to this Agreement and any waiver of the terms hereof shall be effective only in the specific instance and for the specific purpose given. SECTION 10.6 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. SECTION 10.7 Headings. The headings of the various Articles and Sections herein and in the table of contents hereto are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. SECTION 10.8 Counterpart Form. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same agreement. SECTION 10.9 Subordination. (a) As between the Liquidity Providers, on the one hand, and the Trustees and the Certificateholders, on the other hand, this Agreement shall be a subordination agreement for purposes of Section 510 of the United States Bankruptcy Code, as amended from time to time. (b) Notwithstanding the provisions of this Agreement, if prior to the payment in full to the Liquidity Providers of all Liquidity Obligations then due and payable, any party hereto shall have received any payment or distribution in respect of Equipment Notes or any other amount under the Indentures or other Operative Agreements which, had the subordination provisions of this Agreement been properly applied to such payment, distribution or other amount, would not have been distributed to such Person, then such payment, distribution or other amount shall be received and held in trust by such Person and paid over -56- 61 or delivered to the Subordination Agent for application as provided herein. (c) If any Trustee, any Liquidity Provider or the Subordination Agent receives any payment in respect of any obligations owing hereunder (or, in the case of the Liquidity Providers, in respect of the Liquidity Obligations), which is subsequently invalidated, declared preferential, set aside and/or required to be repaid to a trustee, receiver or other party, then, to the extent of such payment, such obligations (or, in the case of the Liquidity Providers, such Liquidity Obligations) intended to be satisfied shall be revived and continue in full force and effect as if such payment had not been received. (d) The Trustees (on behalf of themselves and the holders of Certificates), the Liquidity Providers and the Subordination Agent confirm that the payment priorities specified in Sections 2.4, 3.2 and 3.3 shall apply in all circumstances (including to the payment of any sum which would have accrued but for the commencement of any applicable insolvency proceeding), notwithstanding the fact that the obligations owed to the Trustees and the holders of Certificates are secured by certain assets and the Liquidity Obligations are not so secured. The Trustees expressly agree (on behalf of themselves and the holders of Certificates) not to assert priority over the holders of Liquidity Obligations due to their status as secured creditors in any bankruptcy, insolvency or other legal proceeding. (e) Each of the Trustees (on behalf of themselves and the holders of Certificates), the Liquidity Providers and the Subordination Agent may take any of the following actions without impairing its rights under this Agreement: (i) obtain a lien on any property to secure any amounts owing to it hereunder, including, in the case of the Liquidity Providers, any of the Liquidity Obligations, (ii) obtain the primary or secondary obligation of any other obligor with respect to any amounts owing to it hereunder, including, in the case of the Liquidity Providers, any of the Liquidity Obligations, (iii) renew, extend, increase, alter or exchange any amounts owing to it hereunder, including, in the case of the Liquidity Providers, any of the Liquidity Obligations, or release or compromise any obligation of any obligor with respect thereto, -57- 62 (iv) refrain from exercising any right or remedy, or delay in exercising such right or remedy, which it may have, or (v) take any other action which might discharge a subordinated party or a surety under applicable law. SECTION 10.10 GOVERNING LAW. THIS AGREEMENT 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. -58- 63 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written, and acknowledge that this Agreement has been made and delivered in the City of New York, and this Agreement has become effective only upon such execution and delivery. FLEET NATIONAL BANK, not in its individual capacity but solely as Trustee for each of the Trusts By ----------------------------------- Name: Title: KREDIETBANK N.V., NEW YORK BRANCH, as Class A Liquidity Provider, Class B Liquidity Provider and Class C Liquidity Provider By ----------------------------------- Name: Title: By ----------------------------------- Name: Title: FLEET NATIONAL BANK, not in its individual capacity except as expressly set forth herein but solely as Subordination Agent and Trustee By ----------------------------------- Name: Title: -59- 64 SCHEDULE 1 TO INTERCREDITOR AGREEMENT Indentures Amended and Restated Trust Indenture and Security Agreement [GPA 1989 BN-7] dated as of June __, 1997 between Wilmington Trust Company, not in its individual capacity except as expressly provided therein but solely as Owner Trustee and The Chase Manhattan Bank, not in its individual capacity except as expressly provided therein but solely as Indenture Trustee Amended and Restated Trust Indenture and Security Agreement [GPA 1989 BN-8] dated as of June __, 1997 between Wilmington Trust Company, not in its individual capacity except as expressly provided therein but solely as Owner Trustee and The Chase Manhattan Bank, not in its individual capacity except as expressly provided therein but solely as Indenture Trustee Amended and Restated Trust Indenture and Security Agreement [GPA 1989 BN-9] dated as of June __, 1997 between Wilmington Trust Company, not in its individual capacity except as expressly provided therein but solely as Owner Trustee and The Chase Manhattan Bank, not in its individual capacity except as expressly provided therein but solely as Indenture Trustee Amended and Restated Trust Indenture and Security Agreement [GPA 1989 BN-11] dated as of June __, 1997 between Wilmington Trust Company, not in its individual capacity except as expressly provided therein but solely as Owner Trustee and The Chase Manhattan Bank, not in its individual capacity except as expressly provided therein but solely as Indenture Trustee 65 SCHEDULE 2 TO INTERCREDITOR AGREEMENT Refunding Agreements Refunding Agreement [GPA 1989 BN-7] dated as of June __, 1997 among America West Airlines, Inc., as Lessee, GPA Leasing USA Sub I, Inc., as Original Head Lessee, GPA Group plc, as Parent Guarantor, Wilmington Trust Company, not in its individual capacity except as expressly provided therein but solely as Owner Trustee, Fleet National Bank, not in its individual capacity except as expressly provided therein but solely as Pass Through Trustee under each of the Pass Through Trust Agreements, DFO Partnership, as Owner Participant, Fleet National Bank, as Subordination Agent, and The Chase Manhattan Bank, not in its individual capacity except as expressly provided therein but solely as Indenture Trustee Refunding Agreement [GPA 1989 BN-8] dated as of June __, 1997 among America West Airlines, Inc., as Lessee, GPA Leasing USA Sub I, Inc., as Original Head Lessee, GPA Group plc, as Parent Guarantor, Wilmington Trust Company, not in its individual capacity except as expressly provided therein but solely as Owner Trustee, Fleet National Bank, not in its individual capacity except as expressly provided therein but solely as Pass Through Trustee under each of the Pass Through Trust Agreements, DFO Partnership, as Owner Participant, Fleet National Bank, as Subordination Agent, and The Chase Manhattan Bank, not in its individual capacity except as expressly provided therein but solely as Indenture Trustee Refunding Agreement [GPA 1989 BN-9] dated as of June __, 1997 among America West Airlines, Inc., as Lessee, GPA Leasing USA Sub I, Inc., as Original Head Lessee, GPA Group plc, as Parent Guarantor, Wilmington Trust Company, not in its individual capacity except as expressly provided therein but solely as Owner Trustee, Fleet National Bank, not in its individual capacity except as expressly provided therein but solely as Pass Through Trustee under each of the Pass Through Trust Agreements, DFO Partnership, as Owner Participant, Fleet National Bank, as Subordination Agent, and The Chase Manhattan Bank, not in its individual capacity except as expressly provided therein but solely as Indenture Trustee Refunding Agreement [GPA 1989 BN-11] dated as of June __, 1997 among America West Airlines, Inc., as Lessee, GPA Leasing USA Sub I, Inc., as Original Head Lessee, GPA Group plc, as Parent Guarantor, Wilmington Trust Company, not in its individual capacity except as expressly provided therein but solely as Owner Trustee, Fleet National Bank, not in its individual capacity except as expressly provided therein but solely as Pass Through 66 Trustee under each of the Pass Through Trust Agreements, DFO Partnership, as Owner Participant, Fleet National Bank, as Subordination Agent, and The Chase Manhattan Bank, not in its individual capacity except as expressly provided therein but solely as Indenture Trustee -2- EX-4.14 12 REFUNDING AGREEMENT - GPA 1989 BN-8 1 Exhibit 4.14 - -------------------------------------------------------------------------------- REFUNDING AGREEMENT [GPA 1989 BN-8] Dated as of June ___, 1997 among AMERICA WEST AIRLINES, INC., as Lessee GPA LEASING USA SUB I, INC., as Original Head Lessee GPA GROUP plc, as Parent Guarantor WILMINGTON TRUST COMPANY, not in its individual capacity except as expressly provided herein but solely as Owner Trustee FLEET NATIONAL BANK, not in its individual capacity except as expressly provided herein but solely as Pass Through Trustee under each of the Pass Through Trust Agreements [_______________], as Owner Participant FLEET NATIONAL BANK, as Subordination Agent and THE CHASE MANHATTAN BANK, not in its individual capacity except as expressly provided herein but solely as Indenture Trustee - -------------------------------------------------------------------------------- Secured Equipment Notes Covering One Airbus A320-231 Aircraft Manufacturer's Serial No. 66 Registration No. N627AW Leased by America West Airlines, Inc. - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
PAGE ---- SECTION 1. Purchase of Equipment Notes; Refunding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 2. Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 3. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 SECTION 4. Certain Conditions Precedent to the Obligations of the Original Head Lessee and the Parent Guarantor; Certain Conditions Precedent to the Obligations of the Lessee; Conditions Precedent with Respect to the Pass Through Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 SECTION 5. Amendment and Restatement of the Original Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 6. Amendment and Restatement of the Original Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 7. Termination of the Participation Agreement; Termination of Sublease, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 8. Representations and Warranties of the Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 9. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 10. Transfer of Owner Participant's Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 SECTION 11. Re-Registration of the Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 SECTION 12. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 13. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 14. Certain Additional Provisions Relating to Original Head Lessee, Parent Guarantor, Trust Company, Owner Trustee and Owner Participant . . . . . . . . . . . . . . . . . . . . . . . . . . 49 SECTION 15. Certain Retained Rights and Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 SECTION 16. Certain Additional Obligations of the Lessee, the Owner Trustee, the Owner Participant and the Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 17. Lessee Protection of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 18. Jurisdictional and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 19. Limitation on Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 20. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
- i - 3
PAGE ---- SECTION 21. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 22. Reliance of Liquidity Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 23. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 SECTION 24. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 25. Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Schedules Schedule I Pass Through Trust Agreements Schedule II Equipment Notes, Pass Through Trusts and Purchase Price Schedule III Holders of Equipment Notes - Payment Instructions Exhibits Exhibit A Form of Transferee's Parent Guarantee Exhibit B Form of Assignment and Assumption Agreement Exhibit C List of Countries Exhibit D Form of Insurance Broker's Report Annex Annex A FAA Documents - ii - 4 REFUNDING AGREEMENT [GPA 1989 BN-8] REFUNDING AGREEMENT [GPA 1989 BN-8] (this "Agreement"), dated as of June ___, 1997, among (i) AMERICA WEST AIRLINES, INC., a Delaware corporation (the "Lessee"), (ii) GPA LEASING USA SUB I, INC., a Connecticut corporation (the "Original Head Lessee"), (iii) GPA GROUP plc, an Irish public limited company (the "Parent Guarantor"), (iv) [___________], (the "Owner Participant"), (v) WILMINGTON TRUST COMPANY, a Delaware banking corporation (the "Trust Company"), not in its individual capacity except as otherwise expressly provided herein, but solely as owner trustee (the "Owner Trustee") under the Trust Agreement (as defined below), (vi) FLEET NATIONAL BANK, a national banking association, not in its individual capacity except as otherwise expressly provided herein, but solely as pass through trustee (in such capacity, the "Pass Through Trustee") under each of the four separate Pass Through Trust Agreements (as defined below), (vii) FLEET NATIONAL BANK, not in its individual capacity, but solely as subordination agent and trustee (in such capacity, the "Subordination Agent") under the Intercreditor Agreement (as defined below), and (viii) THE CHASE MANHATTAN BANK (formerly known as Chemical Bank, successor by merger to Manufacturers Hanover Trust Company), a New York corporation, not in its individual capacity except as otherwise expressly provided herein, but solely as Indenture Trustee (the "Indenture Trustee") under the Indenture (as defined below). Except as otherwise defined in this Agreement, the terms used herein in capitalized form shall have the meanings attributed thereto in the Indenture (whether set forth therein or by reference to another document) as if the Restatement Date had occurred. W I T N E S S E T H: WHEREAS, the Original Head Lessee, Air Tara Hong Kong, Limited, a Cayman Islands corporation ("AT Offshore"), the Parent Guarantor, the Owner Participant, Manufacturers Hanover Trust Company and The Mitsubishi Trust and Banking Corporation Grand Cayman Branch, as Lenders (the "Lenders"), the Owner Trustee and the Indenture Trustee are parties to the Participation Agreement [GPA 1989 BN-8], dated as of December 19, 1989 (the "Participation Agreement"), providing for the financing of one Airbus A320-231 aircraft (the "Aircraft"); WHEREAS, concurrently with the execution and delivery of the Participation Agreement, (i) AT Offshore and The Shamrock II Leasing Limited Partnership (the "Foreign Lessor") entered into the Aircraft Hire Purchase Agreement dated as of December 19, 1989 (as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof and of the Operative Documents, the "Hire Purchase Agreement") whereby, subject to the terms and conditions set forth therein, AT Offshore agreed to hire to Foreign Lessor, and Foreign Lessor 5 agreed to hire from AT Offshore, the Aircraft, (ii) Foreign Lessor and GPA HK-320-B, Limited ("GPA Offshore") entered into the Aircraft Lease Agreement, dated the date thereof (as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof and of the Operative Documents, the "Foreign Lease Agreement") whereby, subject to the terms and conditions set forth therein, Foreign Lessor agreed to lease to GPA Offshore, and GPA Offshore agreed to lease from Foreign Lessor, the Aircraft, (iii) GPA Offshore assigned to Owner Trustee all of its rights (but none of its obligations (other than in respect of certain sales agency arrangements referred to therein)) under the Foreign Lease Agreement, (iv) Foreign Lessor under a Consent dated as of 19 December 1989 (by virtue of the General Assumption Agreement and the Payment Assumption Agreement) released and discharged GPA Offshore from all of its obligations, agreements and liabilities under the Foreign Lease Agreement (excluding the sales agency obligations referred to therein) and agreed to look solely to GPAG Caymans, Limited ("GPAG Caymans"), a subsidiary of the Parent Guarantor, and certain other Persons for the payment, performance and satisfaction of all such obligations, agreements and liabilities (other than the sales agency obligations referred to in the Foreign Lease Agreement) and further waived, released and discharged for itself and its successors and assigns any and all rights to hold the Owner Trustee or its successors and assigns liable for any of the obligations, agreements or liabilities of GPA Offshore under the Foreign Lease Agreement (other than in relation to the sales agency obligations referred to therein), (v) the Parent Guarantor (A) arranged for the assumption by one or more financial institutions of all monetary obligations of GPA Offshore under the Foreign Lease Agreement (other than certain indemnity obligations as to which Foreign Lessor agreed to limit its recourse to claims against GPAG Caymans) and (B) obtained the confirmation from the Foreign Lessor under a Deed of Consent dated December 20, 1994 that upon the termination of the Hire Purchase Agreement and/or the Foreign Lease Agreement that the Foreign Lessor would have no right to retain or assert any interest in the Aircraft, (vi) AT Offshore assigned all of its rights (but none of its obligations) under the Hire Purchase Agreement to the Owner Trustee and (vii) the Owner Trustee assigned to the Indenture Trustee all of its right, title and interest in and to the Foreign Financing Documents to secure the Secured Obligations referred to in the Indenture, all on and subject to the terms and conditions thereof; WHEREAS, concurrently with the execution and delivery of the Participation Agreement, the Owner Trustee and the Indenture Trustee entered into the Trust Indenture and Security Agreement [GPA 1989 BN-8], dated as of December 19, 1989, as supplemented by Trust Indenture Supplement No. 1, dated December 29, 1989 (as so supplemented or otherwise modified to the date hereof, the "Original Indenture"), pursuant to which the Owner Trustee issued loan certificates substantially in the form set forth in Section 2.02 thereof (the "Original Certificates") to - 2 - 6 the Lenders as evidence of the indebtedness then being made by the Owner Trustee to finance a portion of the purchase price of the Aircraft; WHEREAS, concurrently with the execution and delivery of the Participation Agreement, the Owner Trustee and the Original Head Lessee entered into the Aircraft Lease Agreement [GPA 1989 BN-8], dated as of December 19, 1989, as supplemented by Lease Supplement [GPA 1989 BN-8] No. 1 dated December 29, 1989 and as further supplemented by Lease Supplement [GPA 1989 BN-8] No. 2 dated December 29, 1994 (as so supplemented, the "Original Lease"), whereby, subject to the terms and conditions set forth therein, the Owner Trustee agreed to lease to the Original Head Lessee, and the Original Head Lessee agreed to lease from the Owner Trustee, the Aircraft commencing on the Delivery Date (as therein defined); WHEREAS, concurrently with the execution and delivery of the Participation Agreement, the Parent Guarantor entered into the Parent Head Lease Guaranty [GPA 1989 BN-8] dated as of December 19, 1989 (the "Parent Head Lease Guaranty") for the benefit of the Owner Trustee pursuant to which the Parent Guarantor guaranteed all of the obligations of the Original Head Lessee under the Operative Documents (as defined in the Participation Agreement); WHEREAS, the Owner Participant and the Trust Company are parties to the Trust Agreement [GPA 1989 BN- 8], dated as of December 19, 1989, as supplemented by Trust Agreement Supplement [GPA 1989 BN-8] No. 1 dated December 29, 1989 (as amended, supplemented or otherwise modified to the date hereof, the "Original Trust Agreement"), pursuant to which the Owner Trustee agreed, among other things, to hold the Trust Estate defined in Section 1.1 thereof for the benefit of the Owner Participant thereunder; WHEREAS, the Owner Participant and the Original Head Lessee are parties to the Head Lease Tax Indemnification Agreement [GPA 1989 BN-8], dated as of December 19, 1989 (as amended, supplemented or otherwise modified to the date hereof, the "Head Lease TIA"); WHEREAS, concurrently with the execution and delivery of the Participation Agreement, the Original Head Lessee in its capacity as sublessor (in such capacity, the "Sublessor") and America West Airlines, Inc. in its capacity as sublessee (in such capacity, the "Sublessee") entered into the Aircraft Sublease Agreement [GPA 1989 BN-8] dated as of September 21, 1990, as supplemented by Sublease Supplement No. 1 dated September 28, 1990 and as amended by Amendment No. 1 to Aircraft Sublease Agreement [GPA 1989 BN-8] dated as of June 25, 1991, and as further amended by Amendment No. 2 to Aircraft Sublease Agreement [GPA 1989 BN-8] dated as of August 26, 1991 (as amended, supplemented or otherwise modified to the date hereof, the - 3 - 7 "Sublease"), whereby, subject to the terms and conditions set forth therein, the Sublessor agreed to sublease to the Sublessee, and the Sublessee agreed to sublease from the Sublessor, the Aircraft commencing on the Delivery Date (as defined therein); WHEREAS, concurrently with the execution and delivery of the Sublease, the Parent Guarantor entered into the GPAG Sublease Guaranty dated as of September 21, 1990 (as amended, modified or otherwise supplemented to the date hereof, the "Sublease Guaranty") for the benefit of the Sublessee pursuant to which the Parent Guarantor guaranteed the obligations of the Original Head Lessee under Section 21(f) of the Sublease; WHEREAS, concurrently with the execution and delivery of the Sublease, the Original Head Lessee and the Sublessee entered into the Sublease Tax Indemnification Agreement [GPA 1989 BN-8], dated as of September 21, 1990 (as amended, modified or otherwise supplemented to the date hereof, the "Sublease TIA"); WHEREAS, concurrently with the execution and delivery of the Sublease, the Sublessor and the Owner Trustee entered into the Assignment of Sublease [GPA 1989 BN-8] dated as of September 21, 1990 (as amended, modified or otherwise supplemented to the date hereof, the "Assignment of Sublease"); WHEREAS, at the Closing (as defined below), the Owner Trustee and the Indenture Trustee will amend and restate the Original Indenture as the First Amended and Restated Trust Indenture and Security Agreement [GPA 1989 BN-8], dated as of the Restatement Date (the "First Amended and Restated Indenture" and, the First Amended and Restated Indenture as so amended and restated, the "Indenture"), under which Indenture the Owner Trustee will issue secured equipment notes substantially in the form set forth in Section 2.01 thereof (the "Equipment Notes") in four series, the proceeds from the issuance and sale of which will be applied in part to the prepayment in full of the Original Certificates; WHEREAS, at the Closing, the Owner Trustee, the Original Head Lessee, the Sublessee and the Indenture Trustee will enter into Assignment and Amendment No. 1 and Sublease Termination Agreement dated as of the Restatement Date ("Lease Amendment No. 1") containing assignments, modifications and terminations necessary to give effect to the transactions described herein and providing, inter alia, for the amendment and restatement in its entirety of the Original Lease as the Amended and Restated Lease (as so amended and restated, the "Lease"); WHEREAS, at the Closing, the Owner Participant and the Owner Trustee will enter into Trust Agreement Supplement [GPA 1989 BN-8] No. 2 ("Trust Supplement No. 2"), amending the Original Trust Agreement (as so amended and as further amended, supplemented or otherwise modified from time to time in - 4 - 8 accordance with the terms thereof and hereof, the "Trust Agreement"); WHEREAS, at the Closing, the Owner Participant and the Original Head Lessee will enter into the Amended and Restated Head Lease Tax Indemnification Agreement, amending and restating the Head Lease TIA (as so amended and restated, the "Amended and Restated Head Lease TIA") and the Sublessor and the Sublessee will enter into the Amended and Restated Sublease Tax Indemnification Agreement, amending and restating the Sublease TIA (as so amended and restated, the "Amended and Restated Sublease TIA"); WHEREAS, pursuant to the Pass Through Trust Agreement and each of the Pass Through Trust Supplements set forth in Schedule I hereto (collectively, the "Pass Through Trust Agreements"), on the Restatement Date, four separate grantor trusts (collectively, the "Pass Through Trusts" and, individually, a "Pass Through Trust") will be created to facilitate certain of the transactions contemplated hereby, including, without limitation, the issuance and sale by each Pass Through Trust of pass through certificates pursuant thereto (collectively, the "Certificates"); WHEREAS, the proceeds from the issuance and sale of the Certificates by each Pass Through Trust will be applied by the Pass Through Trustee at the Closing to purchase from the Owner Trustee, on behalf of each Pass Through Trust, all of the Equipment Notes bearing the same interest rate as the Certificates issued by such Pass Through Trust; WHEREAS, at the Closing, (i) Kredietbank N.V., New York Branch (the "Liquidity Provider") will enter into three revolving credit agreements (each, a "Liquidity Facility"), for the benefit of the Holders of Equipment Notes of each of three Pass Through Trusts, with the Subordination Agent, as agent for the Pass Through Trustee on behalf of each such Pass Through Trust; and (ii) the Pass Through Trustee, the Liquidity Provider and the Subordination Agent will enter into the Intercreditor Agreement, dated as of the Restatement Date (the "Intercreditor Agreement"); and WHEREAS, the Equipment Notes will be held by the Subordination Agent pursuant to the Intercreditor Agreement on behalf of the Pass Through Trusts; NOW, THEREFORE, in consideration of the foregoing premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Purchase of Equipment Notes; Refunding. (a) Subject to the satisfaction or waiver of the conditions - 5 - 9 set forth herein, on June ___, 1997 or on such other date agreed to by the parties hereto (the "Restatement Date"), the following actions shall take place simultaneously: (i) (A) the Sublessee shall pay to the Sublessor as a payment of Supplemental Rent under the Sublease all accrued and unpaid Rent under the Sublease up to the Restatement Date, if any (less any amounts for which Sublessee is indemnified by Sublessor) and (B) the Original Head Lessee shall pay to the Owner Trustee, as a payment of Supplemental Rent under the Original Lease, an amount equal to the accrued and unpaid interest on the Original Certificates up to but not including the Restatement Date plus an amount (the "Prepayment Amount") equal to all other amounts due to the holders of the Original Certificates under the Original Indenture and the other Operative Documents (as defined in the Original Indenture) payable on the Restatement Date under Section 2.13 of the Original Indenture; (ii) the Pass Through Trustee for each Pass Through Trust shall pay to the Owner Trustee the aggregate purchase price of the Equipment Notes being issued to such Pass Through Trustee as set forth in clause (xii) below; (iii) the Owner Trustee (to the extent of proceeds received under clauses (i) and (ii)) shall pay to the Indenture Trustee for the benefit of the holders of the Original Certificates an amount equal to the aggregate principal amount of the Original Certificates outstanding on the Restatement Date, together with accrued and unpaid interest on the Original Certificates up to but not including the Restatement Date plus the Prepayment Amount; (iv) the Indenture Trustee shall disburse to the holders of the Original Certificates the amounts of principal, interest, and all other amounts, if any, described in clause (iii) above, owing to them on the Restatement Date with respect to the Original Certificates as a prepayment of the Original Certificates; (v) the Indenture Trustee shall receive the Original Certificates for cancellation; (vi) the Owner Trustee and the Indenture Trustee shall enter into the Indenture (including Trust Indenture Supplement No. 2); - 6 - 10 (vii) the Original Head Lessee, the Sublessee, the Owner Trustee and the Indenture Trustee shall enter into Lease Amendment No. 1; (viii) the Owner Participant and the Trust Company shall enter into Trust Supplement No. 2; (ix) the Original Head Lessee and the Owner Participant shall enter into the Amended and Restated Head Lease TIA and the Sublessor and the Sublessee shall enter into the Amended and Restated Sublease TIA; (x) the Original Head Lessee, GPA Leasing USA I, Inc., the Parent Guarantor and the Lessee shall enter into an agreement in form and substance reasonably satisfactory to each, inter alia, confirming the termination of certain rights which the Parent Guarantor has to "put" aircraft to the Lessee and the obligation of the Lessee to accept and lease such aircraft (the "Put Termination Agreement"); (xi) the Parent Guarantor and/or one or more of its affiliates and the Lessee will enter into an agreement (the "Deed of Indemnity") pursuant to which the Parent Guarantor and/or one or more of its affiliates, on the one hand, and the Lessee, on the other, will indemnify each other with respect to certain information included in the Prospectus and the Registration Statement (as such terms are defined in the Underwriting Agreement) (the "Prospectus" and the "Registration Statement", respectively); and (xii) the Owner Trustee shall issue, pursuant to Article II of the Indenture, to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, Equipment Notes of the maturity and aggregate principal amount, bearing the interest rate and for the purchase price set forth on Schedule II hereto opposite the name of such Pass Through Trust. (b) The Owner Participant, by its execution and delivery hereof, requests and directs the Owner Trustee to execute and deliver this Agreement and, subject to the terms hereof, to take the actions contemplated herein. (c) The closing (the "Closing") of the transactions described in this Agreement shall take place at the offices of Milbank, Tweed, Hadley & McCloy, 1 Chase Manhattan Plaza, New York, New York 10005, on the Restatement Date, or at such other place as the parties hereto may agree. (d) All payments pursuant to this Section 1 shall be made in immediately available funds to such accounts and at such - 7 - 11 banks as the parties hereto shall designate in writing not less than one Business Day prior to the Restatement Date. (e) In order to facilitate the transactions contemplated hereby, the Original Head Lessee, the Parent Guarantor and the Lessee have entered into the Underwriting Agreement, dated as of the date hereof (the "Underwriting Agreement"), among such Persons and Morgan Stanley & Co. Incorporated (the "Underwriter"), and, subject to the terms and conditions hereof, the Lessee will enter into each of the Pass Through Trust Agreements. SECTION 2. Equipment Notes. The Equipment Notes shall be payable as to principal in accordance with the terms of the Indenture, and the Equipment Notes shall provide for a fixed rate of interest per annum and shall contain the terms and provisions provided for the Equipment Notes in the Indenture. The Owner Trustee shall execute, and the Indenture Trustee shall authenticate and deliver to the Pass Through Trustee for each Pass Through Trust, a principal amount of Equipment Notes bearing the interest rate set forth opposite the name of such Pass Through Trust on Schedule II hereto, which Equipment Notes in the aggregate shall be in the principal amounts set forth on Schedule II hereto. Subject to the terms hereof, of the Pass Through Trust Agreements and of the other Operative Documents, all such Equipment Notes shall be dated and authenticated as of the Restatement Date and shall bear interest therefrom, shall be registered in such names as shall be specified by the Subordination Agent and shall be paid in the manner and at such places as are set forth in the Indenture. SECTION 3. Conditions Precedent. The obligations of the Pass Through Trustee to make the payments described in Section 1(a)(ii) and the obligations of the Owner Trustee to make the payments described in Section 1(a)(iii) and the obligations of each of the Pass Through Trustee, the Owner Trustee, the Owner Participant and the Indenture Trustee to participate in the transactions contemplated by this Agreement on the Restatement Date are subject to the fulfillment, prior to or on the Restatement Date, of the following conditions precedent (except that paragraphs (a), (f) and (j) shall not be conditions precedent to the obligations of the Owner Trustee hereunder, paragraphs (g) and (l) shall not be conditions precedent to the obligations of the Owner Participant hereunder and paragraphs (e) and (k) shall not be conditions precedent to the obligations of the Indenture Trustee hereunder): (a) The Owner Trustee shall have tendered the Equipment Notes to the Indenture Trustee for authentication, and the Indenture Trustee shall have authenticated such Equipment Notes and shall have tendered the Equipment Notes to the Subordination Agent on behalf of the Pass Through Trustee in accordance with Section 1. - 8 - 12 (b) The Pass Through Trustee, the Owner Trustee, the Indenture Trustee and the Owner Participant each shall have received executed counterparts of each of the following documents: (1) this Agreement; (2) Lease Amendment No. 1, the Amended and Restated Lease and Lease Supplement No. 3; (3) Trust Supplement No. 2; (4) the First Amended and Restated Indenture and Trust Indenture Supplement No. 2; (5) each of the Pass Through Trust Agreements and each Pass Through Trust Supplement set forth in Schedule I hereto; (6) the Intercreditor Agreement; (7) the Liquidity Facility for each of the Class A, Class B and Class C Trusts (as defined in the Intercreditor Agreement); and (8) the Termination and Release [GPA 1989 BN-8] dated as of the Restatement Date among [__________], the Lessee, the Original Head Lessee, the Parent Guarantor, the Owner Participant, the Owner Trustee and the Indenture Trustee. (c) The Pass Through Trustee, the Indenture Trustee, the Owner Trustee and the Owner Participant each shall have received the following: (1) an incumbency certificate of each of the Original Head Lessee, the Lessee and the Parent Guarantor as to the person or persons authorized to execute and deliver this Agreement and each of the other documents to be executed on behalf of such Person in connection with the transactions contemplated hereby (including, without limitation, each of the documents referred to herein) and as to the signatures of such person or persons; (2) a copy of the resolutions of the board of directors of each of the Original Head Lessee, the Lessee and the Parent Guarantor or the applicable committee thereof, certified by the Secretary or an Assistant Secretary of such Person, duly authorizing the transactions contemplated hereby and the execution, delivery and performance of each of the documents required to be executed and delivered on behalf of such - 9 - 13 Person in connection with the transactions contemplated hereby; (3) a copy of the certificate of incorporation of each of the Original Head Lessee and the Lessee, certified by the Secretary of State of its state of incorporation, a copy of the by-laws of each of the Original Head Lessee and the Lessee, certified by the Secretary or an Assistant Secretary of such Person, and a certificate or other evidence from the Secretary of State of its state of incorporation, dated as of a date reasonably near the Restatement Date, as to its due incorporation and good standing in such state; and (4) a copy of the Memorandum and Articles of Association of the Parent Guarantor certified to be true and correct by the Secretary or an Assistant Secretary of the Parent Guarantor. (d) The Pass Through Trustee, the Indenture Trustee, the Owner Trustee and the Owner Participant each shall have received, in the case of (1), (5) and (6) below, a certificate signed by an authorized officer of the Lessee and, in the case of (2), (3) and (4) below, a certificate signed by an authorized officer of the Original Head Lessee, dated the Restatement Date, certifying that: (1) the Aircraft has been duly certified by the FAA as to type and airworthiness and has a current, valid certificate of airworthiness; (2) the Second Aircraft FAA Bill of Sale (as defined in the Participation Agreement), the Original Lease and the Original Indenture have each been duly recorded, and the Original Trust Agreement has been duly filed, with the FAA pursuant to the sections of Title 49 of the United States Code relating to aviation (the "Federal Aviation Act"); (3) Lease Amendment No. 1, the Amended and Restated Lease, Lease Supplement No. 3, the First Amended and Restated Indenture, Trust Indenture Supplement No. 2 and Trust Supplement No. 2 covering the Aircraft shall have been duly filed for recordation with the FAA pursuant to the Federal Aviation Act; (4) the Aircraft has been registered with the FAA in the name of the Owner Trustee; (5) the Lessee has authority to operate the Aircraft; and (6) the representations and warranties contained herein of the Lessee are correct as of the Restatement - 10 - 14 Date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were correct on and as of such earlier date). (e) The Pass Through Trustee, the Owner Trustee and the Owner Participant each shall have received the following: (1) an incumbency certificate of the Indenture Trustee as to the person or persons authorized to execute and deliver this Agreement and each of the other documents to be executed on behalf of the Indenture Trustee in connection with the transactions contemplated hereby (including, without limitation, each of the documents referred to herein) and as to the signatures of such person or persons; (2) a copy of the resolutions of the board of directors of the Indenture Trustee, certified by the Secretary or an Assistant Secretary of the Indenture Trustee, duly authorizing the transactions contemplated hereby and the execution, delivery and performance of each of the documents required to be executed and delivered on behalf of the Indenture Trustee in connection with the transactions contemplated hereby; (3) a copy of the organization certificate and by-laws of the Indenture Trustee, each certified by the Secretary or an Assistant Secretary of the Indenture Trustee; and (4) a certificate signed by an authorized officer of the Indenture Trustee, dated the Restatement Date, certifying that the representations and warranties contained herein of the Indenture Trustee are correct as though made on and as of the Restatement 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). (f) The Pass Through Trustee, the Indenture Trustee and the Owner Participant each shall have received the following: (1) an incumbency certificate of the Owner Trustee as to the person or persons authorized to execute and deliver this Agreement and each of the other documents to be executed on behalf of the Owner Trustee in connection with the transactions contemplated hereby (including, without limitation, each of the documents referred to herein) and as to the signatures of such person or persons; - 11 - 15 (2) a copy of the resolutions of the board of directors of the Owner Trustee, certified by the Secretary or an Assistant Secretary of the Owner Trustee, duly authorizing the transactions contemplated hereby and the execution, delivery and performance of each of the documents required to be executed and delivered on behalf of the Owner Trustee in connection with the transactions contemplated hereby; (3) a copy of the articles of association and by-laws of the Owner Trustee, each certified by the Secretary or an Assistant Secretary of the Owner Trustee; and (4) a certificate signed by an authorized officer of the Owner Trustee, dated the Restatement Date, certifying that the representations and warranties contained herein of the Owner Trustee are correct as though made on and as of the Restatement 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). (g) The Pass Through Trustee, the Indenture Trustee and the Owner Trustee each shall have received the following: (1) a secretary's certificate of Security Pacific Leasing Corporation, the managing partner of the Owner Participant (the "Managing Partner"), as to (i) the Certificate of Incorporation and By-laws of the Managing Partner, (ii) the General Operating Resolution of the Managing Partner and (iii) the incumbency and signatures of persons authorized pursuant to such General Operating Resolution to execute and deliver this Agreement and each of the other documents to be executed by the Managing Partner on behalf of the Owner Participant in connection with the transactions contemplated hereby (including, without limitation, each of the documents referred to herein); (2) a copy of the resolutions of the board of directors of the Managing Partner, certified by the Secretary or an Assistant Secretary of the Managing Partner, duly authorizing the Managing Partner to perform the rights and duties of the managing partner of the Owner Participant under the Partnership Agreement (as herein defined); (3) a certificate of an officer of the Managing Partner certifying as to excerpts from the partnership agreement between the partners of the Owner Participant, as amended to the Restatement Date, and as in full force and effect as of the Restatement Date - 12 - 16 (which a complete version thereof shall be the "Partnership Agreement"); (4) a certificate signed by an authorized representative of the Owner Participant, dated the Restatement Date, certifying that the representations and warranties contained herein of the Owner Participant are correct as though made on and as of the Restatement 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 (5) resolutions of the partners of the Owner Participant or other satisfactory evidence evidencing the consent or approval by each of the partners thereof of the execution and delivery of this Agreement and the agreements referred to herein to which the Owner Participant is a party and the performance by the Owner Participant of such agreements and the transactions contemplated thereby. (h) The Pass Through Trustee, the Indenture Trustee, the Owner Trustee and the Owner Participant each shall have received from the Lessee a report from Willis Corroon in substantially the form of Exhibit D attached hereto. (i) The Pass Through Trustee, the Indenture Trustee, the Owner Trustee and the Owner Participant each shall have received an opinion addressed to it from (i) Latham & Watkins, special counsel for the Lessee, (ii) Andrews & Kurth L.L.P., special counsel for the Lessee, (iii) the Senior Vice President - Legal Affairs of the Lessee and (iv) Lewis & Roca, special Arizona counsel for the Lessee, in each case in form and substance satisfactory to each of them. (j) The Pass Through Trustee, the Indenture Trustee and the Owner Participant each shall have received an opinion addressed to it from Morris, James, Hitchens & Williams, special counsel for the Owner Trustee, in form and substance satisfactory to each of them. (k) The Pass Through Trustee, the Owner Trustee and the Owner Participant each shall have received an opinion addressed to it from (i) Kelley Drye & Warren LLP, special counsel for the Indenture Trustee, and (ii) Shipman & Goodwin LLP, special counsel for the Subordination Agent and the Pass Through Trustee, in each case in form and substance satisfactory to each of them. (l) The Pass Through Trustee, the Indenture Trustee and the Owner Trustee each shall have received an opinion addressed to it from (i) White & Case, special counsel for the Owner Participant, and (ii) in-house counsel for the Managing - 13 - 17 Partner, in each case in form and substance satisfactory to each of them. (m) The Pass Through Trustee, the Owner Trustee and the Owner Participant shall have received an opinion from (i) White & Case, special counsel for the Liquidity Provider, and (ii) in-house counsel for the Liquidity Provider, in each case in form and substance satisfactory to each of them. (n) The Pass Through Trustee, the Owner Trustee, the Owner Participant and the Indenture Trustee each shall have received an opinion addressed to it from Daugherty, Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma, in form and substance satisfactory to each of them. (o) The Pass Through Trustee, the Owner Trustee, the Owner Participant and the Indenture Trustee each shall have received an opinion addressed to it from Paul, Hastings, Janofsky & Walker LLP, special New York counsel for the Original Head Lessee and the Parent Guarantor, in form and substance satisfactory to each of them. (p) The Pass Through Trustee, the Owner Trustee, the Owner Participant and the Indenture Trustee each shall have received an opinion addressed to it from McCann FitzGerald, special Irish counsel for the Parent Guarantor, in form and substance satisfactory to each of them. (q) The Original Head Lessee, the Lessee, and the Parent Guarantor shall have entered into the Underwriting Agreement and the Lessee shall have entered into each of the Pass Through Trust Agreements, the Certificates shall have been issued and sold pursuant to the Underwriting Agreement and the Pass Through Trust Agreements, and the Underwriter shall have transferred to the Pass Through Trustee in immediately available funds an amount equal to the aggregate purchase price of the Equipment Notes to be purchased from the Owner Trustee. (r) The Original Head Lessee and the Owner Participant shall each have executed and delivered to the other the Amended and Restated Head Lease TIA. (s) The Sublessor and the Sublessee shall each have executed and delivered to the other the Amended and Restated Sublease TIA. (t) No change shall have occurred after the date of this Agreement in applicable law or regulations thereunder or interpretations thereof by appropriate regulatory authorities or any court that would make it illegal for the Pass Through Trustee to make the payments described in Section 1(a)(ii) or for the Lessee, the Indenture Trustee, the Owner Trustee or the Owner Participant or any other party hereto to participate in the - 14 - 18 transactions contemplated by this Agreement on the Restatement Date. (u) All approvals and consents of any trustee or holder of any indebtedness or obligations of the Lessee which are required in connection with the Pass Through Trustee's making of the payments described in Section 1(a)(ii) or the Owner Trustee's or the Owner Participant's participation in the transactions contemplated by this Agreement on the Restatement Date shall have been duly obtained. (v) Uniform Commercial Code financing, termination, amendment and continuation statement or statements covering all of the security interests created by or pursuant to the Indenture that are not covered by the recording system established by the Federal Aviation Act shall have been executed and delivered by the Original Head Lessee, the Lessee, the Indenture Trustee and the Owner Trustee, as the case may be, and such financing, termination, amendment and continuation statement or statements or documents to the same purposes shall have been duly filed in all places necessary or advisable, and any additional Uniform Commercial Code financing, termination, amendment and continuation statements deemed advisable by the Original Head Lessee, the Lessee, the Owner Participant or the Indenture Trustee shall have been executed and delivered by the Original Head Lessee, the Lessee, the Indenture Trustee or the Owner Trustee, as the case may be, and duly filed in all places advisable. (w) No change shall have occurred after the date of this Agreement in applicable law or regulations thereunder or interpretations thereof by appropriate regulatory authorities or any court that would adversely affect the tax consequences of the transactions contemplated by this Agreement to the Owner Participant, the Owner Trustee or any of their respective Affiliates. Promptly following the recording of Lease Amendment No. 1, the Amended and Restated Lease (including Lease Supplement No. 3) and the First Amended and Restated Indenture (including Trust Indenture Supplement No. 2) pursuant to the Federal Aviation Act, the Original Head Lessee will cause Daugherty, Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma, to deliver to the Pass Through Trustee, the Lessee, the Indenture Trustee, the Owner Participant and the Owner Trustee an opinion as to the due recording of Lease Amendment No. 1, the Amended and Restated Lease, Lease Supplement No. 3, the First Amended and Restated Indenture, Trust Indenture Supplement No. 2 and Trust Supplement No. 2. SECTION 4. Certain Conditions Precedent to the Obligations of the Original Head Lessee and the Parent Guarantor; Certain Conditions Precedent to the Obligations of the Lessee; Conditions Precedent with Respect to the Pass Through Trustee. - 15 - 19 (a) The obligations of the Original Head Lessee and the Parent Guarantor to participate in the transactions contemplated by this Agreement on the Restatement Date, and to execute and deliver this Agreement are subject to the fulfillment, prior to or on the Restatement Date, of the following conditions precedent: (i) Each of the Original Head Lessee and the Parent Guarantor shall have received counterparts of the following documents executed by each of the parties thereto other than the Original Head Lessee and the Parent Guarantor: (1) this Agreement; (2) Lease Amendment No. 1, the Amended and Restated Lease and Lease Supplement No. 3; (3) the Amended and Restated Head Lease TIA; (4) the Amended and Restated Sublease TIA; (5) the Put Termination Agreement; (6) the Deed of Indemnity; (7) the Underwriting Agreement; (8) Uniform Commercial Code termination statements relating to the Original Head Lease executed by the Owner Trustee and/or the Indenture Trustee and such other releases and terminations as it may reasonably request; and (9) that certain letter agreement dated as of the Restatement Date relating to Stipulated Loss Values with respect to the Amended and Restated Lease (the "SLV Letter Agreement"). (ii) Each of the Original Head Lessee and the Parent Guarantor shall have received originals of the following documents: (1) the incumbency certificate of the Lessee referred to in Section 3(c)(1); (2) the resolutions of the Lessee referred to in Section 3(c)(2); (3) the documents referred to in Section 3(e), Section 3(f) and Section 3(g); (4) the opinions referred to in Section 3(i), Section 3(j), Section 3(k), Section 3(l), Section 3(m) and Section 3(n), in each case - 16 - 20 addressed to each of the Original Head Lessee and the Parent Guarantor and in form and substance satisfactory to each of them; (5) the opinions of Paul, Hastings, Janofsky & Walker LLP and Milbank, Tweed, Hadley & McCloy with respect to certain matters relating to and described in the Prospectus, in each case addressed to the Original Head Lessee and the Parent Guarantor and in form and substance reasonably satisfactory to each of them; and (6) the report referred to in Section 3(h) addressed to each of the Original Head Lessee and the Parent Guarantor. (iii) Each of the Original Head Lessee and the Parent Guarantor shall have received such other documents and evidence with respect to each other party hereto as each of them or its counsel may reasonably request in order to establish the due consummation of the transactions contemplated by this Agreement and the "Refunding Agreements" (as defined in the Registration Statement), the taking of all necessary action in connection therewith and compliance with the conditions herein or therein set forth. (b) The obligations of the Lessee to make the payment described in Section 1(a)(i)(A) (if any), to participate in the transactions contemplated by this Agreement on the Restatement Date, and to execute and deliver each of the Pass Through Trust Agreements are subject to the fulfillment, prior to or on the Restatement Date, of the following conditions precedent: (i) The Lessee shall have received counterparts of the following documents executed by each of the parties thereto other than Lessee: (1) this Agreement; (2) Lease Amendment No. 1, the Amended and Restated Lease and Lease Supplement No. 3; (3) the Amended and Restated Sublease TIA; (4) the Put Termination Agreement; (5) the Deed of Indemnity; (6) the Pass Through Trust Agreements; (7) the Underwriting Agreement; - 17 - 21 (8) Uniform Commercial Code termination statements relating to the Sublease executed by the Original Head Lessee; and (9) the SLV Letter Agreement. (ii) The Lessee shall have received originals of the following documents: (1) the incumbency certificate of the Original Head Lessee and Parent Guarantor referred to in Section 3(c)(1); (2) the resolutions of the Original Head Lessee and Parent Guarantor referred to in Section 3(c)(2); (3) the documents referred to in Section 3(e), Section 3(f) and Section 3(g); (4) the opinions referred to in Section 3(j), Section 3(k), Section 3(l), Section 3(m), Section 3(n), Section 3(o) and Section 3(p), in each case addressed to Lessee and in form and substance satisfactory to Lessee; and (5) the opinions of Paul, Hastings, Janofsky & Walker LLP and Milbank, Tweed, Hadley & McCloy with respect to certain matters relating to and described in the Prospectus, in each case addressed to Lessee and in form and substance reasonably satisfactory to Lessee. (iii) The Lessee shall have received such other documents and evidence with respect to each other party hereto as Lessee or its counsel may reasonably request in order to establish the due consummation of the transactions contemplated by this Agreement and the "Refunding Agreements" (as defined in the Registration Statement), the taking of all necessary action in connection therewith and compliance with the conditions herein and therein set forth. (c) The respective obligations of each of the Lessee, the Pass Through Trustee (solely as to clause (ii)), the Original Head Lessee, the Owner Participant, the Owner Trustee and the Indenture Trustee to participate in the transactions contemplated hereby is subject to the receipt by each of them of (i) a certificate signed by an authorized officer of the Pass Through Trustee, dated the Restatement Date, certifying that the representations and warranties contained herein and in the Pass Through Trust Agreements of the Pass Through Trustee are correct as of the Restatement Date, except to the extent that such representations and warranties relate solely to an earlier date (in - 18 - 22 which case such representations and warranties are correct on and as of such earlier date), (ii) an opinion addressed to each of them of Shipman & Goodwin LLP, special counsel for the Pass Through Trustee, in form and substance satisfactory to each of them, and (iii) such other documents and evidence with respect to the Pass Through Trustee as it may reasonably request in order to establish the due consummation of the transactions contemplated by this Agreement, the taking of all necessary action in connection therewith and compliance with the conditions herein set forth. SECTION 5. Amendment and Restatement of the Original Indenture. Subject to the satisfaction or waiver of the conditions precedent set forth herein, the Owner Participant, by execution and delivery hereof, requests, authorizes and directs the Owner Trustee to execute and deliver the First Amended and Restated Indenture, and the Owner Trustee and the Indenture Trustee, by execution and delivery hereof, agree to execute and deliver the First Amended and Restated Indenture. Each of the Original Head Lessee, the Parent Guarantor and the Lessee, by execution and delivery hereof, consent to such execution and delivery of the First Amended and Restated Indenture. The First Amended and Restated Indenture shall be effective as of the Restatement Date. SECTION 6. Amendment and Restatement of the Original Lease. Subject to the satisfaction or waiver of the conditions precedent set forth herein, the Indenture Trustee, the Pass Through Trustee, the Parent Guarantor and the Owner Participant, by execution and delivery hereof, consent to the assignments, delegations, and releases set forth in, and to the amendment and restatement of the Original Lease effected by, and the Owner Participant requests and instructs the Owner Trustee to execute and deliver, Lease Amendment No. 1, and the Owner Trustee, the Original Head Lessee, the Indenture Trustee and the Sublessee agree, by execution and delivery hereof, to execute and deliver Lease Amendment No. 1. The Amended and Restated Lease shall be effective as of the Restatement Date. SECTION 7. Termination of the Participation Agreement; Termination of Sublease, etc. Subject to the satisfaction or waiver of the conditions precedent set forth herein, the Owner Participant, the Owner Trustee, the Original Head Lessee, the Parent Guarantor and the Indenture Trustee, by execution and delivery hereof, agree that, with effect from and including the Restatement Date and except as otherwise provided in Section 15 hereof, the Participation Agreement shall terminate and forever be without force and effect, conferring no rights and imposing no obligations on the parties thereto. Upon the execution and delivery of Lease Amendment No. 1 by each of the parties thereto, the Sublease, the Sublease Guaranty and the Assignment of Sublease shall terminate as and to the extent set forth herein and therein. Lease Amendment No. 1 shall be effective as of the Restatement Date. - 19 - 23 SECTION 8. Representations and Warranties of the Lessee. The Lessee represents and warrants, as of the Restatement Date, to the Original Head Lessee (except as to the representation and warranty contained in Section 8(i)), the Parent Guarantor (except as to the representation and warranty contained in Section 8(i)), the Pass Through Trustee, the Owner Participant, the Owner Trustee, the Liquidity Provider and the Indenture Trustee that: (a) the Lessee is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has the corporate power and authority to own or hold under lease its properties, has, or had on the respective dates of execution thereof, the corporate power and authority to enter into and perform its obligations under this Agreement, Lease Amendment No. 1, the Lease, the Pass Through Trust Agreements, the Amended and Restated Sublease TIA, the SLV Letter Agreement and any certificate delivered by the Lessee pursuant to the foregoing (the "Lessee Documents") and is duly qualified to do business as a foreign corporation in each jurisdiction where the failure to so qualify would have a material adverse effect on its business, operations or condition (financial or otherwise), or on its ability to perform its obligations under the Lessee Documents; (b) the Lessee is a Certificated Air Carrier, and its chief executive office (as such term is used in Article 9 of the Uniform Commercial Code in effect in the State of Arizona) is located at 4000 East Sky Harbor Boulevard, Phoenix, Arizona 85034; (c) the execution and delivery by the Lessee of the Lessee Documents and the performance of the obligations of the Lessee under the Lessee Documents 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 material indebtedness or material obligations of the Lessee, except such as have been duly obtained and are in full force and effect, and do not contravene any law, governmental rule, regulation, judgment or order binding on the Lessee or the certificate of incorporation or by-laws of the Lessee, 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, contract, lease or other agreement in each case having payment obligations in excess of $500,000 to which the Lessee is a party or by which it may be bound or affected; (d) neither the execution and delivery by the Lessee of the Lessee Documents nor the performance of the obligations of the Lessee under the Lessee Documents nor the - 20 - 24 consummation by the Lessee of any of the transactions contemplated by the Lessee Documents, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, the Department of Transportation, the FAA, or any other federal, state, local or foreign governmental authority having jurisdiction, other than those which have already been received and which the Lessee is in compliance with and (i) the registration of the Certificates under the Securities Act of 1933, as amended (the "Securities Act") and the securities laws of any state in which the Certificates may be offered for sale if the laws of such state require such action, (ii) the qualification of the Pass Through Trust Agreements under the Trust Indenture Act of 1939, as amended, (iii) (A) the orders, permits, waivers, exemptions, authorizations and approvals of the regulatory authorities having jurisdiction over the operation of the Aircraft by Lessee required to be obtained on or prior to the Restatement Date, which orders, permits, waivers, exemptions, authorizations and approvals have been duly obtained and are, or will on the Restatement Date be in full force and effect, (B) the registration of the Aircraft pursuant to the Federal Aviation Act and (C) such consents, approvals, notices, registrations and other actions required by the terms of the Lessee Documents to the extent required to be given or obtained only after the Restatement Date and (iv) the registrations and filings referred to in Section 8(i); (e) each Lessee Document has been duly executed and delivered by the Lessee and, assuming the due authorization, execution and delivery thereof by the other parties thereto, each Lessee Document constitutes, or when executed will constitute, the legal, valid and binding obligations of the Lessee enforceable against the Lessee in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors or lessors generally and by general principles of equity, whether considered in a proceeding at law or in equity, and except, in the case of the Lease, as may be limited by applicable laws which may affect the remedies provided in the Lease, which laws, however, do not make the remedies provided in the Lease inadequate for the practical realization of the benefits intended to be afforded thereby; (f) except as disclosed in the Prospectus, there are no pending or, to its knowledge, threatened actions or proceedings before any court or administrative agency or regulatory commission or other governmental agency against or affecting the Lessee that are reasonably expected to materially adversely affect the ability of Lessee to enter into or perform its obligations under the Lessee Documents; - 21 - 25 (g) the Lessee is not an "investment company" or a company controlled by an "investment company" within the meaning of the Investment Company Act of 1940, as amended; (h) on the Restatement Date, the Trust Estate shall be free and clear of any and all Liens (other than Permitted Liens) created by or through the Lessee; (i) except for the registration of the Aircraft pursuant to the Federal Aviation Act, the filing for recordation pursuant to the Federal Aviation Act (with confidential financial terms redacted) of Lease Amendment No. 1, the Amended and Restated Lease, Lease Supplement No. 3, Trust Supplement No. 2, the First Amended and Restated Indenture and Indenture Supplement No. 2, and each of the other documents referred to in Annex A hereto, all with the FAA, the filing of a Uniform Commercial Code ("UCC") amended financing statement with the Secretary of State of the State of Delaware with regard to the Original Lease, the filing of UCC termination statements with regard to the Original Head Lessee with the Secretary of State of the States of New York, Connecticut and Arizona, the filing of a protective UCC financing statement with the Secretary of State of the State of Arizona with respect to the Lease, the filing of a UCC termination statement with the Secretary of State of the State of Arizona with respect to the Sublease, and the filing of a UCC termination statement with the Secretary of State of the State of Delaware with respect to the Initial Sublease Assignment (as defined in the Original Lease) all of which financing and termination statements shall have been duly effected as of the Restatement Date (and assignments thereof and continuation statements at periodic intervals), and other than the taking of possession by the Indenture Trustee of the original counterparts of the Original Lease, Lease Amendment No. 1, the Amended and Restated Lease, and all Lease Supplements thereto (to the extent the Lease constitutes chattel paper), and the placing of the Lease identification required by Section 6(e) of the Lease, no further filing or recording of the Lease or of any other document (including any financing statement under Article 9 of the UCC of the State of Delaware, New York or Arizona) and no further action is necessary, under the laws of the United States of America or the States of Delaware, New York and Arizona in order to perfect the Owner Trustee's interest in the Aircraft as against the Lessee and any third parties, or to perfect the security interest in favor of the Indenture Trustee in the Owner Trustee's interest in the Aircraft and in the Lease; (j) all obligations of the Lessee owing to the Lessor in connection with the Lease are at least pari passu with all unsecured and unsubordinated debt obligations of the Lessee; - 22 - 26 (k) no event has occurred and is continuing which constitutes a Lease Event of Default or would constitute a Lease Event of Default but for the requirement that notice be given or time lapse or both; (l) no event has occurred and is continuing which constitutes an Event of Loss (as defined in the Lease) or would constitute an Event of Loss with the lapse of time; (m) the Lessee has filed or will file, or has caused or will cause to be filed, all federal and state tax returns which are required to be filed and has paid or will pay or has caused or will cause to be paid all taxes shown to be due or payable on said returns and on any assessment received by the Lessee, to the extent such taxes have become due and payable, except for taxes and returns with respect thereto the nonpayment or nonfiling of which, either in any case or in the aggregate, could have no material adverse effect on the Lessee, its condition (financial or otherwise), business, operations or prospects, or on its ability to perform its obligations under the Lease or which are being diligently contested by the Lessee in good faith by appropriate proceedings and with appropriate reserves; (n) the financial statements together with the notes related thereto contained in the Registration Statement are complete in all material respects and fairly present the Lessee's financial condition as of December 31, 1996 and the results of its operations for the period covered in conformance with GAAP (except as otherwise noted therein and with which any such change the independent auditors of the Lessee have agreed) and do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading; since December 31, 1996, there has been no material adverse change in the Lessee's business, operations, condition (financial or otherwise) or prospects which has not been disclosed in writing to the Owner Participant and the Indenture Trustee; (o) on the Restatement Date, all sales, use, documentary duties or other similar Taxes then due and for which the Lessee is responsible pursuant to the Lessee Documents, shall have been paid, other than such Taxes which are being contested by the Lessee in good faith and by appropriate proceedings (and for which the Lessee shall have established such reserves as are required under GAAP) so long as such proceedings or the non- payment of such Taxes do not involve any material danger to the sale, forfeiture or loss of the Aircraft; (p) the Lessee is not a "national" of any designated foreign country within the meaning of the Foreign Assets Control Regulations or the Cuban Assets Control Regulations - 23 - 27 of the United States Treasury Department, 31 Code of Federal Regulations, Subtitle B, Chapter V, as amended, or of any regulations, interpretations or rulings issued thereunder, and the Lessee is not, and is not acting on behalf of or for the benefit of, an "Iranian Entity" within the meaning of the Iranian Assets Control Regulations of the United States Treasury Department, 31 Code of Federal Regulations, Subtitle B, Chapter V, as amended, and the transactions contemplated by this Agreement are not prohibited by Executive Order 12170, the above-mentioned Iranian Assets Control Regulations or any regulations, interpretations or rulings issued under any thereof; (q) no part of the Rent or other payments made by the Lessee under the Lease or under the other Operative Documents will be made out of the assets of any "employee benefit plan" as defined in Section 3(3) of ERISA; (r) no representation or warranty of the Lessee contained in any Lessee Document or other information in writing furnished to the Owner Participant or the Indenture Trustee by the Lessee in connection herewith contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading; there is no fact known to the Lessee (other than matters of a general economic nature) which the Lessee has not disclosed in writing to the Owner Participant or the Indenture Trustee which could impair its ability to perform its obligations under the Lessee Documents; and (s) if the Lessee were to become a debtor under the Bankruptcy Code, the Lessor as lessor of the Aircraft under the Lease, and the Indenture Trustee, as assignee of the Owner Trustee's rights under the Lease pursuant to the Indenture, would be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to the Aircraft. SECTION 9. Representations and Warranties. Each of the parties below represents and warrants, as of the Restatement Date, to each of the other parties to this Agreement and to the Liquidity Provider (except that the representation and warranty set forth in Section 9(f)(8) shall be a representation and warranty of the Original Head Lessee to the Lessee only) as follows: (a) The Indenture Trustee in its individual capacity (and as Indenture Trustee to the extent provided in clause (6) below) represents and warrants that: (1) the Indenture Trustee is a corporation duly organized, validly existing and in good standing under the laws of the State of New York, is a "citizen of the United States" as defined in Section 40102(a)(15) of - 24 - 28 the Federal Aviation Act and the rules and regulations of the FAA thereunder (as so defined, a "Citizen of the United States") (without making use of a voting trust, voting powers agreement or similar arrangement), will notify promptly all parties to this Agreement if in its reasonable opinion its status as a Citizen of the United States (without making use of a voting trust, voting powers agreement or similar arrangement) is likely to change and will resign as Indenture Trustee as provided in Section 8.02 of the Indenture promptly after it obtains actual knowledge that it has ceased to be such a Citizen of the United States (without making use of a voting trust, voting powers agreement or similar arrangement), and has the full corporate power, authority and legal right under the laws of the State of New York and the federal laws of the United States pertaining to its banking, trust and fiduciary powers to execute and deliver each of this Agreement, the Indenture and each other Operative Document to which it is a party and to carry out its obligations under this Agreement, the Indenture and each other Operative Document to which it is a party; (2) neither the execution and delivery by the Indenture Trustee of this Agreement, the Indenture, Lease Amendment No. 1 and each other Operative Document to which it is a party, nor the consummation by it of any of the transactions contemplated hereby or thereby, nor the compliance by it with any of the terms and provisions hereof and thereof, (A) requires or will require any approval of its stockholders, or approval or consent of any trustees or holders of any indebtedness or obligations of it, or (B) violates or will violate its articles of association or by-laws, or contravenes or will contravene any provision of, or constitutes or will constitute a default under, or results or will result in any breach of, or results or will result in the creation of any Lien (other than as permitted under the Operative Documents) upon its property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sale contract, bank loan or credit agreement, license or other agreement or instrument to which it is a party or by which it is bound, or contravenes or will contravene any law, governmental rule or regulation or any judgment or order applicable to or binding on it of any United States governmental authority or agency governing the trust powers of the Indenture Trustee; (3) this Agreement constitutes, and the Indenture, when executed and delivered by the Indenture Trustee, will constitute, the legal, valid and binding obligations of the Indenture Trustee enforceable against it in accordance with their respective terms, - 25 - 29 except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; (4) there are no pending or, to its knowledge, threatened actions or proceedings against the Indenture Trustee, either in its individual capacity or as Indenture Trustee, before any court or administrative agency which, if determined adversely to it, would materially adversely affect the ability of the Indenture Trustee, in its individual capacity or as Indenture Trustee, as the case may be, to perform its obligations under the Operative Documents to which it is a party; (5) no consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any State of New York or any United States of America governmental authority or agency regulating the trust powers of the Indenture Trustee is required for the execution and delivery of, or the carrying out by, the Indenture Trustee of any of the transactions contemplated hereby or by the Indenture, Lease Amendment No. 1 or any other Operative Document to which it is a party or by which it is bound, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken; (6) there are no Lenders' Liens (as defined in the Lease) on the Aircraft or any portion of the Trust Estate created by or through the Indenture Trustee in its individual capacity; and (7) it has possession of the chattel paper original counterpart of the Original Lease, Lease Amendment No. 1 and the Lease. (b) Each of the Trust Company (except with respect to clauses (2)(ii), (3), (4)(i) and (6) below, which representations and warranties are made solely by the Owner Trustee) and the Owner Trustee (except with respect to clauses 1(i), (2)(i), 4(ii), (7), (11) and (12) below, which representations and warranties are made solely by the Trust Company) represents and warrants that: (1) (i) the Trust Company is a banking corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has full corporate power and authority to carry on its business as now conducted, has, or had on the respective dates of execution thereof, the corporate power and authority - 26 - 30 to execute and deliver Trust Supplement No. 2, has the corporate power and authority to carry out the terms of the Trust Agreement, and (ii) each of the Trust Company and the Owner Trustee has, or had on the respective dates of execution thereof (assuming the authorization, execution and delivery of Trust Supplement No. 2 by the Owner Participant), the corporate power and authority to execute and deliver and to carry out the terms of this Agreement, the Indenture, the Equipment Notes, Lease Amendment No. 1, the Lease and each other Operative Document (other than the Trust Agreement) to which it is a party; (2) (i) the Trust Company has duly authorized, executed and delivered the Trust Agreement (and, to the extent provided herein to be in its individual capacity, this Agreement) and (assuming the due authorization, execution and delivery of Trust Supplement No. 2 by the Owner Participant) the Trust Agreement (and, to the extent provided herein to be in its individual capacity, this Agreement) constitutes a legal, valid and binding obligation of the Trust Company, enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity, (ii) the Owner Trustee has duly authorized, executed and delivered this Agreement and (assuming the due authorization, execution and delivery of Trust Supplement No. 2 by the Owner Participant) this Agreement and the Trust Agreement constitute, and the Indenture and the Lease, when entered into, will constitute, legal, valid and binding obligations of the Owner Trustee, enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; (3) assuming the due authorization, execution and delivery of Trust Supplement No. 2 by the Owner Participant, the Owner Trustee has duly authorized, and on the Restatement Date shall have duly issued, executed and delivered to the Indenture Trustee for authentication, the Equipment Notes pursuant to the terms and provisions hereof and of the Indenture, and, upon such issuance, execution and delivery by the Owner Trustee and authentication by the Indenture Trustee in accordance with the terms of the Indenture, each Equipment Note issued on the Restatement Date will - 27 - 31 constitute the valid and binding obligation of the Owner Trustee and will be entitled to the benefits and security afforded by the Indenture in accordance with the terms of such Equipment Note and the Indenture; (4) (i) neither the execution and delivery by the Owner Trustee of this Agreement, the Original Trust Agreement, Trust Supplement No. 2, the Original Indenture, the Indenture, the Original Lease, Lease Amendment No. 1, the Lease, the Equipment Notes, or any other Operative Document to which it is a party, nor the consummation by it of any of the transactions contemplated hereby or thereby, nor the compliance by it with any of the terms and provisions hereof or thereof, contravenes or will contravene any judgment or order applicable to or binding on it, and (ii) neither the execution and delivery by the Trust Company of this Agreement, the Original Trust Agreement, Trust Supplement No. 2, the Original Indenture, the Indenture, the Original Lease, Lease Amendment No. 1, the Lease, the Equipment Notes, or any other Operative Document to which it is a party, nor the consummation by it of any of the transactions contemplated hereby or thereby, nor the compliance by it with any of the terms and provisions hereof or thereof, (A) requires or will require any approval of its stockholders, or approval or consent of any trustees or holders of any indebtedness or obligations of it, or (B) violates or will violate its articles of association or by-laws, or contravenes or will contravene any law, governmental rule or regulation of the State of Delaware or any United States governmental authority or agency governing the trust powers of the Trust Company, or any judgment or order applicable to or binding on it; (5) no consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any state or local governmental authority or agency or any State of Delaware, State of New York or any United States of America governmental authority or agency regulating the trust powers of the Trust Company is required for the execution and delivery of, or the carrying out by, the Trust Company or the Owner Trustee, as the case may be, of any of the transactions contemplated hereby or by the Trust Agreement, the Indenture, the Lease, Lease Amendment No. 1, the Equipment Notes or any other Operative Document to which it is a party or by which it is bound, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken or which is described in Section 8(d); - 28 - 32 (6) there exists no Lessor's Lien or Head Lessor's Lien (each as defined in the Lease) (including for this purpose Liens that would be Lessor's Liens but for the first proviso in the definition of Lessor's Liens) attributable to the Owner Trustee; (7) there exists no Lessor's Lien or Head Lessor's Lien (including for this purpose Liens that would be Lessor's Liens but for the first proviso in the definition of Lessor's Liens) attributable to the Trust Company; (8) there are no Taxes payable by the Owner Trustee or the Trust Company imposed by the State of Delaware or any political subdivision thereof in connection with the prepayment of the Original Certificates or the issuance of the Equipment Notes,or the execution and delivery by it of any of the instruments referred to in clauses (1), (2), (3) and (4) above, that, in each case, would not have been imposed if the Trust Estate were not located in the State of Delaware and the Trust Company had not (a) had its principal place of business in, (b) performed (in its individual capacity or as Owner Trustee) any or all of its duties under the Operative Documents in, and (c) engaged in any activities unrelated to the transactions contemplated by the Operative Documents in, the State of Delaware; (9) there are no pending or, to its knowledge, threatened actions or proceedings against the Owner Trustee, either in its individual capacity or as Owner Trustee, before any court or administrative agency which, if determined adversely to it, would materially adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to perform its obligations under any of the instruments referred to in clauses (1), (2), (3) and (4) above; (10) both its chief executive office, and the place where its records concerning the Aircraft and all its interests in, to and under all documents relating to the Trust Estate (other than such as may be maintained and held by the Indenture Trustee pursuant to the Indenture), are located in Wilmington, Delaware. Owner Trustee, in its individual capacity or as Owner Trustee, agrees that it will not change the location of such office to a location outside of Delaware, without prior written notice to all parties hereto; (11) it is a Citizen of the United States (without making use of a voting trust agreement, voting powers agreement or similar arrangements); and - 29 - 33 (12) there has not occurred any event which constitutes (or to the best of its knowledge would, with the passage of time or the giving of notice or both, constitute) an Event of Default as defined in the Indenture which has been caused by or relates to the Trust Company and which is presently continuing. (c) The Owner Participant represents and warrants that: (1) it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has the partnership power and authority to carry on its present business and operations and to own or lease its properties, has, or had on the respective dates of execution thereof, as the case may be, the partnership power and authority to enter into and to perform its obligations under this Agreement, the Trust Agreement, the SLV Letter Agreement and the Amended and Restated Head Lease TIA; this Agreement, the SLV Letter Agreement and Trust Supplement No. 2 have been duly authorized, executed and delivered by it; assuming the due authorization, execution and delivery hereof and thereof by the other parties hereto and thereto, this Agreement, the Trust Agreement, the SLV Letter Agreement and the Amended and Restated Head Lease TIA constitute the legal, valid and binding obligations of the Owner Participant enforceable against it in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; and the Managing Partner is duly incorporated, validly existing and in good standing under the laws of the State of Delaware, has the corporate power and authority to carry on its present business and operations and to own or lease its properties, has, or had on the respective dates of execution thereof, as the case may be, the corporate power and authority to execute and deliver this Agreement, the Trust Agreement, the SLV Letter Agreement and the Amended and Restated Head Lease TIA on behalf of the Owner Participant; (2) neither (A) the execution and delivery by the Owner Participant of this Agreement, the Trust Agreement, the SLV Letter Agreement, the Amended and Restated Head Lease TIA or any other Operative Document to which it is a party nor (B) compliance by it with all of the provisions hereof or thereof, (x) will contravene any law or order of any court or governmental authority or agency applicable to or binding on - 30 - 34 the Owner Participant (it being understood that no representation or warranty is made with respect to laws, rules or regulations relating to aviation or to the nature of the equipment owned by the Owner Trustee other than such laws, rules or regulations relating to the citizenship requirements of the Owner Participant under applicable law), or (y) will contravene the provisions of, or constitutes or has constituted or will constitute a default under, the Partnership Agreement or any indenture, mortgage, contract or other agreement or instrument to which the Owner Participant is a party or by which it or any of its property may be bound or affected, except where such contravention or default would not result in any liability to any other party hereto or have a material adverse effect on the rights or on the remedies of the other parties hereto or on its ability to perform its obligations hereunder or thereunder; (3) no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body (other than as required by the Federal Aviation Act or the regulations promulgated thereunder) is or was required, as the case may be, for the due execution, delivery or performance by it of this Agreement, the Trust Agreement and the Amended and Restated Head Lease TIA (it being understood that no representation or warranty is made with respect to laws, rules or regulations relating to aviation or to the nature of the equipment owned by the Owner Trustee other than the laws, rules or regulations relating to aircraft lease transactions generally or to the citizenship requirements of the Owner Participant under the Federal Aviation Act); (4) there are no pending or, to its knowledge, threatened actions or proceedings against the Owner Participant or any of its partners before any court or administrative agency or arbitrator which, if determined adversely to the Owner Participant or such partner(s), would materially adversely affect the Owner Participant's ability to perform its obligations under this Agreement, the Trust Agreement, the SLV Letter Agreement or the Amended and Restated Head Lease TIA; (5) on the Restatement Date, the Trust Estate shall be free of Lessor's Liens and Head Lessor's Liens attributable to the Owner Participant and its partners (including for this purpose Liens that would be Lessor's Liens but for the first proviso in the definition of Lessor's Liens); and (6) each of its partners is a Citizen of the United States (without making use of a voting trust - 31 - 35 agreement, voting powers agreement or similar arrangement). If at any time the Owner Participant or any partner of the Owner Participant has ceased to be, or the Owner Participant shall have actual knowledge that the Owner Participant or any partner of the Owner Participant is likely to cease to be, such a citizen, and (i) the Aircraft shall be or would thereupon become ineligible for registration in the name of Owner Trustee under the Federal Aviation Act as in effect at such time (without regard to the "based and primarily used" provisions thereof) and the regulations then applicable thereunder, or (ii) the Aircraft is registered in a jurisdiction other than the United States of America, in circumstances in which the preceding clause (i) does not apply and the Lessee or any Permitted Sublessee at any time proposes to register the Aircraft in the United States of America, then Owner Participant shall (at its own expense and without any reimbursement or indemnification from the Lessee or any Permitted Sublessee) (A) immediately either (1) transfer in accordance with Section 10 hereof all of its right, title and interest in and to the Trust Agreement, the Trust Estate, this Agreement and the Amended and Restated Head Lease TIA or (2) take such other action, including, without limitation, the establishment of a voting trust or voting powers agreement (in which case Owner Participant shall remain the beneficial owner of the Trust Estate), as may be necessary to prevent the deregistration of the Aircraft under the Federal Aviation Act or to maintain such registration of the Aircraft or to make possible such registration of the Aircraft in the United States of America and to prevent Indenture Trustee, the Holders of the Equipment Notes, the Lessee or any Permitted Sublessee from being adversely affected as a result thereof and (B) indemnify the Lessee, the Indenture Trustee, the Holders of the Equipment Notes and any Permitted Sublessee, from and against any and all Claims incurred or suffered as a result of such partner's or partners' failure to be such a citizen or loss of such citizenship, including, without limitation, as a result of the Aircraft's becoming ineligible or ceasing to remain eligible for such registration. (d) The Pass Through Trustee represents, warrants and covenants that: (1) the Pass Through Trustee is duly organized, validly existing and in good standing under the federal laws of the United States of America, and has the full corporate power, authority and legal right under the federal laws of the United States of America pertaining to its banking, trust and fiduciary powers to execute and deliver each of the Pass Through Trust Agreements, - 32 - 36 the Intercreditor Agreement, and this Agreement and to perform its obligations under this Agreement, the Pass Through Trust Agreements and the Intercreditor Agreement; (2) this Agreement has been, and when executed and delivered by the Pass Through Trustee, each of the Pass Through Trust Agreements and the Intercreditor Agreement will have been, duly authorized, executed and delivered by the Pass Through Trustee; this Agreement constitutes, and when executed and delivered by the Pass Through Trustee, each of the Pass Through Trust Agreements and the Intercreditor Agreement, will constitute, the legal, valid and binding obligations of the Pass Through Trustee enforceable against it in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; (3) none of the execution, delivery and performance by the Pass Through Trustee of any of the Pass Through Trust Agreements, the Intercreditor Agreement or this Agreement, the purchase by the Pass Through Trustee of the Equipment Notes pursuant to this Agreement, or the issuance of the Certificates pursuant to the Pass Through Trust Agreements, contravenes any law, rule or regulation of the State of Connecticut or any United States governmental authority or agency regulating the Pass Through Trustee's banking, trust or fiduciary powers or any judgment or order applicable to or binding on the Pass Through Trustee nor contravenes or results in any breach of, or constitutes a default under, the Pass Through Trustee's articles of association or by-laws or any agreement or instrument to which the Pass Through Trustee is a party or by which it or any of its properties may be bound; (4) neither the execution and delivery by the Pass Through Trustee of any of the Pass Through Trust Agreements, the Intercreditor Agreement or this Agreement, nor the consummation by the Pass Through Trustee of any of the transactions contemplated hereby or thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action with respect to, any State of Connecticut governmental authority or agency or any federal governmental authority or agency regulating the Pass Through Trustee's banking, trust or fiduciary powers; - 33 - 37 (5) assuming that the trusts created by the Pass Through Trust Agreements will not be taxable as corporations, but, rather, each will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Code for federal income tax purposes, there are no Taxes payable by the Pass Through Trustee imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the acquisition, possession or ownership by the Pass Through Trustee of any of the Equipment Notes (other than franchise or other taxes based on or measured by any fees or compensation received by the Pass Through Trustee for services rendered in connection with the transactions contemplated by any of the Pass Through Trust Agreements), and prior to the exercise of remedies upon the occurrence of an Indenture Event of Default, there are no Taxes payable by the Pass Through Trustee imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Pass Through Trustee of this Agreement, any of the Pass Through Trust Agreements or the Intercreditor Agreement (other than franchise or other Taxes based on or measured by any fees or compensation received by the Pass Through Trustee for services rendered in connection with the transactions contemplated by any of the Pass Through Trust Agreements), and such trusts will not be subject to any Taxes imposed by the State of Connecticut or any political subdivision or taxing authority thereof; upon the exercise of remedies following the occurrence of an Indenture Event of Default, there will be no Taxes payable by the Pass Through Trustee imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Pass Through Trustee of this Agreement, any of the Pass Through Trust Agreements or the Intercreditor Agreement (other than franchise or other Taxes based on or measured by any fees or compensation received by the Pass Through Trustee for services rendered in connection with the transactions contemplated by any of the Pass Through Trust Agreements), and the trusts created by the Pass Through Trust Agreements will not be subject to any Taxes imposed by the State of Connecticut or any political subdivision thereof, solely because the Pass Through Trustee maintains an office in, and administers the trusts created by the Pass Through Trust Agreements in, the State of Connecticut; (6) there are no pending or threatened actions or proceedings against the Pass Through Trustee before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would - 34 - 38 materially adversely affect the ability of the Pass Through Trustee to perform its obligations under this Agreement, the Intercreditor Agreement or any Pass Through Trust Agreement; (7) except for the issue and sale of the Certificates contemplated hereby, the Pass Through Trustee has not directly or indirectly offered any Equipment Notes for sale to any Person or solicited any offer to acquire any Equipment Notes from any Person, nor has the Pass Through Trustee authorized anyone to act on its behalf to offer directly or indirectly any Equipment Notes for sale to any Person, or to solicit any offer to acquire any Equipment Notes from any Person; and the Pass Through Trustee is not in default under any Pass Through Trust Agreement; and (8) the Pass Through Trustee is not directly or indirectly controlling, controlled by or under common control with the Owner Participant, the Owner Trustee, the Underwriter or the Lessee. (e) The Subordination Agent represents and warrants that: (1) the Subordination Agent is a duly organized national banking association, validly existing and in good standing with the Comptroller of the Currency under the federal laws of the United States of America and has the full corporate power, authority and legal right under the federal laws of the United States of America pertaining to its banking, trust and fiduciary powers to execute and deliver each of the Liquidity Facilities, the Intercreditor Agreement and this Agreement and to perform its obligations under this Agreement, the Liquidity Facilities and the Intercreditor Agreement; (2) this Agreement has been, and when executed and delivered by the Subordination Agent, each of the Liquidity Facilities and the Intercreditor Agreement will have been, duly authorized, executed and delivered by the Subordination Agent; this Agreement constitutes, and when executed and delivered by the Subordination Agent, each of the Liquidity Facilities and the Intercreditor Agreement, will constitute, the legal, valid and binding obligations of the Subordination Agent enforceable against it in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; - 35 - 39 (3) none of the execution, delivery and performance by the Subordination Agent of any of the Liquidity Facilities, the Intercreditor Agreement and this Agreement or the performance by the Subordination Agent of this Agreement, contravenes any law, rule or regulation of the State of Connecticut or any United States governmental authority or agency regulating the Subordination Agent's banking, trust or fiduciary powers or any judgment or order applicable to or binding on the Subordination Agent and do not contravene or result in any breach of, or constitute a default under, the Subordination Agent's articles of association or by-laws or any agreement or instrument to which the Subordination Agent is a party or by which it or any of its properties may be bound; (4) neither the execution and delivery by the Subordination Agent of any of the Liquidity Facilities, the Intercreditor Agreement or this Agreement nor the consummation by the Subordination Agent of any of the transactions contemplated hereby or thereby requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action with respect to, any State of Connecticut governmental authority or agency or any federal governmental authority or agency regulating the Subordination Agent's banking, trust or fiduciary powers; (5) there are no Taxes payable by the Subordination Agent imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Subordination Agent of this Agreement, any of the Liquidity Facilities or the Intercreditor Agreement (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities) solely because the Subordination Agent maintains an office and administers its trust business in the State of Connecticut, and there are no Taxes payable by the Subordination Agent imposed by the State of Connecticut or any political subdivision thereof in connection with the acquisition, possession or ownership by the Subordination Agent of any of the Equipment Notes solely because the Subordination Agent maintains an office and administers its trust business in the State of Connecticut (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions - 36 - 40 contemplated by the Intercreditor Agreement or any of the Liquidity Facilities); (6) there are no pending or threatened actions or proceedings against the Subordination Agent before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Subordination Agent to perform its obligations under this Agreement, the Intercreditor Agreement or any Liquidity Facility; (7) the Subordination Agent has not directly or indirectly offered any Equipment Note for sale to any Person or solicited any offer to acquire any Equipment Note from any Person, nor has the Subordination Agent authorized anyone to act on its behalf to offer directly or indirectly any Equipment Note for sale to any Person, or to solicit any offer to acquire any Equipment Note from any Person; and the Subordination Agent is not in default under any Liquidity Facility; and (8) the Subordination Agent is not directly or indirectly controlling, controlled by or under common control with the Owner Participant, the Owner Trustee, the Underwriter or the Lessee. (f) The Original Head Lessee represents and warrants that: (1) it is duly incorporated, validly existing and in good standing under the laws of the State of Connecticut and has the corporate power and authority to carry on its present business and operations and to own or lease its properties, has the corporate power and authority to enter into and to perform its obligations under this Agreement, Lease Amendment No. 1, the Amended and Restated Head Lease TIA, the Amended and Restated Sublease TIA and the SLV Letter Agreement (collectively, the "Original Head Lessee Transaction Documents"); each Original Head Lessee Transaction Document has been duly authorized, and upon the execution and delivery thereof will constitute, the legal, valid and binding obligations of the Original Head Lessee enforceable against it in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; - 37 - 41 (2) neither (A) the execution and delivery by the Original Head Lessee of this Agreement and each of the other Original Head Lessee Transaction Documents nor (B) compliance by it with all of the provisions hereof or thereof, (x) will contravene any law or order of any court or governmental authority or agency applicable to or binding on the Original Head Lessee, or (y) will contravene the provisions of, or constitutes or has constituted or will constitute a default under, its certificate of incorporation or by-laws or any indenture, mortgage, contract or other agreement or instrument to which the Original Head Lessee is a party or by which it or any of its property may be bound or affected, except where such contravention or default would not result in any liability to any other party hereto or have a material adverse effect on the rights or on the remedies of the other parties hereto or on its ability to perform its obligations hereunder or thereunder; (3) no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body (other than as required by the Federal Aviation Act or the regulations promulgated thereunder) is or was required, as the case may be, for the due execution, delivery or performance by the Original Head Lessee of this Agreement and each of the other Original Head Lessee Transaction Documents; (4) except as set forth in the Parent Guarantor's most recent Form 20-F filed with the Commission, there are no pending or, to its knowledge, threatened actions or proceedings against the Original Head Lessee before any court or administrative agency or arbitrator which, if determined adversely to the Original Head Lessee, would materially adversely affect the Original Head Lessee's ability to perform its obligations under this Agreement or any other Original Head Lessee Transaction Documents; (5) on the Restatement Date, the Trust Estate, the Aircraft, the Airframe, each Engine and each Part shall be free and clear of any and all Sublessor's Liens (as defined in the Sublease); (6)on the Delivery Date, the Owner Trustee received good title to the Aircraft free and clear of all Liens, except the rights of the Original Head Lessee under the Original Lease, the rights of the Sublessee under the Sublease, the Lien of the Original Indenture, the beneficial interest of the Owner Participant in the Aircraft, and Permitted Liens under the Original Lease (including, without limitation, the - 38 - 42 rights of the parties to and under the Foreign Financing Documents); (7) title to the Buyer Furnished Equipment for the Aircraft has been transferred to the Owner Trustee in accordance with Section 8(y) of the Participation Agreement. As of the Restatement Date, there are no existing Claims against Parent Guarantor or Original Head Lessee with respect to Buyer Furnished Equipment; and (8)except for the registration of the Aircraft pursuant to the Federal Aviation Act, the filing for recordation pursuant to the Federal Aviation Act (with confidential financial terms redacted) of Lease Amendment No. 1, the Amended and Restated Lease, Lease Supplement No. 2, Trust Supplement No. 2, the First Amended and Restated Indenture and Indenture Supplement No. 2, and each of the other documents referred to in Annex A hereto, all with the FAA, the filing of a Uniform Commercial Code ("UCC") amended financing statement with the Secretary of State of the State of Delaware with regard to the Original Lease, the filing of UCC termination statements with regard to the Original Head Lessee with the Secretary of State of the States of New York, Connecticut and Arizona, the filing of a protective UCC financing statement with the Secretary of State of the State of Arizona with respect to the Lease, the filing of a UCC termination statement with the Secretary of State of the State of Arizona with respect to the Sublease, and the filing of a UCC termination statement with the Secretary of State of the State of Delaware with respect to the Initial Sublease Assignment (as defined in the Original Lease) all of which financing and termination statements shall have been duly effected as of the Restatement Date (and assignments thereof and continuation statements at periodic intervals), and other than the taking of possession by the Indenture Trustee of the original counterparts of the Original Lease, Lease Amendment No. 1, the Amended and Restated Lease, and all Lease Supplements thereto (to the extent the Lease constitutes chattel paper), and the placing of the Lease identification required by Section 6(e) of the Lease, no further filing or recording of the Lease or of any other document (including any financing statement under Article 9 of the UCC of the State of Delaware, New York or Arizona) and no further action is necessary, under the laws of the United States of America or the States of Delaware, New York and Arizona in order to perfect the Owner Trustee's interest in the Aircraft as against the Lessee and any third parties, or to perfect the security interest in favor of the - 39 - 43 Indenture Trustee in the Owner Trustee's interest in the Aircraft and in the Lease. (g) The Parent Guarantor represents and warrants that: (1) it is duly organized and validly existing under the laws of Ireland and has the corporate power and authority to enter into and to perform its obligations under this Agreement; this Agreement has been duly authorized and constitutes the legal, valid and binding obligations of the Parent Guarantor enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; (2) neither (A) the execution and delivery by the Parent Guarantor of this Agreement nor (B) compliance by it with all of the provisions hereof (x) will contravene any law or order of any court or governmental authority or agency applicable to or binding on the Parent Guarantor, or (y) will contravene the provisions of, or constitutes or has constituted or will constitute a default under, its Memorandum and Articles of Association or any indenture, mortgage, contract or other agreement or instrument to which the Parent Guarantor is a party or by which it or any of its property may be bound or affected, except where such contravention or default would not result in any liability to any other party hereto or have a material adverse effect on the rights or on the remedies of the other parties hereto or on its ability to perform its obligations hereunder or thereunder; (3) no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body (other than as required by the Federal Aviation Act or the regulations promulgated thereunder) is or was required, as the case may be, for the due execution, delivery or performance by the Parent Guarantor of this Agreement; (4) except as set forth in the Parent Guarantor's most recent Form 20-F filed with the Commission, there are no pending or, to its knowledge, threatened actions or proceedings against the Parent Guarantor before any court or administrative agency or arbitrator which, if determined adversely to the Parent Guarantor, would materially adversely affect the Parent Guarantor's ability to perform its obligations under this Agreement; - 40 - 44 (5) on the Restatement Date, the Trust Estate, the Aircraft, the Airframe, each Engine and each Part shall be free and clear of any and all Sublessor's Liens (as defined in the Sublease); and (6) The representations and warranties of the Original Head Lessee contained in this Agreement are true and correct in all respects on the date made (provided that the representation and warranty with respect to Section 9(f)(8) shall be only for the benefit of the Lessee). SECTION 10. Transfer of Owner Participant's Interest. Owner Participant shall not (i) directly or indirectly sell, assign, convey or otherwise transfer (whether by operation of law, consolidation, merger, sale of assets or otherwise) any of its right, title or interest in and to the Trust Estate, the Aircraft, the Lease, this Agreement, the Trust Agreement, the Amended and Restated Head Lease TIA or any other Operative Document or any proceeds therefrom or (ii) sell, transfer or otherwise dispose of (in one or more related transactions) all or more than 75% of its property or assets (based on the book value of such property and assets) unless such sale, transfer or other disposition is made at the end of the lease term for any such property or assets; provided that, subject to the conditions set forth below, (1) Owner Participant may transfer to a Transferee (as defined below) all (but not less than all) of its right (except for such rights accruing prior to transfer), title and interest as an entirety in and to the Trust Estate, the Aircraft, this Agreement, the Trust Agreement, the Amended and Restated Head Lease TIA and each other Operative Document to which Owner Participant is a party or by which Owner Participant is bound and (2) Owner Participant may sell, transfer or otherwise dispose of all or substantially all of its property or assets in a manner that would otherwise be prohibited by clause (ii) above if, prior to any such sale, transfer or other disposition, Owner Participant transfers to a Transferee (as defined below) all (but not less than all) of its right (except for such rights accruing prior to transfer), title and interest as an entirety in and to the Trust Estate, the Aircraft, this Agreement, the Trust Agreement, the Amended and Restated Head Lease TIA and each other Operative Document to which Owner Participant is a party or by which Owner Participant is bound; and provided further, that, so long as [________] shall be the Owner Participant hereunder, nothing in this Section 10 shall restrict the right of any partner of [________] to sell, assign, convey or otherwise transfer any of its right, title or interest in [_________]. Each such transfer shall be subject to the following conditions, and Owner Participant agrees for the express benefit of each party hereto that any such transfer will comply with such conditions: (i) the Person to whom such transfer is to be made (a "Transferee") is either (A) a bank, trust company or other - 41 - 45 financial institution with a combined capital, surplus and undivided profits of, or a corporation with a tangible net worth of, in either case at least $60,000,000, (B) any partnership in which such bank, trust company, financial institution, or corporation (or a direct or indirect subsidiary of such bank, trust company, financial institution or corporation) is a general partner if such bank, trust company, financial institution or corporation furnishes to Owner Trustee, Indenture Trustee, Original Head Lessee and Lessee an agreement or agreements of such bank, trust company, financial institution or corporation guaranteeing such partnership's obligations as Owner Participant contained in this Agreement, the Trust Agreement, the Amended and Restated Head Lease TIA and each other Operative Document to which Owner Participant is a party or by which it is bound, which guarantee shall be substantially in the form attached as Exhibit A hereto, (C) any direct or indirect wholly-owned subsidiary of such bank, trust company, financial institution or corporation if such bank, trust company, financial institution or corporation furnishes to Owner Trustee, Indenture Trustee, Original Head Lessee and Lessee an agreement or agreements of such bank, trust company, financial institution or corporation guaranteeing such subsidiary's obligations as Owner Participant contained in this Agreement, the Trust Agreement, the Amended and Restated Head Lease TIA and each other Operative Document to which Owner Participant is a party or by which it is bound, which guarantee shall be substantially in the form attached as Exhibit A hereto or (D) an Affiliate or a subsidiary of Owner Participant if Owner Participant furnishes to Owner Trustee, Indenture Trustee, Original Head Lessee and Lessee an agreement whereby Owner Participant will guarantee such Affiliate's or subsidiary's obligations as Owner Participant contained in this Agreement, the Trust Agreement, the Amended and Restated Head Lease TIA and each other Operative Document to which Owner Participant is a party or by which it is bound, which guarantee shall be substantially in the form attached as Exhibit A hereto; (ii) Owner Trustee, Indenture Trustee, Original Head Lessee and Lessee shall have received at least 15 days' prior written notice of such transfer specifying the name and address of any proposed transferee and specifying the facts necessary to determine whether such proposed transferee qualifies as a "Transferee" under clause (i) above and does not violate clause (vii) below; provided that if such Transferee is an Affiliate or a subsidiary of Owner Participant, such notice may be given promptly following rather than prior to such transfer if such Transferee meets the net worth requirement set forth above on its own account without a guarantee and otherwise meets the requirements of this Section 10; - 42 - 46 (iii) upon giving effect to such transfer, such Transferee is a Citizen of the United States and such Transferee shall deliver to Lessee an affidavit to such effect; (iv) such Transferee has the requisite power and authority and legal right to enter into and carry out the transactions contemplated hereby; (v) such Transferee enters into an agreement in substantially the form attached as Exhibit B hereto whereby such Transferee confirms that it shall be deemed a party to this Agreement, the Trust Agreement, the Amended and Restated Head Lease TIA and each other Operative Document to which Owner Participant is a party or by which Owner Participant is bound, and in which such Transferee shall agree to be bound by and undertake the obligations of Owner Participant in the Operative Documents and shall make representations and warranties comparable to those of Owner Participant contained herein; (vi) such transfer does not violate any provision of the Federal Aviation Act or any rules or regulations promulgated thereunder, or create a relationship that would be in violation thereof, or violate any provisions of the Securities Act or any other applicable Federal, state or other law, rule or regulation; (vii) such Transferee is not an airline, a commercial air carrier, an air freight forwarder, any Person engaged in the business of parcel transport by air, or a subsidiary or an Affiliate of any thereof or other similar Person; (viii) an opinion of counsel of the Transferee confirming the matters referred to in clauses (iv) and (vi) above (with appropriate reliance on certificates of corporate officers or public officials as to matters of fact) and confirming that the agreement referred to in clause (v) above is the legal, valid, binding and enforceable obligation of the Transferee and that the guarantee referred to in clause (i)(B), (C) or (D) above, if any, is the legal, valid, binding and enforceable obligation of the Transferee's guarantor shall be provided, at least 3 days prior to such transfer, to Lessee, Owner Trustee, Original Head Lessee and Indenture Trustee, which shall be in form and substance reasonably satisfactory to each of them; and (x) the terms of the Operative Documents and the Amended and Restated Head Lease TIA shall not be altered. Upon any such transfer, except as the context otherwise requires, such Transferee shall be deemed "Owner Participant" for all purposes hereof and of the Trust Agreement, the Amended and Restated Head Lease TIA and each other Operative Document to - 43 - 47 which Owner Participant is a party or by which Owner Participant is bound, and shall be deemed to have made the original participation in the Aircraft previously made by Owner Participant; and except as the context otherwise requires, each reference in this Agreement, the Trust Agreement, the Amended and Restated Head Lease TIA and each other Operative Document to "Owner Participant" shall thereafter be deemed to include such Transferee as provided in this Section 10. No transfer shall release Owner Participant from its obligations hereunder, under the Trust Agreement, the Amended and Restated Head Lease TIA and under the other Operative Documents, except to the extent expressly assumed by the Transferee in accordance with this Section 10, provided, that notwithstanding such an assumption, in no event shall Owner Participant be released from its obligations hereunder or under any of the other Operative Documents with respect to claims under this Agreement or under the Trust Agreement or the Amended and Restated Head Lease TIA by or against Owner Participant which have accrued or been made prior to the date of such transfer. The transferor Owner Participant shall pay the reasonable expenses of each party hereto related to any such transfer. Each party hereto agrees, upon the request of Owner Participant, to use reasonable efforts to cooperate at no cost or expense to it with Owner Participant in complying with its obligations under the provisions of clause (A) of paragraph (6) of Section 9(c), provided that such cooperation shall not be subject to the indemnity in Section 13 of the Lease. The Lessee shall have no obligation to prevent any such deregistration or assist in maintaining or otherwise enhancing the Aircraft's eligibility for registration by restricting the use of the Aircraft. SECTION 11. Re-Registration of the Aircraft. The Indenture Trustee agrees, that if the Owner Participant consents thereto, which consent shall not be unreasonably withheld, at any time after the Restricted Use Period, Lessee may, in connection with effecting a Permitted Sublease elect to effect a change in registration of the Aircraft, at Lessee's cost and expense, so long as (a) the country of registry of the Aircraft is a country listed on Exhibit C hereto (or such other country as the Owner Participant approves) and (b) the following conditions are met: (i) unless the country of registry is Taiwan, the United States of America maintains normal diplomatic relations with the country of registry of the Aircraft, and if the country of registry is Taiwan, the United States of America maintains diplomatic relations at least as good as those in effect on the Restatement Date; and (ii) the Owner Trustee, the Owner Participant and the Indenture Trustee shall have received favorable opinions (subject to customary exceptions) addressed to each such party, from counsel of recognized reputation qualified in the laws of the relevant jurisdiction and reasonably acceptable to the Owner - 44 - 48 Participant to the effect of the following and as to such other matters as the Owner Participant may reasonably request: (A) the Owner Trustee's ownership interest in the Aircraft and interest in the Lease and any Permitted Sublease shall be recognized under the laws of such jurisdiction, (B) the obligations of Lessee, and the rights and remedies of the Owner Trustee, under the Lease shall remain valid, binding and (subject to customary bankruptcy and equitable remedies exceptions and to other exceptions customary in foreign opinions generally) enforceable under the laws of such jurisdiction (or the laws of the jurisdiction to which the laws of such jurisdiction would refer as the applicable governing law), (C) after giving effect to such change in registration, the Lien of the Indenture on the Owner Trustee's right, title and interest in and to the Aircraft, the Lease and any Permitted Sublease shall continue as a valid and duly perfected security interest (and will not adversely affect the validity of the opinions stated in paragraphs 5(a) and 5(c) of the opinion letter delivered by Freshfields on the Restatement Date in connection with the transactions contemplated by this Agreement) and all filing, recording or other action necessary to protect the same and the Owner Trustee's ownership interest in the Aircraft shall have been accomplished (or, if such opinion cannot be given at the time of such proposed change in registration because such change in registration is not yet effective, (1) the opinion shall detail what filing, recording or other action is necessary and (2) the Owner Trustee and the Indenture Trustee shall have received a certificate from Lessee that all possible preparations to accomplish such filing, recording and other action shall have been done, and such filing, recording and other action shall be accomplished and a supplemental opinion to that effect shall be delivered to the Owner Trustee and the Indenture Trustee on or prior to the effective date of such change in registration), (D) it is not necessary, solely as a consequence of such change in registration and without giving effect to any other activity of the Owner Trustee, the Owner Participant or the Indenture Trustee (or any Affiliate thereof), as the case may be, for the Owner Trustee, the Owner Participant or the Indenture Trustee to qualify to do business in such jurisdiction, (E) there is no tort liability of the owner of an aircraft not in possession thereof under the laws of such jurisdiction (it being agreed that, in the event such latter opinion cannot be given in a form satisfactory to the Owner Participant, such opinion shall be waived if insurance - 45 - 49 reasonably satisfactory to the Owner Participant is provided to cover such risk), (F) (unless Lessee shall have agreed, or pursuant to the Lease shall have been required, to provide insurance covering the risk of requisition of use of such Aircraft by the government of such jurisdiction so long as such Aircraft is registered under the laws of such jurisdiction) the laws of such jurisdiction require fair compensation by the government of such jurisdiction payable in currency freely convertible into Dollars for the loss of use of such Aircraft in the event of the requisition by such government of such use. In addition, as a condition precedent to any such change in registration, (i) the insurance required by Section 12 of the Lease shall be in full force and effect at the time of such change in registration after giving effect to such change in registration and the Owner Trustee and the Indenture Trustee shall have received a certificate of the type described in Section 12(f) of the Lease, (ii) the aircraft maintenance standards of the new country of registry shall be not materially less stringent from those of the United States of America or not materially less stringent from those of the United Kingdom and the Owner Trustee and the Indenture Trustee shall have received a certificate to such effect signed by the President, any Executive Vice President or any Senior Vice President of Lessee which certificate shall, as among the parties hereto, be presumed to be correct as to the matters stated therein absent conclusive evidence to the contrary and (iii) such re-registration shall not be in conflict with, and all action shall be taken as may be required by the terms of, Section [__] and [__] of the Foreign Lease Agreement [other agreements] in connection with such change in registration. Lessee shall pay all reasonable costs, expenses, fees, and recording and registration taxes, including the reasonable fees and expenses of counsel to the Owner Trustee, the Owner Participant and the Indenture Trustee and of counsel delivering any opinions required pursuant to Section [__] and [__] of the Foreign Lease Agreement [other agreements], and other charges in connection with any such change in registration. At any time during the Term of the Lease, the Owner Trustee, the Indenture Trustee and the Owner Participant shall, subject to the terms and conditions hereof, at the request and sole expense of the Lessee (1) cooperate with Lessee in effecting a change in registration of the Aircraft pursuant to this Section 11 and, in connection therewith, execute such documents and instruments as may be reasonably requested by Lessee and (2) cooperate with the Lessee to comply with all the terms of Section 15.02(b) of the Foreign Lease Agreement. Except as provided in this Section 11, the Owner Trustee shall not cause any change in the registration of the Aircraft pursuant to Section 15.02(b) of the Foreign Lease Agreement during the Term of the Lease. Anything herein or in any other Operative Document to the - 46 - 50 contrary notwithstanding, at no time during the term of the Foreign Lease Agreement shall the Lessee register, or permit any Permitted Sublessee to register, the Aircraft in Hong Kong or, after Hong Kong becomes a part of the People's Republic of China, the People's Republic of China. SECTION 12. Quiet Enjoyment. Each of the Trust Company, Owner Trustee, Owner Participant (as to itself and as to Owner Trustee), Indenture Trustee in its individual capacity and as Indenture Trustee and on behalf of the Note Holders, the Pass Through Trustee and the Subordination Agent severally covenants and agrees that during the Term, so long as no Lease Event of Default shall have occurred and be continuing and the Lease shall not have been declared or deemed in default, no action shall be taken or caused to be taken by it or a Person lawfully claiming by, through or on behalf of it to interfere with the right of Lessee or any Permitted Sublessee to the possession, use, operation and quiet enjoyment of and other rights with respect to the Aircraft under the Lease, and all rents, revenues, profits and income therefrom, in accordance with the terms of the Lease; provided that the Trust Company, Owner Trustee and Owner Participant shall not be liable for any such interference by Indenture Trustee, Pass Through Trustee, holders of any Equipment Notes, or any other Person lawfully claiming by, through or on behalf of them. SECTION 13. Liens. Each of the Trust Company, Owner Trustee and Owner Participant severally covenants and agrees with each other party hereto that it shall not cause or permit to exist a Lessor's Lien or Head Lessor's Lien attributable to it with respect to the Aircraft or any other portion of the Trust Estate or the Indenture Estate. Each of Trust Company, Owner Trustee and Owner Participant severally agrees that it will promptly, at its own expense (and without any right of indemnification or reimbursement from Lessee), take such action as may be necessary duly to discharge any such Lessor's Lien or Head Lessor's Lien attributable to it and to make restitution to the Trust Estate and the Indenture Estate for any diminution of the assets thereof resulting therefrom and will indemnify and hold harmless Lessee and each Indemnitee against any claims incurred or suffered by any such Person and any reduction in amounts payable out of, or diminution in the assets of, the Trust Estate or the Indenture Estate resulting from any such Lessor's Lien or Head Lessor's Lien attributable to it. For all purposes of this Agreement and the other Operative Documents, any Lessor's Lien or Head Lessor's Lien arising as a result of the nonpayment of any Tax imposed on or measured by the net income of the Trust Estate or the trust created by the Trust Agreement that is not indemnifiable by Lessee or Original Head Lessee shall be deemed to be attributable to Owner Participant, and Owner Participant shall be responsible for all Lessor's Liens attributable to Owner Participant and Owner Trustee. - 47 - 51 Each of the Indenture Trustee, Pass Through Trustee and Subordination Agent severally covenants and agrees with each other party hereto that it shall not cause or permit to exist a Trustee's Lien (as defined below) attributable to it with respect to the Aircraft or any other portion of the Trust Estate or the Indenture Estate. Each of Indenture Trustee, Pass Through Trustee and Subordination Agent severally agrees that it will promptly, at its own expense (and without any right of indemnification or reimbursement from Lessee), take such action as may be necessary duly to discharge any such Trustee's Lien attributable to it and to make restitution to the Trust Estate and the Indenture Estate for any diminution of the assets thereof resulting therefrom and will indemnify and hold harmless Lessee and each Indemnitee against any claims incurred or suffered by any such Person and any reduction in amounts payable out of, or diminution in the assets of, the Trust Estate or the Indenture Estate resulting from any such Trustee's Lien attributable to it. For purposes of this paragraph, "Trustee's Lien" means any Lien or disposition of title attributable to Indenture Trustee in its individual capacity (and not as Indenture Trustee), Pass Through Trustee in its individual capacity (and not as Pass Through Trustee) or Subordination Agent in its individual capacity (and not as Subordination Agent) on or in respect of (as the case may be) the Aircraft or any other portion of the Trust Estate or the Trust Indenture Estate arising as a result of (i) Claims against such Person not related to its interest in the Aircraft or the administration of the Trust Estate or the Trust Indenture Estate pursuant to the Indenture, whether under Section 9-207(2)(e) of the Uniform Commercial Code or otherwise, (ii) acts or omissions of such Person not contemplated hereunder or under the other Operative Documents, or acts or omissions of such Person which are in violation of any of the Operative Documents, (iii) Taxes imposed on or Claims against such Person which are excluded from indemnification by Lessee, or (iv) Claims against such Person arising out of the voluntary or involuntary transfer by such Person of all or any portion of its interest in the Aircraft, the Airframe, any Engine, the Trust Estate, the Trust Indenture Estate or the Operative Documents (except a Claim resulting from the exercise of remedies under and in accordance with the Indenture or for a transfer provided for in the Operative Documents). Each of the Original Head Lessee and Parent Guarantor jointly and severally covenants and agrees with each other party hereto that it shall not cause or permit to exist a Sublessor's Lien (as defined in the Sublease) attributable to it or other Lien or disposition of title created by or through Original Head Lessee, Parent Guarantor or any Affiliate of either thereof which would have constituted a Sublessor's Lien had the Sublease remained in effect with respect to the Aircraft or any other portion of the Trust Estate or the Indenture Estate. Each of the Original Head Lessee and Parent Guarantor severally agrees that it will promptly, at its own expense (and without any right of indemnification or reimbursement from Lessee), take such action - 48 - 52 as may be necessary duly to discharge any such Sublessor's Lien attributable to it or other Lien or disposition of title created by or through Original Head Lessee, Parent Guarantor or any Affiliate of either thereof which would have constituted a Sublessor's Lien had the Sublease remained in effect and to make restitution to the Trust Estate and the Indenture Estate for any diminution of the assets thereof resulting therefrom and will indemnify and hold harmless Lessee and each Indemnitee against any claims incurred or suffered by any such Person and any reduction in amounts payable out of, or diminution in the assets of, the Trust Estate or the Indenture Estate resulting from any such Sublessor's Lien attributable to it or other Lien or disposition of title created by or through Original Head Lessee, Parent Guarantor or any Affiliate of either thereof which would have constituted a Sublessor's Lien had the Sublease remained in effect. In no event will Lessee be liable for any Claims resulting from, pertaining to, arising from, or related to the granting, creation or existence of a Lessor's Lien, a Head Lessor's Lien, a Lenders' Lien, or a Sublessor's Lien (including, without limitation, Claims against Lessor and Original Head Lessee with respect to Buyer Furnished Equipment) or other Lien or disposition of title created by or through Original Head Lessee, Parent Guarantor or any Affiliate of either thereof which would have constituted a Sublessor's Lien had the Sublease remained in effect. The Parent Guarantor covenants and agrees that it shall cause the Original Head Lessee to perform its obligations under this Section 13. SECTION 14. Certain Additional Provisions Relating to Original Head Lessee, Parent Guarantor, Trust Company, Owner Trustee and Owner Participant. (a) Each of Owner Participant and Trust Company hereby agrees with Lessee and Indenture Trustee (i) to comply with the terms of the Trust Agreement, (ii) not to amend, supplement, or otherwise modify the Trust Agreement except in accordance with the terms thereof, provided that any such amendment, supplement or modification shall not adversely affect the Lessee or the Lien of the Indenture, and (iii) not to terminate or revoke the Trust Agreement except in accordance with the terms thereof, provided that any such termination or revocation shall not adversely affect the Lessee or the Lien of the Indenture. (b) Notwithstanding anything to the contrary in the Trust Agreement or Section 14(a) hereof, but subject always to the provisions of Section 14(c) hereof, Owner Participant shall not consent to or direct a change in the situs of the Trust Estate so long as a successor Owner Trustee meeting the requirements of the Trust Agreement is reasonably available at the present situs of the Trust Estate (A) unless the Indenture Trustee, the Original Head Lessee and Lessee shall have been - 49 - 53 given 30 days' prior notice thereof and (B) if, within 15 days after notice of such a proposed change is given to Lessee and the Original Head Lessee, either (1) Lessee or Original Head Lessee delivers to Owner Participant and Owner Trustee (at the expense of Owner Participant) an opinion of counsel, which counsel shall be reasonably satisfactory to Owner Participant and Owner Trustee, to the effect that such proposed change in the situs of the Trust Estate would have an adverse effect on the rights or obligations of Lessee or Original Head Lessee or (2) Lessee or Original Head Lessee delivers to Owner Participant and Owner Trustee (at the expense of Owner Participant) an opinion of counsel, which counsel shall be reasonably satisfactory to Owner Participant and Owner Trustee, to the effect that such proposed change in the situs of the Trust Estate would cause an increase in the amount for which Lessee may be required to indemnify any Person pursuant to the provisions of Section 10 of the Lease or for which Original Head Lessee is required to indemnify any Person pursuant to the provisions of the Amended and Restated Head Lease TIA, unless any and all Persons entitled to indemnification pursuant to Section 10 of the Lease or applicable provision of the Amended and Restated Head Lease TIA shall waive indemnification under Section 10 of the Lease or applicable provision of the Amended and Restated Head Lease TIA for any adverse tax or other consequences to it of such a change in the situs of the Trust Estate, (C) unless Indenture Trustee receives from Owner Participant an opinion of counsel, which counsel shall be reasonably satisfactory to Indenture Trustee, to the effect that such proposed change in the situs of the Trust Estate would not have an adverse effect on the validity or priority of the Lien of the Indenture and that such Uniform Commercial Code and FAA filings as are required to maintain the validity and priority of the Lien of Indenture have been made, and (D) such change does not affect the registration of the Aircraft. (c) Owner Participant agrees that if, at any time, the Trust Estate has become, or in Lessee's good faith opinion will become, subject to any Taxes for which it is indemnified pursuant to Section 10 of the Lease and if, as a consequence thereof, Lessee should request that the situs of the trust be moved to another state in the United States of America from the state in which it is then located, the situs of the trust shall be moved and Owner Participant will take whatever action may be requested by Lessee that is reasonably necessary to accomplish such removal; provided that (A) Lessee shall provide such additional tax indemnification with respect to such change of situs and request of Lessee as Original Head Lessee, Owner Participant or the Indenture Trustee (subject to the exclusions set forth in Section 10(b) of the Lease and the exclusions in the Amended and Restated Head Lease TIA) may reasonably request, (B) promptly after notice thereof Owner Participant has not notified Lessee and provided reasonable evidence of an adverse effect on Owner Participant's rights or obligations under the Trust Agreement, (C) Indenture Trustee shall have received an opinion of counsel selected by Lessee, which counsel shall be reasonably satisfac- - 50 - 54 tory to Indenture Trustee, to the effect that the validity and priority of the Lien of the Indenture will not be adversely affected by such action, and that such Uniform Commercial Code and FAA filings as are required to maintain the validity and the priority of the Lien of the Indenture have been made, (D) Owner Participant and Indenture Trustee shall have received an opinion or opinions of counsel selected by Owner Participant to the effect that, with customary exceptions, (I) the trust, as thus removed, shall remain a validly established trust, (II) any amendments to the Trust Agreement or the Indenture necessitated by such removal shall have been duly authorized, executed and delivered by the parties thereto and shall constitute the legal, valid and binding obligations of such parties, enforceable in accordance with their terms, (III) if such removal involves the replacement of Owner Trustee, an opinion of counsel to such successor Owner Trustee in form and substance reasonably satisfactory to Indenture Trustee and to Owner Participant covering the matters described in the opinion described in Section 3(j) hereof, and (IV) covering such other matters as Owner Participant or the Indenture Trustee may reasonably request, and (E) Lessee shall indemnify and hold harmless on an after tax basis Owner Trustee, Owner Participant and their respective Affiliates and Indenture Trustee against any and all reasonable and actual costs and expenses including reasonable attorneys' fees and disbursements, registration, recording or filing fees and other Taxes incurred by Owner Trustee, Owner Participant and their respective Affiliates, or Indenture Trustee in connection with such change of situs and shall indemnify and hold harmless Owner Participant, Owner Trustee and their respective Affiliates, and Indenture Trustee on an after tax basis (subject to the exclusions set forth in Section 10(b) of the Lease and the Amended and Restated Sublease TIA) from and against any increase in Taxes borne by such Person that results from such change in situs. In no event shall any change in situs of the trust affect Original Head Lessee's rights or obligations under the Amended and Restated Head Lease TIA. (d) Owner Trustee or any successor may resign or be removed by Owner Participant, a successor Owner Trustee may be appointed, and a corporation may become Owner Trustee under the Trust Agreement, only in accordance with the provisions of Article X of the Trust Agreement. Owner Participant agrees promptly to appoint a successor Owner Trustee in the event that Owner Participant has actual knowledge that Owner Trustee is not in compliance with its covenants contained herein. No successor Owner Trustee shall be appointed unless Lessee and Indenture Trustee shall have given written consent thereto, which consent shall not be unreasonably withheld. Owner Participant will not instruct Owner Trustee to terminate any Operative Document or take any action thereunder in violation of the terms thereof. Owner Participant shall not transfer any interest in the Trust Estate except in compliance with Section 10 hereof and the Trust Company shall not permit Owner Trustee to engage in any business other than owning and leasing the Aircraft as contemplated - 51 - 55 hereby. Lessee shall pay expenses on an after tax basis relating to the resignation or, if requested by Lessee, the removal of Owner Trustee, provided that the Owner Participant shall pay expenses relating to the removal of the Owner Trustee, if such removal was solely at the request of the Owner Participant. (e) The Trust Company agrees that if at any time it shall obtain actual knowledge that it has ceased to be or will likely cease to be a Citizen of the United States, it will promptly resign as Owner Trustee (if and so long as such citizenship is necessary under such Federal Aviation Act or any other law to permit the continued registration of the Aircraft in the name of the Lessor or, if it is not necessary, if and so long as Owner Trustee's citizenship would have any material adverse effect on any holder of Equipment Notes, the Lessee or any Permitted Sublessee), effective upon the appointment of the successor Owner Trustee in accordance with Section 10.1 of the Trust Agreement. (f) The Owner Participant hereby instructs the other parties hereto to deal directly with the Managing Partner as managing partner of the Owner Participant and the Owner Participant agrees that the other parties hereto will be entitled to rely conclusively on any consent, waiver, approval or other action taken by the Managing Partner as managing partner of the Owner Participant. (g) The Parent Guarantor hereby agrees, for the benefit of the Indenture Trustee, that in the event any Termination Sum and/or Supplemental Residual Value (as such terms are defined in the Foreign Lease Agreement) not payable by the Security Agent under its Payment Assumption Agreement (as such terms are defined in the Foreign Lease Agreement) but covered by that certain Non-transferable and Irrevocable Stand-by Letter of Credit No. G90/44 (as at any time amended or otherwise modified or replaced, the "Letter of Credit") issued by Swiss Bank Corporation or any replacement letter of credit issuer ("Issuing Bank") in favor of the Foreign Lessor shall at any time become due and payable under the Foreign Lease Agreement to Foreign Lessor, then the Parent Guarantor shall cause the same to be duly paid to the Foreign Lessor by directing GPAG Caymans to instruct the Foreign Lessor to satisfy such payment obligation by making a drawing therefor under the Letter of Credit in accordance with the terms thereof. Each of the Parent Guarantor and the Indenture Trustee agree not to amend the provisions of this Section 14(g) without the prior written consent of the Rating Agencies (as defined in the Intercreditor Agreement). SECTION 15. Certain Retained Rights and Releases. (a) Each of Owner Trustee, Indenture Trustee, Lessee and Owner Participant hereby agrees and consents to and confirms that it is bound by the terminations, assignments, delegations, releases and amendments set forth in or contemplated by Lease Amendment No. 1 and the Amended and Restated Lease. - 52 - 56 (b) Each of Parent Guarantor, Original Head Lessee and Lessee agree as among themselves that the following rights, benefits, obligations and liabilities (such rights, benefits, obligations and liabilities are, collectively, the "Retained Sublease Rights and Obligations"), shall survive the termination of the Sublease and the Sublease Guaranty: (i) Lessee, Original Head Lessee and Parent Guarantor shall retain all rights, benefits, obligations and liabilities under the Sublease, including that Sublessee shall remain liable for all of its obligations under Sections 10 and 13 of the Sublease, with respect to the period up to (but excluding) the Restatement Date and each of Parent Guarantor, Original Head Lessee and Lessee shall retain all rights and liabilities under any provision of the Sublease which by the express terms thereof survives the termination or expiration thereof (including, without limitation, any such liability arising from and including the Restatement Date under the Sublease in respect of the period up to (but excluding), or acts or omissions or circumstances arising prior to (but excluding), the Restatement Date), (ii) all rights, benefits, obligations and liabilities under the Sublease TIA (which rights, benefits, obligations and liabilities are amended and restated as of the Restatement Date) and (iii) Original Head Lessee and Parent Guarantor shall remain liable to Sublessee under the Sublease and the Sublease Guaranty for Sublessor's Liens (as therein defined); all of which rights, benefits, obligations and liabilities shall expressly survive the termination of the Sublease and the Sublease Guaranty. In furtherance of the foregoing, it is agreed that (x) Original Head Lessee shall continue to be liable to the Sublessee as and to the extent provided hereunder for removal of Sublessor's Liens and (y) Parent Guarantor is hereby released from any and all obligations and liabilities under the Sublease Guaranty, other than in respect of the obligations and liabilities of the Original Head Lessee in respect of Sublessor's Liens as provided above. (c) Each of the Lessee, Owner Trustee and Owner Participant agree as among themselves that the following rights, benefits, obligations and liabilities shall survive the termination of the Sublease: Lessee, and Owner Trustee, Owner Participant and the other "Indemnitees" (as such term is defined in the Sublease) other than Original Head Lessee and Parent Guarantor, shall retain all rights, benefits, obligations and liabilities under the Sublease, including that Sublessee shall remain liable for all of its obligations under Sections 10 and 13 of the Sublease, with respect to the period up to (but excluding) the Restatement Date and each of Lessee, Owner Trustee and Owner Participant shall retain all rights and liabilities under any provision of the Sublease which by the express terms thereof survives the termination thereof (including, without limitation, any such liability arising on or after the Restatement Date under the Sublease in respect of the period up to (but excluding), or acts or omissions or circumstances arising prior to (but excluding), the Restatement Date), all of which rights, benefits, - 53 - 57 obligations and liabilities shall expressly survive the termination of the Sublease. In furtherance of the foregoing, it is agreed by Sublessee that the indemnities contained in Sections 10 and 13 of the Sublease are expressly made for the benefit of and shall be enforceable by each Indemnitee (as such term is defined in the Sublease). (d) Except with respect to the Sublease and the Sublease TIA to the extent provided in Section 15(b) and (c) hereof, it is expressly understood and agreed by each of the parties hereto that the Original Head Lessee and the Parent Guarantor shall, as of the Restatement Date, have no liabilities or obligations under the "Operative Documents" (as defined in the Original Head Lease as in effect immediately prior to (but excluding) the Restatement Date and excluding the Head Lease TIA (which rights, benefits, obligations and liabilities are amended and restated as of the Restatement Date)) and are released from all such obligations and liabilities, except the Original Head Lessee and the Parent Guarantor pursuant to the Parent Head Lease Guaranty (i) shall continue to be liable to the parties hereto for the removal of any Sublessor's Liens and (ii) (without releasing Sublessor as provided in the Sublease) each of the Original Head Lessee, the Parent Guarantor, the Owner Trustee, the Indenture Trustee and the Owner Participant agree as among themselves and for the benefit of the other "Indemnitees" (as such term is defined in the Original Head Lease) that all rights, benefits, obligations and liabilities under Sections 7(c) and 7(d) of the Participation Agreement with respect to the period up to (but excluding) the Restatement Date and under any other provision of the Participation Agreement which by the express terms thereof survives the termination thereof (including, without limitation, any such liability arising from and including the Restatement Date under the Participation Agreement in respect of the period up to (but excluding), or acts or omissions or circumstances arising prior to (but excluding), the Restatement Date) shall survive the termination of the Participation Agreement, the Original Head Lease and the Parent Head Lease Guaranty (the foregoing surviving rights, benefits, obligations and liabilities of Parent Guarantor and Original Head Lessee, are, collectively, the "Retained Head Lease Rights and Obligations"). In furtherance of the foregoing, the parties hereto consent and agree that the Parent Guarantor is hereby released from any and all "Obligations" under and as defined in the Parent Head Lease Guaranty, except in respect of the Retained Head Lease Rights and Obligations and except in respect of the Amended and Restated Head Lease TIA, the "Obligations" in respect of which shall continue in full force and effect in accordance with the Parent Head Lease Guaranty and are hereby ratified and confirmed by the Parent Guarantor. (e) The Owner Participant hereby directs the Owner Trustee, and the Owner Trustee hereby agrees for the benefit of the Owner Participant, the Indenture Trustee, the Original Head Lessee, the Parent Guarantor and the Lessee that it shall (so - 54 - 58 long as no Event of Default under the Lease shall have occurred and be continuing and the Lease shall not have been declared or deemed in default): (i) (A) with respect to the Foreign Financing Documents to which it is or is made a party (or under which it has rights or obligations), and subject to the terms and conditions thereof, comply with all of the provisions with which it has undertaken to comply pursuant to the Foreign Lease Assignment, the Hire Purchase Agreement and the Foreign Power of Attorney that impose on Owner Trustee a duty or obligation, if and to the extent not performed or complied with, or required to be performed or complied with, by the Original Head Lessee, and not knowingly take any affirmative action that is in violation of any provisions (whether or not the Owner Trustee is bound by such provisions) of such Foreign Financing Documents or this Section 15(e), (B) observe and fulfill, to the best of its ability, all conditions to be fulfilled by it pursuant to any of the Foreign Financing Documents in order to exercise rights under such documents which are vested in it, and (C) except as provided in paragraphs (iv) and (vii) below and in Section 15(f), not exercise any discretionary actions under or with respect to the Foreign Financing Documents except solely at the written direction or with written consent of the Original Head Lessee or, if an Event of Default under the Lease shall have occurred and be continuing and the Lease shall have been declared or deemed to be in default, of the Indenture Trustee (so long as the Lien of the Indenture shall not have been discharged) or the Owner Participant (thereafter) and the Trust Company shall comply with any such directions given in accordance with the provisions of this Section 15; (ii) not amend, supplement or otherwise modify or waive any provision of the Foreign Financing Documents or consent to any such amendment, supplement, modification or waiver, or grant any consent requested under any provision thereof, in any such case without the prior written consent of the Original Head Lessee, the Parent Guarantor, the Owner Participant, and (so long as the Lien of the Indenture shall not have been discharged) the Indenture Trustee and, if any obligation of the Lessee would be increased thereby or any right of the Lessee decreased thereby, the Lessee; (iii) deliver promptly to the Original Head Lessee, the Lessee and (so long as the Lien of the Indenture shall not have been discharged) the Indenture Trustee, copies of all notices and other documents given by the Owner Trustee or received by it under any of the Foreign Financing Documents and copies of all amendments, supplements and modifications entered into from time to time to any Foreign Financing Documents to which it is or is made a party (or - 55 - 59 under which it possesses rights) unless such persons shall have received such material from another source; (iv) carry out the sale of the Aircraft contemplated by Section 2.03 of the Foreign Lease Agreement and the Foreign Power of Attorney upon any termination of the Foreign Lease Agreement, it being understood that the Owner Trustee is to sell the Aircraft to itself, as permitted by the Foreign Lease Agreement, to offset its right to a rebate of all but US $1,300 of the sale proceeds against the obligation to remit such sale proceeds to the Foreign Lessor, and to give notice to the Escrow Agent under the Escrow Agreement to deliver the conveyance documents to and in the name of the Owner Trustee; (v) exercise the rights of termination provided for in Sections 2.02(a) and 21.01 of the Foreign Lease Agreement, effective as of any time when such rights of termination are exercisable under said Sections 2.02(a) and 21.01 at the direction of the Original Head Lessee, except during such time as an Event of Default under the Lease shall have occurred and be continuing; (vi) exercise the right of termination provided for in Section 17.02(a) of the Foreign Lease Agreement upon the occurrence of a Casualty Occurrence (as defined therein), at the direction of Original Head Lessee, except during such time as an Event of Default under the Lease shall have occurred and be continuing; (vii) exercise the right of termination provided for in Section 2.02(b) of the Foreign Lease Agreement at the direction of the Indenture Trustee so long as the Lien of the Indenture shall not have been discharged and thereafter by the Owner Trustee; (viii) exercise the right to terminate the Hire Purchase Agreement, at the direction of the Original Head Lessee, except during such time as an Event of Default under the Lease shall have occurred and be continuing; and (ix) not exercise any right to terminate or revoke any Foreign Financing Document, except as provided in this Section 15. (f) Provided that no Event of Default under the Lease shall have occurred and be continuing and the Lease shall not have been declared or deemed in default, any rights or claims that the Owner Trustee or the Indenture Trustee may have against the Foreign Lessor with respect to any of its representations, warranties and covenants under the Foreign Lease Agreement or any of the other Foreign Financing Documents may be enforced by the Original Head Lessee on behalf of the Owner Trustee or the Indenture Trustee, directly by the Original Head Lessee in its - 56 - 60 own name or in the name of the Owner Trustee or the Indenture Trustee; provided that if such rights or claims are exercised by the Owner Trustee or the Indenture Trustee (i) the Original Head Lessee shall be subrogated to any such rights of the Owner Trustee or the Indenture Trustee to the extent of any recovery by the Owner Trustee in respect thereof and (ii) no such right or claim shall be enforced in a manner inconsistent with the provisions of this Section 15 specifying the party or parties entitled to take particular actions. (g) The Indenture Trustee shall not exercise any of the Owner Trustee's rights under the Foreign Financing Documents that have been assigned to the Indenture Trustee pursuant to the Indenture except as provided therein and in this Section 15. The Indenture Trustee consents to the performance by the Owner Trustee of the Owner Trustee's obligations under Sections 15(e) and 15(f) hereof and to the Original Head Lessee's and the Parent Guarantor's rights set forth therein. SECTION 16. Certain Additional Obligations of the Lessee, the Owner Trustee, the Owner Participant and the Indenture Trustee. Each of Lessee, Owner Trustee, Owner Participant and Indenture Trustee hereby covenants and agrees for the benefit of each other that it will be bound by the terms of the other Operative Documents to which it or its applicable trustee is a party, and comply with and perform its agreements, covenants and indemnities set forth in the other Operative Documents (the provisions of which are hereby incorporated herein) to which it or its applicable trustee is a party, as amended, supplemented or otherwise modified from time to time as permitted hereby. SECTION 17. Lessee Protection of Title. Each of the Owner Trustee and the Indenture Trustee agrees to execute and deliver such documents or other instruments as the Lessee may reasonably request to enable the Lessee to perform its obligations under Section 15 of the Lease for the benefit of such Person. SECTION 18. Jurisdictional and Related Matters. (a) Jurisdiction. Each of Owner Participant, Owner Trustee, Trust Company, Indenture Trustee, Original Head Lessee, Parent Guarantor and Lessee (i) hereby irrevocably submits for itself and its property to the nonexclusive jurisdiction of the courts of the State of New York in New York County, and to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement, the Lease or any other Operative Document or any of the transactions contemplated hereby or thereby, and (ii) hereby waives, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, to the extent permitted by applicable law, any immunity (including, without limitation, sovereign immunity), that the suit, action or pro- - 57 - 61 ceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper, or that this Agreement, the Lease or any other Operative Document or any of the transactions contemplated hereby or thereby may not be enforced in or by such courts. (b) Service of Process. Lessee generally consents to service of process by registered mail, return receipt requested, addressed to it at 4000 East Sky Harbor Blvd., Phoenix, Arizona 85034 or such other office of Lessee as from time to time may be designated by Lessee in writing to Owner Trustee, Original Head Lessee, Owner Participant and Indenture Trustee. Parent Guarantor hereby appoints Paul, Hastings, Janofsky & Walker LLP, Attention: John Howitt/Leigh Ryan, located at 399 Park Avenue, New York, New York 10022, as its agent for service of process, and covenants and agrees that service of process in any suit, action or proceeding may be made upon it at the office of such agent or such other office of Parent Guarantor or such other agent, as from time to time may be designated by Parent Guarantor in writing to Owner Trustee, Owner Participant and Indenture Trustee. Original Head Lessee hereby generally consents to service of process by registered mail, return receipt requested, addressed to it c/o GPA Corporation at 83 Wooster Heights Road, Danbury, Connecticut 06810 or such other office of Original Head Lessee as from time to time may be designated by Original Head Lessee in writing to Owner Trustee, Owner Participant and Indenture Trustee. Owner Participant generally consents to service of process by registered mail, return receipt requested, addressed to it c/o Security Pacific Leasing Corporation at 555 California Street, San Francisco, California 94104 or such other office of Owner Participant as from time to time may be designated by Owner Participant in writing to Owner Trustee, Original Head Lessee, Lessee and Indenture Trustee. Owner Trustee generally consents to service of process by registered mail, return receipt requested, addressed to it at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001 or such other office of Owner Trustee as from time to time may be designated by Owner Trustee in writing to Owner Participant, Original Head Lessee, Lessee and Indenture Trustee. Indenture Trustee generally consents to service of process by registered mail, return receipt requested, addressed to it at 450 West 33rd Street, 15th Floor, New York, New York 10001 or such other office of Indenture Trustee as from time to time may be designated in writing to Owner Participant, Original Head Lessee, Owner Trustee and Lessee. (c) Judgments. A final judgment (the enforcement of which has not been stayed) against Owner Participant, Owner Trustee, Lessee, Original Head Lessee, Parent Guarantor and Indenture Trustee obtained in any suit in the court of the State of New York in New York County or in the United States District Court for the Southern District of New York shall be conclusive, and, to the extent permitted by applicable law, may be enforced in other jurisdictions by suit on the judgment, a certified or - 58 - 62 true copy of which shall be conclusive evidence of the fact and of the amount of any indebtedness or liability of Lessee therein described; provided that the plaintiff at its option may bring suit, or institute other judicial proceedings against, Lessee or any of its assets in the courts of any country or place where Lessee or such assets may be found. SECTION 19. Limitation on Recourse. The provisions of Section 2.03(a) of the Indenture are hereby incorporated herein by reference mutatis mutandis as fully and with the same force and effect as if set forth in full. SECTION 20. Notices. Unless otherwise specifically provided herein, all notices required or permitted by the terms of this Agreement shall be in English and in writing, and shall be sent to the Original Head Lessee, the Parent Guarantor, the Lessee, the Owner Participant, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, at their respective addresses or facsimile numbers set forth below the signatures of such parties at the foot of this Agreement and any such notice shall become effective when received. SECTION 21. Expenses. (a) Subject to receipt by the Original Head Lessee of invoices therefor in reasonable detail, all of the reasonable out-of-pocket costs, fees and expenses incurred by the Lessee, the Owner Trustee, the Owner Participant, the Pass Through Trustee, the Subordination Agent, the Liquidity Provider, the Indenture Trustee and the Original Certificate Holders in connection with the transactions contemplated by this Agreement, the other Operative Documents, the Lease, the Pass Through Trust Agreements, the Intercreditor Agreement, the Liquidity Facilities and the Underwriting Agreement (except, in each case, as otherwise provided therein) shall be paid by the Original Head Lessee, including, without limitation: (1) the reasonable fees, expenses and disbursements allocable to the Equipment Notes issued under the Indenture of (A) Kelley Drye & Warren LLP, special counsel for the Indenture Trustee, (B) Shipman & Goodwin LLP, special counsel for the Pass Through Trustee and the Subordination Agent, (C) Morris, James, Hitchens & Williams, special counsel for the Owner Trustee, (D) Daugherty, Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma and (E) Milbank, Tweed, Hadley & McCloy, special counsel for the Underwriter; (2) the reasonable fees, expenses and disbursements of White & Case, special counsel for the Owner Participant; (3) the reasonable fees, expenses and disbursements of Andrews & Kurth L.L.P. and Latham & Watkins, special counsel for the Lessee; - 59 - 63 (4) underwriting fees and commissions; (5) the initial fees and expenses of the Liquidity Provider, the Pass Through Trustee, the Indenture Trustee, the Owner Trustee and the Subordination Agent; (6) the costs of filing and recording documents with the FAA and filing Uniform Commercial Code financing statements in the United States of America; and (7) the reasonable fees, expenses and disbursements of White & Case, special counsel for the Liquidity Provider. (b) In the event that the transactions contemplated by this Section 21 and the agreements referred to herein are not consummated, the Original Head Lessee shall bear and pay all costs, expenses and fees referred to in this Section 21. (c) The Lessee agrees to pay the amounts it is obligated to pay under Section 21(j) of the Lease. SECTION 22. Reliance of Liquidity Provider. Each of the parties hereto agrees and acknowledges that the Liquidity Provider shall be a third party beneficiary of each of the representations and warranties made herein by such party, and that the Liquidity Provider may rely on such representations and warranties to the same extent as if such representations and warranties were made to the Liquidity Provider directly. The terms of this Agreement shall inure to the benefit of the Liquidity Provider, its successors and permitted assigns. SECTION 23. Miscellaneous. (a) Provided that the transactions contemplated hereby have been consummated, and except as otherwise provided for herein, the representations and warranties herein of the Original Head Lessee, the Parent Guarantor, the Lessee, the Owner Trustee, the Indenture Trustee, the Owner Participant, the Subordination Agent and the Pass Through Trustee shall survive the execution and delivery of this Agreement. This Agreement may be executed in any number of counterparts (and each of the parties hereto shall not be required to execute the same counterpart). Each counterpart of this Agreement, including a signature page executed by each of the parties hereto, shall be an original counterpart of this Agreement, but all of such counterparts together shall constitute one instrument. Neither this Agreement nor any of the terms hereof may be terminated, amended, supplemented, waived or modified orally, but only by an instrument in writing signed by each party hereto; and no such termination, amendment, supplement, waiver or modification shall be effective unless a signed copy thereof shall have been delivered to each party hereto. The index preceding this Agreement and the headings of the various Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof. The terms of this Agreement shall be binding - 60 - 64 upon, and shall inure to the benefit of, the Original Head Lessee and its successors and permitted assigns, the Parent Guarantor and its successors and permitted assigns, the Lessee and its successors and permitted assigns, the Pass Through Trustee and its successors as Pass Through Trustee (and any additional trustee appointed) under any of the Pass Through Trust Agreements, the Indenture Trustee and its successors as Indenture Trustee (and any additional Indenture Trustee appointed) under the Indenture, the Subordination Agent and its successors as Subordination Agent under the Intercreditor Agreement, the Owner Trustee and its successors as Owner Trustee under the Trust Agreement, and the Owner Participant and its successors and permitted assigns. No purchaser or holder of any Equipment Notes shall be deemed to be a successor or assign of any holder of the Original Certificates. (b) Upon the release of the Aircraft from the lien of the Indenture and the termination of the Indenture pursuant to and in accordance with Section 10.01 thereof, each requirement in the Operative Documents that the consent of Indenture Trustee be obtained or that the Indenture Trustee be given notice shall be of no further force and effect. (c) The Lessee agrees for the express benefit of the Indenture Trustee to perform its obligations under Section 8(k) of the Lease. (d) The parties hereto agree for the benefit of the Lessee that the Lessee can rely on the options, elections, determinations, consents, approvals, waivers and notices given, exercised or made by the Owner Trustee under the Lease to the extent reserved to the Owner Trustee pursuant to Section 5.10(d) of the Indenture. (e) Notwithstanding anything to the contrary in any Operative Document, the parties hereto hereby agree that the Put Termination Agreement and the Deed of Indemnity (as such terms are defined herein) shall not constitute Operative Documents or Financing Documents. SECTION 24. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK. SECTION 25. Effectiveness. The parties hereto agree that this Agreement shall be effective among all such parties on and as of the Restatement Date. - 61 - 65 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. AMERICA WEST AIRLINES, INC. By: -------------------------------------- Name: Jacques C. Lazard Title: Vice President/Treasurer Address: 4000 East Sky Harbor Blvd. Phoenix, Arizona 85034 Telex: 755089 (Answerback: AMERWEST) Telephone: (602) 693-5785 Telecopier: (602) 693-5904 Attention: Senior Vice President - Legal Affairs GPA LEASING USA SUB I, INC. By: -------------------------------------- Name: Title: Address: c/o GPA Corporation 83 Wooster Heights Road Danbury, Connecticut 06810 Telephone: (203) 830-4760 Telecopier: (203) 830-4764 Attention: Company Secretary GPA GROUP plc By: -------------------------------------- Name: Title: Address: GPA House Shannon, County Clare, Ireland Telephone: 011-353-61360-051 Telecopier: 011-353-61360-000 Attention: Company Secretary 66 WILMINGTON TRUST COMPANY, not in its individual capacity, except as expressly provided herein, but solely as Owner Trustee By: -------------------------------------- Name: Title: Address: Rodney Square North 1100 North Market Street Wilmington, Delaware 19890-0001 Telephone: (302) 651-1000 Telecopier: (302) 651-8882 Attention: Corporate Trust Administration [___________] By: -------------------------------------- Name: Title: Address: Telephone: Telecopier: Attention: 67 THE CHASE MANHATTAN BANK, not in its individual capacity, except as otherwise provided herein, but solely as Indenture Trustee By: -------------------------------------- Name: Andrew M. Deck Title: Vice President Address: 450 West 33rd Street 15th Floor New York, New York 10001 Telephone: (212) 946-3348 Telecopier: (212) 946-8160 Attention: Corporate Trust Department FLEET NATIONAL BANK, not in its individual capacity, except as otherwise provided herein, but solely as Subordination Agent By: -------------------------------------- Name: Philip G. Kane, Jr. Title: Vice President Address: 777 Main Street CTMO 0238 Hartford, Connecticut 06115 Telephone: (860) 986-4545 Telecopier: (860) 986-7920 Attention: Corporate Trust Administration FLEET NATIONAL BANK, not in its individual capacity, except as otherwise provided herein, but solely as Pass Through Trustee By: -------------------------------------- Name: Philip G. Kane, Jr. Title: Vice President Address: 777 Main Street CTMO 0238 Hartford, Connecticut 06115 Telephone: (860) 986-4545 Telecopier: (860) 986-7920 Attention: Corporate Trust Administration 68 SCHEDULE I to Refunding Agreement PASS THROUGH TRUST AGREEMENTS 1. Pass Through Trust Agreement, dated as of June ___, 1997 between America West Airlines, Inc. and Fleet National Bank, as supplemented by Trust Supplement No. 1997-1A, dated June ___, 1997. 2. Pass Through Trust Agreement, dated as of June ___, 1997 between America West Airlines, Inc. and Fleet National Bank, as supplemented by Trust Supplement No. 1997-1B, dated June ___, 1997 3. Pass Through Trust Agreement, dated as of June ___, 1997 between America West Airlines, Inc. and Fleet National Bank, as supplemented by Trust Supplement No. 1997-1C, dated June ___, 1997. 4. Pass Through Trust Agreement, dated as of June ___, 1997 between America West Airlines, Inc. and Fleet National Bank, as supplemented by Trust Supplement No. 1997-1D, dated June ___, 1997. 69 SCHEDULE II to Refunding Agreement EQUIPMENT NOTES, PASS THROUGH TRUSTS AND PURCHASE PRICE Interest Rate Principal Purchase Pass Through Trusts and Maturity Amount Price - ------------------- ------------ ------ -----
70 SCHEDULE III to Refunding Agreement HOLDERS OF EQUIPMENT NOTES Payment Instructions Fleet National Bank, 777 Main Street, Hartford, Connecticut 06115, Attn: Philip Kane, Corporate Trust Administration, Ref. AWA, for the account of Fleet National Bank Account No. ABA # ______________________, ACCT. # ________________________. 71 EXHIBIT A to REFUNDING AGREEMENT TRANSFEREE'S PARENT GUARANTEE [GPA 1989 BN-8] TRANSFEREE'S PARENT GUARANTEE [GPA 1989 BN-8], dated as of ____________ by _________________, a ________________________ corporation ("Guarantor") to and for the benefit of Indenture Trustee (individually and as trustee), the Original Head Lessee, Owner Trustee and Lessee referred to in the Refunding Agreement described below (collectively, together with their permitted successors and assigns, "Beneficiaries" and, individually, a "Beneficiary"). WITNESSETH: WHEREAS, [_____________] ("Transferor"), is the Owner Participant under that certain Refunding Agreement [GPA 1989 BN-8], dated as of June ___, 1997 among Lessee, Original Head Lessee, Parent Guarantor, Owner Trustee, Transferor, Pass Through Trustee, Subordination Agent and Indenture Trustee, as amended, modified or supplemented from time to time (the "Refunding Agreement"); WHEREAS, Transferor wishes to transfer, except to the extent expressly reserved to Transferor, all of its right, title and interest in and to the Refunding Agreement, the Trust Estate, the other Operative Documents to which Transferor is a party, certain other agreements, instruments and documents in its capacity as Owner Participant under the Refunding Agreement and all proceeds therefrom as set forth in the Assignment and Assumption Agreement dated the date hereof between Transferor and _____________________, a ________________________ corporation ("Transferee"); and WHEREAS, the terms of the Refunding Agreement provide that the aforementioned transfer is conditioned upon the execution and delivery of this Guarantee by Guarantor; NOW, THEREFORE, Guarantor hereby agrees with and for the benefit of Beneficiaries as follows: 1. Definitions. As used in this Guarantee, terms defined in the Refunding Agreement are used herein as therein defined, unless otherwise defined herein. 2. Guarantee. (a) Guarantor hereby unconditionally and irrevocably guarantees to Beneficiaries and their respective successors, endorsees, transferees and assigns, the prompt and complete payment by Transferee when due (whether at the stated maturity, by acceleration or otherwise) of, and the faithful performance of, and compliance with, all payment obligations of Transferee under the Refunding Agreement, the Amended and Restated Head 72 Lease TIA, the Foreign Financing Documents and each other Operative Document to which Owner Participant is a party and each other Operative Document to which Transferee is a party or by which either is bound (collectively, the "Relevant Documents"), strictly in accordance with the terms thereof and the timely performance of all other obligations of Transferee thereunder (such payment and other obligations, the "Obligations"), and Guarantor further agrees to pay any and all expenses (including, without limitation, all fees and disbursements of counsel) that may be paid or incurred by Beneficiaries in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, Guarantor under this Guarantee. (b) No payment or payments made by Transferee, Guarantor, any other guarantor or any other Person or received or collected by any Beneficiary from Transferee, Guarantor, any other guarantor or any other person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of Guarantor hereunder until the Obligations are paid and performed in full. (c) If for any reason any Obligation to be performed or observed by Transferee (whether affirmative or negative in character) shall not be observed or performed, or if any amount payable by Transferee referred to in Section 1(a) hereof shall not be paid promptly when due and payable, Guarantor shall promptly perform or observe or cause to be performed or observed each such Obligation or undertaking and shall forthwith pay such amount at the place and to the person or entity entitled thereto pursuant to the Relevant Documents regardless of whether or not Lessee, Original Head Lessee, Owner Trustee, Pass Through Trustee, Subordination Agent, Indenture Trustee, or anyone on behalf of any of them shall have instituted any suit, action or proceeding or exhausted its remedies or taken any steps to enforce any rights against Transferee or any other person or entity to compel any such performance or to collect all or any part of such amount pursuant to the provisions of the Relevant Documents or at law or in equity, or otherwise, and regardless of any other condition or contingency. 3. No Subrogation. Notwithstanding any payment or payments made by Guarantor hereunder or any setoff or application of funds of Guarantor by any Beneficiary, Guarantor shall not be entitled to be subrogated to any of the rights of any Beneficiary against Transferee or any collateral, security or guarantee or right of set-off held by any Beneficiary for the payment of the Obligations, nor shall Guarantor seek or be entitled to seek any reimbursement from Transferee in respect of payments made by Guarantor hereunder, until all amounts and performance owing to - 2 - 73 Beneficiaries by Transferee on account of the Obligations are paid and performed in full. 4. Amendments, etc., with respect to the Obligations; Waiver of Rights. The Guarantor shall remain fully obligated hereunder notwithstanding that, without any reservation of rights against the Guarantor and without notice to or further assent by the Guarantor, any demand for payment or performance of any of the Obligations made by any Beneficiary may be rescinded by such party and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by any Beneficiary and any Relevant Document and/or any collateral security document or other guarantee or document in connection therewith, may be amended, modified, supplemented or terminated, in whole or in part, as the parties thereto may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by any Beneficiary for the payment or performance of the Obligations may be sold, exchanged, waived, surrendered or released. No Beneficiary shall have any obligation to protect, secure, perfect or insure any lien at any time held by it as security for the Obligations or for this Guarantee or any property subject thereto. When making any demand hereunder against the Guarantor, a Beneficiary may, but shall be under no obligation to, make a similar demand on the Transferee or any other guarantor, and any failure by a Beneficiary to make any such demand or to collect any payments from the Transferee or any such other guarantor or any release of the Transferee or such other guarantor shall not relieve the Guarantor of its obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of any Beneficiary against the Guarantor. For purposes hereof, "demand" shall include the commencement and continuance of any legal proceedings. The Guarantor represents and warrants that it owns, directly or indirectly, at least the portion of the capital stock of the Transferee required by the Refunding Agreement and that, except as otherwise provided in Section 5 hereof, its obligations hereunder shall continue unimpaired, even if the Guarantor no longer owns, directly or indirectly, such portion of the capital stock of the Transferee. 5. Transfer of Interest in Transferee. Guarantor shall not assign, convey or otherwise transfer to any person any of its interest in Transferee unless in connection therewith, Guarantor assigns its rights and obligations hereunder to a guarantor which meets the requirements of Section 10 of the Refunding Agreement; provided that nothing contained in this Section 5 shall be construed to prohibit any merger, consolidation or other corporate restructuring of Transferee or Guarantor so long as the resulting corporation meets the requirements of - 3 - 74 Section 10 of the Refunding Agreement and assumes the obligations of the corporation merged or consolidated into. 6. Guarantee Absolute and Unconditional. The Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by any Beneficiary upon this Guarantee or acceptance of this Guarantee; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guarantee; and all dealings between the Transferee or the Guarantor and any Beneficiary shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guarantee. The Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Transferee or the Guarantor with respect to the Obligations. The Guarantor understands and agrees that this Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment and performance (and not merely of collectibility) without regard to (a) the validity, regularity or enforceability of any Relevant Document, any of the Obligations or any collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by any Beneficiary, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) that may at any time be available to or be asserted by the Transferee against any Beneficiary, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Transferee or the Guarantor) that constitutes, or might be construed to constitute, an equitable or legal discharge of the Transferee for the Obligations, or of the Guarantor under this Guarantee, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against the Guarantor, any Beneficiary may, but shall be under no obligation to, pursue such rights and remedies as it may have against the Transferee or any other person or entity or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by any Beneficiary to pursue such other rights or remedies or to collect any payments from the Transferee or any such other person or entity or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Transferee or any such other person or entity or any such collateral security, guarantee or right of offset, shall not relieve the Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of any Beneficiary against the Guarantor. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantor and the successors and assigns thereof, and shall inure to the benefit of the Beneficiaries, and their respective successors, endorsees, transferees and assigns, until all of the Obligations and the Obligations of the Guarantor under this Agreement shall have been satisfied by payment and performance in full. The Guarantor further agrees that, without - 4 - 75 limiting the generality of this Guarantee, if any Beneficiary (or any assignee thereof) shall be prevented by applicable law from exercising its remedies (or any of them) against the Transferee under any Operative Document, such Beneficiary (or any assignee thereof) shall be entitled to receive hereunder from the Guarantor, upon demand therefor, the sums that would have otherwise been due from the Transferee had such remedies been able to be exercised. 7. Reinstatement. This Guarantee shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by any Beneficiary upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Transferee or the Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Transferee or the Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made. The Guarantor shall not commence any "case" (as defined in Title 11 of the United States Code) against the Transferee. 8. Payments. The Guarantor hereby guarantees that payments hereunder shall be paid without set-off, counterclaim, deduction or withholding, and shall be made in U.S. Dollars. If any payment hereunder is subject to deduction or withholding, Guarantor shall pay an additional amount such that, after deduction of all amounts required to be deducted or withheld, the net amount actually received will equal the amount that would have been received had such deduction or withholding not been required. 9. Representations and Warranties. The Guarantor hereby represents and warrants that: (a) the Guarantor is a [type of legal personality] duly organized, validly existing and in good standing under the laws of the jurisdiction of its [organization] and has the [corporate] power and authority and the legal right to own and operate its property, to lease the property it operates and to conduct the business in which it is currently engaged; (b) the Guarantor has the [corporate] power and authority and the legal right to execute and deliver, and to perform its obligations under, this Guarantee, and has taken all necessary [corporate] action to authorize its execution, delivery and performance of this Guarantee; (c) this Guarantee constitutes a legal, valid and binding obligation of the Guarantor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, - 5 - 76 moratorium or similar laws affecting the enforcement of creditors' rights generally; (d) the execution, delivery and performance of this Guarantee will not violate any provision of any requirement of law or contractual obligation of the Guarantor and will not result in or require the creation or imposition of any lien on any of the properties or revenues of the Guarantor pursuant to any requirement of law or contractual obligation of the Guarantor; (e) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or governmental authority and no consent of any other person (including, without limitation, any stockholder or creditor of the Guarantor) is required in connection with the execution, delivery, performance, validity or enforceability of this Guarantee; (f) no litigation, investigation or proceeding of or before any arbitrator or governmental authority is pending or, to the knowledge of the Guarantor, threatened by or against the Guarantor or against any of its properties or revenues (i) with respect to this Guarantee or any of the transactions contemplated hereby or (ii) that could have a material adverse effect on the business, operations, property or financial or other condition of the Guarantor; [(g) the balance sheet of the Guarantor as at _________________ and the related statement of income and retained earnings for the fiscal year then ended (copies of which have heretofore been furnished to each Beneficiary) have been prepared in accordance with generally accepted accounting principles applied consistently throughout the period involved, are complete and correct and present fairly the financial condition of the Guarantor as at such date and the results of its operations for such fiscal year; since such date there has been no material adverse change in the business, operations, property or financial or other condition of the Guarantor; the Guarantor has no material contingent obligation, contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment that is not reflected in the foregoing statements or in the notes thereto; and(1) (h) the Guarantor is [type of legal personality] with a [combined capital, surplus and undivided profits] [tangible net worth] of at least $60,000,000. -------------------- (1) This representation is not applicable if Transferee is a wholly-owned subsidiary of the Owner Participant. - 6 - 77 10. Severability. Any provision of this Guarantee that 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. 11. No Waiver; Cumulative Remedies. No Beneficiary shall by any act (except by a written instrument pursuant to Section 13 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of any Beneficiary, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by a Beneficiary of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that such Beneficiary would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. 12. Integration. This Guarantee represents the entire agreement of Guarantor with respect to the subject matter hereof and there are no promises or representations by any Beneficiary relative to the subject matter hereof not reflected herein. 13. Amendments and Waivers. None of the terms or provisions of this Guarantee may be waived, amended or supplemented or otherwise modified except by a written instrument executed by Guarantor and each Beneficiary. 14. Section Headings. The Section headings used in this Guarantee are for convenience of reference only and not to affect the construction hereof or be taken into consideration in the interpretation hereof. 15. Successors and Assigns. This Guarantee shall be binding upon the successors and assigns of Guarantor and shall inure to the benefit of Beneficiaries and their respective successors and assigns. 16. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. 17. Notices. All notices, requests and demands to or upon the Guarantor or any Beneficiary to be effective shall be in writing or by telegraph, telex or telecopy and, unless otherwise expressly provided herein, shall be deemed to have been duly - 7 - 78 given or made when delivered by hand, or, in the case of mail, two days after deposit in the postal system, first class postage pre-paid, or, in the case of telegraphic notice, when sent, answerback received, addressed to (a) in the case of the Guarantor, the address provided on the signature page hereof, and (b) in the case of any Beneficiary, the address provided for such party in the Refunding Agreement. - 8 - 79 IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be duly executed and delivered by its duly authorized officer as of the day and the year first above written. [NAME OF GUARANTOR] By: ------------------------------- Title: - 9 - 80 EXHIBIT B to REFUNDING AGREEMENT ASSIGNMENT AND ASSUMPTION AGREEMENT [GPA 1989 BN-8] ASSIGNMENT AND ASSUMPTION AGREEMENT [GPA 1989 BN-8] ("Assignment") dated as of _____________, between ______________, a ___________ corporation ("Assignor") and ________________, a __________ corporation ("Assignee") entered into for the benefit of Indenture Trustee, Owner Trustee, Original Head Lessee and Lessee referred to in the Refunding Agreement mentioned below. WITNESSETH: WHEREAS, the parties hereto desire to effect (a) the transfer by Assignor to Assignee of all of the right, title and interest of the Assignor (except as reserved below) in, under and with respect to, among other things, (i) the Refunding Agreement, dated as of June ___, 1997, among America West Airlines, Inc., Assignor, GPA Leasing USA Sub I, Inc., GPA Group plc, Wilmington Trust Company, as Owner Trustee, Fleet National Bank, as Pass Through Trustee, [____________], as Owner Participant, Fleet National Bank, as Subordination Agent, and The Chase Manhattan Bank, as Indenture Trustee, as amended, modified or supplemented from time to time (the "Refunding Agreement"), (ii) the Trust Agreement identified in the Refunding Agreement, (iii) the Trust Estate (as defined in the Trust Agreement), (iv) the Amended and Restated Head Lease TIA identified in the Refunding Agreement, (v) the Foreign Financing Documents identified in the Refunding Agreement, (vi) the Lease, (vii) the proceeds therefrom and (viii) the Indenture (as defined in the Refunding Agreement) and (b) the assumption by Assignee of the obligations of Assignor accruing thereunder; NOW, THEREFORE, it is hereby agreed as follows: 1. Definitions. Capitalized terms used herein without definition shall have the meaning ascribed thereto in the Refunding Agreement. For purposes of this Assignment, the defined term "Operative Document" shall have the meaning ascribed thereto in the Refunding Agreement and shall be deemed to include the Amended and Restated Head Lease TIA. 2. Assignment. Assignor has sold, conveyed, assigned, transferred and set over, and does hereby sell, convey, assign, transfer and set over, unto Assignee, as of the date hereof, all of its right, title and interest in, under and with respect to the Refunding Agreement, the Trust Agreement, the Trust Estate, the Amended and Restated Head Lease TIA, the Lease, the Indenture, the Foreign Financing Documents, all of the other Operative Documents to which Assignor is a party or any other contract, agreement, document or instrument relating to the Trust Estate by which Assignor is bound, and any proceeds therefrom, together with all other documents and instruments evidencing any of such right, title and interest (collectively, the "Relevant 81 Documents"), except such rights of Assignor as have accrued to Assignor prior to the date hereof (including specifically, but without limitation, the right to receive any amounts due or accrued to Assignor under the Trust Agreement as of a date prior to such date and the right to receive any indemnity payment pursuant to the Refunding Agreement, the Amended and Restated Head Lease TIA or the Lease with respect to events occurring prior to such date). 3. Assumption. Assignee hereby undertakes all of the duties and obligations of Assignor whenever accrued (other than duties and obligations of Assignor required to be performed by it on or prior to the date hereof under the Relevant Documents to which Owner Participant is a party and any of the other Relevant Documents by which Assignor is bound or any other contract, agreement, document or other instrument relating to the Trust Estate to which Assignor is a party or by which it is bound), pursuant to the Trust Agreement and any of the other Relevant Documents by which Assignor is bound or any other contract, agreement, document or other instrument relating to the Trust Estate to which Assignor is a party or by which it is bound, and hereby confirms that it shall be deemed a party to the Trust Agreement and shall be bound by each of the other Relevant Documents and each other contract, agreement, document or other instrument relating to the Trust Estate to which Assignor is a party or by which it is bound as if therein named as Trustor. 4. Release of Assignor. Except for liabilities not assumed as provided in Section 3 hereof, upon the execution of this Assignment and Assumption Agreement, Assignor shall have no further duty or obligation under the Relevant Documents to which Owner Participant is a party or under any of the other Relevant Documents by which Assignor is bound or under any other contract, agreement, document or other instrument relating to the Trust Estate to which Assignor is a party or by which it is bound; provided, however, that Assignor shall in no event be released from any obligation under the Relevant Documents with respect to Claims or other claims thereunder by or against Assignor which have accrued or been made prior to the date of transfer. 5. Appointment as Attorney-in-Fact. In furtherance of the within assignment, Assignor hereby constitutes and appoints Assignee, and its successors and assign, the true and lawful attorneys of Assignor, with full power of substitution, in the name of Assignee or in the name of Assignor but on behalf of and for the benefit of and at the expense of Assignee, to collect for the account of Assignee all items sold, transferred or assigned to Assignee pursuant hereto; to institute and prosecute, in the name of Assignor or otherwise, but at the expense of Assignee, all proceedings that Assignee may deem proper in order to collect, assert or enforce any claim, right or title of any kind in or to the items sold, transferred or assigned; to defend and compromise at the expense of Assignee any and all actions, suits or proceedings as to title to or interest in any of the property - 2 - 82 acquired by Assignee; and to do all such acts and things in relation thereto at the expense of Assignee as Assignee shall reasonably deem advisable. Assignor hereby acknowledges that this appointment is coupled with an interest and is irrevocable by Assignor in any manner or for any reason. 6. Payments. Assignor hereby covenants and agrees to pay over to Assignee, if and when received following the date hereof, any amounts (including any sums payable as interest in respect thereof) paid to or for the benefit of Assignor that, under Section 2 hereof, belong to Assignee, and Assignee hereby covenants and agrees to pay over to Assignor, if and when received following the date hereof, any amounts (including any sums payable as interest in respect thereof) paid to or for the benefit of Assignee that, under Section 2 hereof, belong to Assignor. 7. Investment Purpose. Assignee hereby represents that it is acquiring the Trust Estate interests and other interests hereby assigned to it without a view to the distribution or resale of either thereof. 8. Representations and Warranties. Assignee represents and warrants that: (a) it has all requisite power and authority and legal right to enter into and carry out the transactions contemplated hereby and to carry out and perform the transactions of Owner Participant as contemplated by the Relevant Documents; (b) on the date hereof it is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Federal Aviation Act and the rules and regulations of the FAA thereunder; (c) on and as of the date hereof, the representations and warranties of Owner Participant set forth in Section 9 of the Refunding Agreement mutatis mutandis and as set forth in any other Agreement to which Owner Participant is a party are true and correct as to Assignee; (d) it is a permitted Transferee under Section 10 of the Refunding Agreement; (e) Assignee or its guarantor has a [combined capital, surplus and undivided profits] [tangible net worth] of not less than $60,000,000. 9. Governing Law. This Assignment and Assumption Agreement shall be governed by and construed in accordance with the laws of the State of New York. - 3 - 83 IN WITNESS WHEREOF, the parties hereto have executed this Assignment and Assumption Agreement as of the day and year first above written. [ASSIGNOR] By: -------------------------------------------------- Title: [ASSIGNEE] By: -------------------------------------------------- Title: - 4 - 84 EXHIBIT C to REFUNDING AGREEMENT LIST OF COUNTRIES Australia Canada Denmark Finland France Germany Iceland Ireland Japan Luxembourg Netherlands New Zealand Norway Singapore South Korea Sweden Switzerland United Kingdom 85 EXHIBIT D to REFUNDING AGREEMENT FORM OF INSURANCE BROKER'S REPORT [to come] 86 ANNEX A to REFUNDING AGREEMENT FAA DOCUMENTS Documents Filed on the Restatement Date (a) Trust Agreement Supplement [GPA 1989 BN-8] No. 2 dated June __, 1997 (the "Trust Agreement Supplement") between the Owner Trustee and the Owner Participant, amending the Trust Agreement, which Trust Agreement Supplement was filed with the FAA at _____ p.m., C.D.T. on June __, 1997; (b) Amended and Restated Trust Indenture and Security Agreement [GPA 1989 BN-8] dated as of June __, 1997 (the "Amended and Restated Indenture") between the Owner Trustee and the Indenture Trustee, amending and restating the Original Indenture with attached thereto Trust Agreement and Indenture Supplement No. 2 [GPA 1989 BN-8] dated June __, 1997 (the "Indenture Supplement"), with respect to the Aircraft, which Amended and Restated Indenture with the Indenture Supplement attached was filed with the FAA at _____ p.m., C.D.T. on June __, 1997; (c) Assignment and Amendment No. 1 and Sublease Termination Agreement dated as of June __, 1997 (the "Lease Amendment") among the Original Head Lessee, as assignor, the Owner Trustee, as lessor, the Lessee, as successor lessee, and the Indenture Trustee, which (i) assigns certain right, title and interest of the Original Head Lessee in and to the Original Head Lease to the Lessee, (ii) terminates the Sublease and (iii) releases the Sublease Collateral Assignment, which Lease Amendment was filed with the FAA at _____ p.m., C.D.T. on June __, 1997; and (d) Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-8] dated as of December 19, 1989, amended and restated as of June __, 1997 (the "Amended and Restated Lease") between the Owner Trustee, as lessor, and the Lessee, as successor lessee, amending and restating the Original Head Lease with Lease Supplement [GPA 1989 BN-8] No. 3 dated June __, 1997 (the "Lease Supplement") between the Owner Trustee, as lessor, and the Lessee, as successor lessee, with respect to the Aircraft, attached thereto, which Amended and Restated Lease with the Lease Supplement attached was filed with the FAA at _____ p.m., C.D.T. on June __, 1997. 87 Description of Hire Purchase Agreement Aircraft Hire Purchase Agreement (1989 B) dated as of December 19, 1989 between Air Tara Hong Kong, Limited, as owner, and the companies listed in Schedule 1 thereto as partners in a Hong Kong limited partnership carrying on business under the name of the Shamrock II Leasing Limited Partnership, as hire, with the following attached thereto: (i) Acceptance Certificate dated December 29, 1989; and, (ii) Bill of Sale and HPA Assignment [GPA 1989 BN-8] dated as of December 19, 1989 from Air Tara Hong Kong Limited, as seller, to Wilmington Trust Company, as trustee under Trust Agreement [GPA 1989 BN-8] dated as of December 19, 1989, which was recorded as one instrument by the Federal Aviation Administration on January 19, 1990 and assigned Conveyance No. H68554. - 2 - 88 Description of Lease A Aircraft Lease Agreement (1989 B) dated as of December 19, 1989 between the companies listed in Schedule 1 thereto as partners in a Hong Kong limited partnership carrying on business under the name of the Shamrock II Leasing Limited Partnership, as lessor, and GPA HK-320-B, Limited, as lessee, with the following attached thereto: (i) Acceptance Certificate dated December 29, 1989; (ii) General Assumption Agreement (1989 B) dated as of December 19, 1989; (iii) Charge (1989 B) dated as of December 19, 1989; (iv) Assignment of Lease Agreement, General Assumption Agreement and of Charge (1989 B) dated as of December 19, 1989 between GPA HK-320-B, Limited, as assignor, and Wilmington Trust Company, as trustee under Trust Agreement [GPA 1989 BN-8] dated as of December 19, 1989, as assignee; and, (v) Consent (1989 B) dated December 19, 1989, which was recorded as one instrument by the Federal Aviation Administration on January 19, 1990 and assigned Conveyance No. H68555. - 3 - 89 Description of Indenture Trust Indenture and Security Agreement [GPA 1989 BN-8] dated as of December 19, 1989 between Wilmington Trust Company, as trustee under Trust Agreement [GPA 1989 BN-8] dated as of December 19, 1989, and Manufacturers Hanover Trust Company, as indenture trustee, which was recorded by the Federal Aviation Administration on January 19, 1990 and assigned Conveyance No. H68557, as supplemented by the following described instrument:
Date of FAA FAA Instrument Instrument Recording Date Conveyance No. - ---------- ---------- -------------- -------------- Indenture Supplement No. 1 12/29/89 01/19/90 H68557
- 4 - 90 Description of Lease B Aircraft Lease Agreement [GPA 1989 BN-8] dated as of December 19, 1989 between Wilmington Trust Company, as trustee under Trust Agreement [GPA 1989 BN-8] dated as of December 19, 1989, as lessor, and GPA Leasing USA Sub I, Inc., as lessee, which was recorded by the Federal Aviation Administration on January 19, 1990 and assigned Conveyance No. H68558, as supplemented and amended by the following described instruments:
Date of FAA FAA Instrument Instrument Recording Date Conveyance No. - ---------- ---------- -------------- -------------- Lease Supplement [GPA 1989 BN-8] No. 1 12/29/89 01/19/90 H68558 Lease Supplement [GPA 1989 BN-8] No. 2 12/no date/94 02/27/95 JJ13285
- 5 - 91 Description of Sublease Aircraft Sublease Agreement [GPA 1989 BN-8] dated as of September 21, 1990 between GPA Leasing USA Sub I, Inc., as sublessor, and America West Airlines, Inc., as sublessee, which was recorded by the Federal Aviation Administration on October 11, 1990 and assigned Conveyance No. 258042, as supplemented and amended by the following described instruments:
Date of FAA FAA Instrument Instrument Recording Date Conveyance No. - ---------- ---------- -------------- -------------- Sublease Supplement No. 1 09/28/90 10/11/90 258042 Amendment No. 1 to Aircraft Sublease Agreement [GPA 1989 as of BN-8] 06/25/91 07/09/91 A43606 Amendment No. 2 to Aircraft Sublease Agreement [GPA 1989 as of BN-8] 08/26/91 10/01/91 DD001721
- 6 - EX-4.15 13 REFUNDING AGREEMENT - GPA 1989 BN-11 1 Exhibit 4.15 ================================================================================ REFUNDING AGREEMENT [GPA 1989 BN-11] Dated as of June ___, 1997 among AMERICA WEST AIRLINES, INC., as Lessee GPA LEASING USA SUB I, INC., as Original Head Lessee GPA GROUP plc, as Parent Guarantor WILMINGTON TRUST COMPANY, not in its individual capacity except as expressly provided herein but solely as Owner Trustee FLEET NATIONAL BANK, not in its individual capacity except as expressly provided herein but solely as Pass Through Trustee under each of the Pass Through Trust Agreements [_______________________], as Owner Participant FLEET NATIONAL BANK, as Subordination Agent and THE CHASE MANHATTAN BANK, not in its individual capacity except as expressly provided herein but solely as Indenture Trustee ================================================================================ Secured Equipment Notes Covering One Airbus A320-231 Aircraft Manufacturer's Serial No. 81 Registration No. N632AW Leased by America West Airlines, Inc. ================================================================================ 2 TABLE OF CONTENTS
PAGE ---- SECTION 1. Purchase of Equipment Notes; Refunding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 2. Equipment Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 3. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 SECTION 4. Certain Conditions Precedent to the Obligations of the Original Head Lessee and the Parent Guarantor; Certain Conditions Precedent to the Obligations of the Lessee; Conditions Precedent with Respect to the Pass Through Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 5. Amendment and Restatement of the Original Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 6. Amendment and Restatement of the Original Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 7. Termination of the Participation Agreement; Termination of Sublease, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 8. Representations and Warranties of the Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 9. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 10. Transfer of Owner Participant's Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 SECTION 11. Re-Registration of the Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 SECTION 12. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 SECTION 13. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 SECTION 14. Certain Additional Provisions Relating to Original Head Lessee, Parent Guarantor, Trust Company, Owner Trustee and Owner Participant . . . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 15. Certain Retained Rights and Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 SECTION 16. Certain Additional Obligations of the Lessee, the Owner Trustee, the Owner Participant and the Indenture Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 17. Lessee Protection of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 18. Jurisdictional and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 19. Limitation on Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 20. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
- i - 3
Page ---- SECTION 21. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 22. Reliance of Liquidity Provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 23. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 24. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 SECTION 25. Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Schedules --------- Schedule I Pass Through Trust Agreements Schedule II Equipment Notes, Pass Through Trusts and Purchase Price Schedule III Holders of Equipment Notes - Payment Instructions Exhibits -------- Exhibit A Form of Transferee's Parent Guarantee Exhibit B Form of Assignment and Assumption Agreement Exhibit C List of Countries Exhibit D Form of Insurance Broker's Report Annex ----- Annex A FAA Documents - ii - 4 REFUNDING AGREEMENT [GPA 1989 BN-11] REFUNDING AGREEMENT [GPA 1989 BN-11] (this "Agreement"), dated as of June ___, 1997, among (i) AMERICA WEST AIRLINES, INC., a Delaware corporation (the "Lessee"), (ii) GPA LEASING USA SUB I, INC., a Connecticut corporation (the "Original Head Lessee"), (iii) GPA GROUP plc, an Irish public limited company (the "Parent Guarantor"), (iv) [____________________] (the "Owner Participant"), (v) WILMINGTON TRUST COMPANY, a Delaware banking corporation (the "Trust Company"), not in its individual capacity except as otherwise expressly provided herein, but solely as owner trustee (the "Owner Trustee") under the Trust Agreement (as defined below), (vi) FLEET NATIONAL BANK, a national banking association, not in its individual capacity except as otherwise expressly provided herein, but solely as pass through trustee (in such capacity, the "Pass Through Trustee") under each of the four separate Pass Through Trust Agreements (as defined below), (vii) FLEET NATIONAL BANK, not in its individual capacity, but solely as subordination agent and trustee (in such capacity, the "Subordination Agent") under the Intercreditor Agreement (as defined below), and (viii) THE CHASE MANHATTAN BANK (formerly known as Chemical Bank, successor by merger to Manufacturers Hanover Trust Company), a New York corporation, not in its individual capacity except as otherwise expressly provided herein, but solely as Indenture Trustee (the "Indenture Trustee") under the Indenture (as defined below). Except as otherwise defined in this Agreement, the terms used herein in capitalized form shall have the meanings attributed thereto in the Indenture (whether set forth therein or by reference to another document) as if the Restatement Date had occurred. W I T N E S S E T H: WHEREAS, the Original Head Lessee, the Parent Guarantor, the Owner Participant, Manufacturers Hanover Trust Company and The Mitsubishi Trust and Banking Corporation Grand Cayman Branch, as Lenders (the "Lenders"), the Owner Trustee and the Indenture Trustee are parties to the Participation Agreement [GPA 1989 BN-11], dated as of December 19, 1989 (the "Participation Agreement"), providing for the financing of one Airbus A320-231 aircraft (the "Aircraft"); WHEREAS, concurrently with the execution and delivery of the Participation Agreement, the Owner Trustee and the Indenture Trustee entered into the Trust Indenture and Security Agreement [GPA 1989 BN-11], dated as of December 19, 1989, as supplemented by Trust Indenture Supplement No. 1, dated December 29, 1989 (as so supplemented or otherwise modified to the date hereof, the "Original Indenture"), pursuant to which the Owner 5 Trustee issued loan certificates substantially in the form set forth in Section 2.02 thereof (the "Original Certificates") to the Lenders as evidence of the indebtedness then being made by the Owner Trustee to finance a portion of the purchase price of the Aircraft; WHEREAS, concurrently with the execution and delivery of the Participation Agreement, the Owner Trustee and the Original Head Lessee entered into the Aircraft Lease Agreement [GPA 1989 BN-11], dated as of December 19, 1989, as supplemented by Lease Supplement [GPA 1989 BN-11] No. 1 dated December 29, 1989 and as further supplemented by Lease Supplement [GPA 1989 BN-11] No. 2 dated January 5, 1995 (as so supplemented, the "Original Lease"), whereby, subject to the terms and conditions set forth therein, the Owner Trustee agreed to lease to the Original Head Lessee, and the Original Head Lessee agreed to lease from the Owner Trustee, the Aircraft commencing on the Delivery Date (as therein defined); WHEREAS, concurrently with the execution and delivery of the Participation Agreement, the Parent Guarantor entered into the Parent Head Lease Guaranty [GPA 1989 BN-11] dated as of December 19, 1989 (the "Parent Head Lease Guaranty") for the benefit of the Owner Trustee pursuant to which the Parent Guarantor guaranteed all of the obligations of the Original Head Lessee under the Operative Documents (as defined in the Participation Agreement); WHEREAS, the Owner Participant and the Trust Company are parties to the Trust Agreement [GPA 1989 BN- 11], dated as of December 19, 1989, as supplemented by Trust Agreement Supplement [GPA 1989 BN-11] No. 1 dated December 29, 1989 (as amended, supplemented or otherwise modified to the date hereof, the "Original Trust Agreement"), pursuant to which the Owner Trustee agreed, among other things, to hold the Trust Estate defined in Section 1.1 thereof for the benefit of the Owner Participant thereunder; WHEREAS, the Owner Participant and the Original Head Lessee are parties to the Head Lease Tax Indemnification Agreement [GPA 1989 BN-11], dated as of December 19, 1989 (as amended, supplemented or otherwise modified to the date hereof, the "Head Lease TIA"); WHEREAS, concurrently with the execution and delivery of the Participation Agreement, the Original Head Lessee in its capacity as sublessor (in such capacity, the "Sublessor") and America West Airlines, Inc. in its capacity as sublessee (in such capacity, the "Sublessee") entered into the Aircraft Sublease Agreement [GPA 1989 BN-11] dated as of September 21, 1990, as supplemented by Sublease Supplement No. 1 dated September 28, 1990 and as amended by Amendment No. 1 to Aircraft Sublease - 2 - 6 Agreement [GPA 1989 BN-11] dated as of June 25, 1991, and as further amended by Amendment No. 2 to Aircraft Sublease Agreement [GPA 1989 BN-11] dated as of August 26, 1991 (as amended, supplemented or otherwise modified to the date hereof, the "Sublease"), whereby, subject to the terms and conditions set forth therein, the Sublessor agreed to sublease to the Sublessee, and the Sublessee agreed to sublease from the Sublessor, the Aircraft commencing on the Delivery Date (as defined therein); WHEREAS, concurrently with the execution and delivery of the Sublease, the Parent Guarantor entered into the GPAG Sublease Guaranty dated as of September 21, 1990 (as amended, modified or otherwise supplemented to the date hereof, the "Sublease Guaranty") for the benefit of the Sublessee pursuant to which the Parent Guarantor guaranteed the obligations of the Original Head Lessee under Section 21(f) of the Sublease; WHEREAS, concurrently with the execution and delivery of the Sublease, the Original Head Lessee and the Sublessee entered into the Sublease Tax Indemnification Agreement [GPA 1989 BN-11], dated as of September 21, 1990 (as amended, modified or otherwise supplemented to the date hereof, the "Sublease TIA"); WHEREAS, concurrently with the execution and delivery of the Sublease, the Sublessor and the Owner Trustee entered into the Assignment of Sublease and Sublessee Consent and Agreement [GPA 1989 BN-11] dated as of September 21, 1990 (as amended, modified or otherwise supplemented to the date hereof, the "Assignment of Sublease"); WHEREAS, at the Closing (as defined below), the Owner Trustee and the Indenture Trustee will amend and restate the Original Indenture as the First Amended and Restated Trust Indenture and Security Agreement [GPA 1989 BN- 11], dated as of the Restatement Date (the "First Amended and Restated Indenture" and, the First Amended and Restated Indenture as so amended and restated, the "Indenture"), under which Indenture the Owner Trustee will issue secured equipment notes substantially in the form set forth in Section 2.01 thereof (the "Equipment Notes") in four series, the proceeds from the issuance and sale of which will be applied in part to the prepayment in full of the Original Certificates; WHEREAS, at the Closing, the Owner Trustee, the Original Head Lessee, the Sublessee and the Indenture Trustee will enter into Assignment and Amendment No. 1 and Sublease Termination Agreement dated as of the Restatement Date ("Lease Amendment No. 1") containing assignments, modifications and terminations necessary to give effect to the transactions described herein and providing, inter alia, for the amendment and restatement in its entirety of the Original Lease as the Amended and Restated Lease (as so amended and restated, the "Lease"); - 3 - 7 WHEREAS, at the Closing, the Owner Participant and the Owner Trustee will enter into Trust Agreement Supplement [GPA 1989 BN-11] No. 2 ("Trust Supplement No. 2"), amending the Original Trust Agreement (as so amended and as further amended, supplemented or otherwise modified from time to time in accordance with the terms thereof and hereof, the "Trust Agreement"); WHEREAS, at the Closing, the Owner Participant and the Original Head Lessee will enter into the Amended and Restated Head Lease Tax Indemnification Agreement, amending and restating the Head Lease TIA (as so amended and restated, the "Amended and Restated Head Lease TIA") and the Sublessor and the Sublessee will enter into the Amended and Restated Sublease Tax Indemnification Agreement, amending and restating the Sublease TIA (as so amended and restated, the "Amended and Restated Sublease TIA"); WHEREAS, pursuant to the Pass Through Trust Agreement and each of the Pass Through Trust Supplements set forth in Schedule I hereto (collectively, the "Pass Through Trust Agreements"), on the Restatement Date, four separate grantor trusts (collectively, the "Pass Through Trusts" and, individually, a "Pass Through Trust") will be created to facilitate certain of the transactions contemplated hereby, including, without limitation, the issuance and sale by each Pass Through Trust of pass through certificates pursuant thereto (collectively, the "Certificates"); WHEREAS, the proceeds from the issuance and sale of the Certificates by each Pass Through Trust will be applied by the Pass Through Trustee at the Closing to purchase from the Owner Trustee, on behalf of each Pass Through Trust, all of the Equipment Notes bearing the same interest rate as the Certificates issued by such Pass Through Trust; WHEREAS, at the Closing, (i) Kredietbank N.V., New York Branch (the "Liquidity Provider") will enter into three revolving credit agreements (each, a "Liquidity Facility"), for the benefit of the Holders of Equipment Notes of each of three Pass Through Trusts, with the Subordination Agent, as agent for the Pass Through Trustee on behalf of each such Pass Through Trust; and (ii) the Pass Through Trustee, the Liquidity Provider and the Subordination Agent will enter into the Intercreditor Agreement, dated as of the Restatement Date (the "Intercreditor Agreement"); and WHEREAS, the Equipment Notes will be held by the Subordination Agent pursuant to the Intercreditor Agreement on behalf of the Pass Through Trusts; - 4 - 8 NOW, THEREFORE, in consideration of the foregoing premises and the mutual agreements herein contained and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Purchase of Equipment Notes; Refunding. (a) Subject to the satisfaction or waiver of the conditions set forth herein, on June ___, 1997 or on such other date agreed to by the parties hereto (the "Restatement Date"), the following actions shall take place simultaneously: (i) (A) the Sublessee shall pay to the Sublessor as a payment of Supplemental Rent under the Sublease all accrued and unpaid Rent under the Sublease up to the Restatement Date, if any (less any amounts for which Sublessee is indemnified by Sublessor) and (B) the Original Head Lessee shall pay to the Owner Trustee, as a payment of Supplemental Rent under the Original Lease, an amount equal to the accrued and unpaid interest on the Original Certificates up to but not including the Restatement Date plus an amount (the "Prepayment Amount") equal to all other amounts due to the holders of the Original Certificates under the Original Indenture and the other Operative Documents (as defined in the Original Indenture) payable on the Restatement Date under Section 2.13 of the Original Indenture; (ii) the Pass Through Trustee for each Pass Through Trust shall pay to the Owner Trustee the aggregate purchase price of the Equipment Notes being issued to such Pass Through Trustee as set forth in clause (xii) below; (iii) the Owner Trustee (to the extent of proceeds received under clauses (i) and (ii)) shall pay to the Indenture Trustee for the benefit of the holders of the Original Certificates an amount equal to the aggregate principal amount of the Original Certificates outstanding on the Restatement Date, together with accrued and unpaid interest on the Original Certificates up to but not including the Restatement Date plus the Prepayment Amount; (iv) the Indenture Trustee shall disburse to the holders of the Original Certificates the amounts of principal, interest, and all other amounts, if any, described in clause (iii) above, owing to them on the Restatement Date with respect to the Original Certificates as a prepayment of the Original Certificates; - 5 - 9 (v) the Indenture Trustee shall receive the Original Certificates for cancellation; (vi) the Owner Trustee and the Indenture Trustee shall enter into the Indenture (including Trust Indenture Supplement No. 2); (vii) the Original Head Lessee, the Sublessee, the Owner Trustee and the Indenture Trustee shall enter into Lease Amendment No. 1; (viii) the Owner Participant and the Trust Company shall enter into Trust Supplement No. 2; (ix) the Original Head Lessee and the Owner Participant shall enter into the Amended and Restated Head Lease TIA and the Sublessor and the Sublessee shall enter into the Amended and Restated Sublease TIA; (x) the Original Head Lessee, GPA Leasing USA I, Inc., the Parent Guarantor and the Lessee shall enter into an agreement in form and substance reasonably satisfactory to each, inter alia, confirming the termination of certain rights which the Parent Guarantor has to "put" aircraft to the Lessee and the obligation of the Lessee to accept and lease such aircraft (the "Put Termination Agreement"); (xi) the Parent Guarantor and/or one or more of its affiliates and the Lessee will enter into an agreement (the "Deed of Indemnity") pursuant to which the Parent Guarantor and/or one or more of its affiliates, on the one hand, and the Lessee, on the other, will indemnify each other with respect to certain information included in the Prospectus and the Registration Statement (as such terms are defined in the Underwriting Agreement) (the "Prospectus" and the "Registration Statement", respectively); and (xii) the Owner Trustee shall issue, pursuant to Article II of the Indenture, to the Subordination Agent on behalf of the Pass Through Trustee for each of the Pass Through Trusts, Equipment Notes of the maturity and aggregate principal amount, bearing the interest rate and for the purchase price set forth on Schedule II hereto opposite the name of such Pass Through Trust. (b) The Owner Participant, by its execution and delivery hereof, requests and directs the Owner Trustee to execute and deliver this Agreement and, subject to the terms hereof, to take the actions contemplated herein. - 6 - 10 (c) The closing (the "Closing") of the transactions described in this Agreement shall take place at the offices of Milbank, Tweed, Hadley & McCloy, 1 Chase Manhattan Plaza, New York, New York 10005, on the Restatement Date, or at such other place as the parties hereto may agree. (d) All payments pursuant to this Section 1 shall be made in immediately available funds to such accounts and at such banks as the parties hereto shall designate in writing not less than one Business Day prior to the Restatement Date. (e) In order to facilitate the transactions contemplated hereby, the Original Head Lessee, the Parent Guarantor and the Lessee have entered into the Underwriting Agreement, dated as of the date hereof (the "Underwriting Agreement"), among such Persons and Morgan Stanley & Co. Incorporated (the "Underwriter"), and, subject to the terms and conditions hereof, the Lessee will enter into each of the Pass Through Trust Agreements. SECTION 2. Equipment Notes. The Equipment Notes shall be payable as to principal in accordance with the terms of the Indenture, and the Equipment Notes shall provide for a fixed rate of interest per annum and shall contain the terms and provisions provided for the Equipment Notes in the Indenture. The Owner Trustee shall execute, and the Indenture Trustee shall authenticate and deliver to the Pass Through Trustee for each Pass Through Trust, a principal amount of Equipment Notes bearing the interest rate set forth opposite the name of such Pass Through Trust on Schedule II hereto, which Equipment Notes in the aggregate shall be in the principal amounts set forth on Schedule II hereto. Subject to the terms hereof, of the Pass Through Trust Agreements and of the other Operative Documents, all such Equipment Notes shall be dated and authenticated as of the Restatement Date and shall bear interest therefrom, shall be registered in such names as shall be specified by the Subordination Agent and shall be paid in the manner and at such places as are set forth in the Indenture. SECTION 3. Conditions Precedent. The obligations of the Pass Through Trustee to make the payments described in Section 1(a)(ii) and the obligations of the Owner Trustee to make the payments described in Section 1(a)(iii) and the obligations of each of the Pass Through Trustee, the Owner Trustee, the Owner Participant and the Indenture Trustee to participate in the transactions contemplated by this Agreement on the Restatement Date are subject to the fulfillment, prior to or on the Restatement Date, of the following conditions precedent (except that paragraphs (a), (f) and (j) shall not be conditions precedent to the obligations of the Owner Trustee hereunder, paragraphs (g) and (l) shall not be conditions precedent to the obligations of the Owner Participant hereunder and paragraphs (e) - 7 - 11 and (k) shall not be conditions precedent to the obligations of the Indenture Trustee hereunder): (a) The Owner Trustee shall have tendered the Equipment Notes to the Indenture Trustee for authentication, and the Indenture Trustee shall have authenticated such Equipment Notes and shall have tendered the Equipment Notes to the Subordination Agent on behalf of the Pass Through Trustee in accordance with Section 1. (b) The Pass Through Trustee, the Owner Trustee, the Indenture Trustee and the Owner Participant each shall have received executed counterparts of each of the following documents: (1) this Agreement; (2) Lease Amendment No. 1, the Amended and Restated Lease and Lease Supplement No. 3; (3) Trust Supplement No. 2; (4) the First Amended and Restated Indenture and Trust Indenture Supplement No. 2; (5) each of the Pass Through Trust Agreements and each Pass Through Trust Supplement set forth in Schedule I hereto; (6) the Intercreditor Agreement; (7) the Liquidity Facility for each of the Class A, Class B and Class C Trusts (as defined in the Intercreditor Agreement); and (8) the Termination and Release [GPA 1989 BN-11] dated as of the Restatement Date among [______________], the Lessee, the Original Head Lessee, the Parent Guarantor, the Owner Participant, the Owner Trustee and the Indenture Trustee. (c) The Pass Through Trustee, the Indenture Trustee, the Owner Trustee and the Owner Participant each shall have received the following: (1) an incumbency certificate of each of the Original Head Lessee, the Lessee and the Parent Guarantor as to the person or persons authorized to execute and deliver this Agreement and each of the other documents to be executed on behalf of such Person in connection with the transactions contemplated hereby (including, without limitation, each of the documents - 8 - 12 referred to herein) and as to the signatures of such person or persons; (2) a copy of the resolutions of the board of directors of each of the Original Head Lessee, the Lessee and the Parent Guarantor or the applicable committee thereof, certified by the Secretary or an Assistant Secretary of such Person, duly authorizing the transactions contemplated hereby and the execution, delivery and performance of each of the documents required to be executed and delivered on behalf of such Person in connection with the transactions contemplated hereby; (3) a copy of the certificate of incorporation of each of the Original Head Lessee and the Lessee, certified by the Secretary of State of its state of incorporation, a copy of the by-laws of each of the Original Head Lessee and the Lessee, certified by the Secretary or an Assistant Secretary of such Person, and a certificate or other evidence from the Secretary of State of its state of incorporation, dated as of a date reasonably near the Restatement Date, as to its due incorporation and good standing in such state; and (4) a copy of the Memorandum and Articles of Association of the Parent Guarantor certified to be true and correct by the Secretary or an Assistant Secretary of the Parent Guarantor. (d) The Pass Through Trustee, the Indenture Trustee, the Owner Trustee and the Owner Participant each shall have received, in the case of (1), (5) and (6) below, a certificate signed by an authorized officer of the Lessee and, in the case of (2), (3) and (4) below, a certificate signed by an authorized officer of the Original Head Lessee, dated the Restatement Date, certifying that: (1) the Aircraft has been duly certified by the FAA as to type and airworthiness and has a current, valid certificate of airworthiness; (2) the Second Aircraft FAA Bill of Sale (as defined in the Participation Agreement), the Original Lease and the Original Indenture have each been duly recorded, and the Original Trust Agreement has been duly filed, with the FAA pursuant to the sections of Title 49 of the United States Code relating to aviation (the "Federal Aviation Act"); (3) Lease Amendment No. 1, the Amended and Restated Lease, Lease Supplement No. 3, the First - 9 - 13 Amended and Restated Indenture, Trust Indenture Supplement No. 2 and Trust Supplement No. 2 covering the Aircraft shall have been duly filed for recordation with the FAA pursuant to the Federal Aviation Act; (4) the Aircraft has been registered with the FAA in the name of the Owner Trustee; (5) the Lessee has authority to operate the Aircraft; and (6) the representations and warranties contained herein of the Lessee are correct as of the Restatement Date, except to the extent that such representations and warranties relate solely to an earlier date (in which case such representations and warranties were correct on and as of such earlier date). (e) The Pass Through Trustee, the Owner Trustee and the Owner Participant each shall have received the following: (1) an incumbency certificate of the Indenture Trustee as to the person or persons authorized to execute and deliver this Agreement and each of the other documents to be executed on behalf of the Indenture Trustee in connection with the transactions contemplated hereby (including, without limitation, each of the documents referred to herein) and as to the signatures of such person or persons; (2) a copy of the resolutions of the board of directors of the Indenture Trustee, certified by the Secretary or an Assistant Secretary of the Indenture Trustee, duly authorizing the transactions contemplated hereby and the execution, delivery and performance of each of the documents required to be executed and delivered on behalf of the Indenture Trustee in connection with the transactions contemplated hereby; (3) a copy of the organization certificate and by-laws of the Indenture Trustee, each certified by the Secretary or an Assistant Secretary of the Indenture Trustee; and (4) a certificate signed by an authorized officer of the Indenture Trustee, dated the Restatement Date, certifying that the representations and warranties contained herein of the Indenture Trustee are correct as though made on and as of the Restatement Date, except to the extent that such representations and warranties relate solely to an earlier date (in which - 10 - 14 case such representations and warranties are correct on and as of such earlier date). (f) The Pass Through Trustee, the Indenture Trustee and the Owner Participant each shall have received the following: (1) an incumbency certificate of the Owner Trustee as to the person or persons authorized to execute and deliver this Agreement and each of the other documents to be executed on behalf of the Owner Trustee in connection with the transactions contemplated hereby (including, without limitation, each of the documents referred to herein) and as to the signatures of such person or persons; (2) a copy of the resolutions of the board of directors of the Owner Trustee, certified by the Secretary or an Assistant Secretary of the Owner Trustee, duly authorizing the transactions contemplated hereby and the execution, delivery and performance of each of the documents required to be executed and delivered on behalf of the Owner Trustee in connection with the transactions contemplated hereby; (3) a copy of the articles of association and by-laws of the Owner Trustee, each certified by the Secretary or an Assistant Secretary of the Owner Trustee; and (4) a certificate signed by an authorized officer of the Owner Trustee, dated the Restatement Date, certifying that the representations and warranties contained herein of the Owner Trustee are correct as though made on and as of the Restatement 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). (g) The Pass Through Trustee, the Indenture Trustee and the Owner Trustee each shall have received the following: (1) a secretary's certificate of [___________________] (the "Managing Partner"), as to (i) the Certificate of Incorporation and By-laws of the Managing Partner, (ii) the General Operating Resolution of the Managing Partner and (iii) the incumbency and signatures of persons authorized pursuant to such General Operating Resolution to execute and deliver this Agreement and each of the other documents to be executed by the Managing Partner on behalf of the Owner Participant in connection with the transactions contem- - 11 - 15 plated hereby (including, without limitation, each of the documents referred to herein); (2) a copy of the resolutions of the board of directors of the Managing Partner, certified by the Secretary or an Assistant Secretary of the Managing Partner, duly authorizing the Managing Partner to perform the rights and duties of the managing partner of the Owner Participant under the Partnership Agreement (as herein defined); (3) a certificate of an officer of the Managing Partner certifying as to excerpts from the partnership agreement between the partners of the Owner Participant, as amended to the Restatement Date, and as in full force and effect as of the Restatement Date (which a complete version thereof shall be the "Partnership Agreement"); (4) a certificate signed by an authorized representative of the Owner Participant, dated the Restatement Date, certifying that the representations and warranties contained herein of the Owner Participant are correct as though made on and as of the Restatement 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 (5) resolutions of the partners of the Owner Participant or other satisfactory evidence evidencing the consent or approval by each of the partners thereof of the execution and delivery of this Agreement and the agreements referred to herein to which the Owner Participant is a party and the performance by the Owner Participant of such agreements and the transactions contemplated thereby. (h) The Pass Through Trustee, the Indenture Trustee, the Owner Trustee and the Owner Participant each shall have received from the Lessee a report from Willis Corroon in substantially the form of Exhibit D attached hereto. (i) The Pass Through Trustee, the Indenture Trustee, the Owner Trustee and the Owner Participant each shall have received an opinion addressed to it from (i) Latham & Watkins, special counsel for the Lessee, (ii) Andrews & Kurth L.L.P., special counsel for the Lessee, (iii) the Senior Vice President - Legal Affairs of the Lessee and (iv) Lewis & Roca, special Arizona counsel for the Lessee, in each case in form and substance satisfactory to each of them. - 12 - 16 (j) The Pass Through Trustee, the Indenture Trustee and the Owner Participant each shall have received an opinion addressed to it from Morris, James, Hitchens & Williams, special counsel for the Owner Trustee, in form and substance satisfactory to each of them. (k) The Pass Through Trustee, the Owner Trustee and the Owner Participant each shall have received an opinion addressed to it from (i) Kelley Drye & Warren LLP, special counsel for the Indenture Trustee, and (ii) Shipman & Goodwin LLP, special counsel for the Subordination Agent and the Pass Through Trustee, in each case in form and substance satisfactory to each of them. (l) The Pass Through Trustee, the Indenture Trustee and the Owner Trustee each shall have received an opinion addressed to it from (i) White & Case, special counsel for the Owner Participant, and (ii) in-house counsel for the Managing Partner, in each case in form and substance satisfactory to each of them. (m) The Pass Through Trustee, the Owner Trustee and the Owner Participant shall have received an opinion from (i) White & Case, special counsel for the Liquidity Provider, and (ii) in-house counsel for the Liquidity Provider, in each case in form and substance satisfactory to each of them. (n) The Pass Through Trustee, the Owner Trustee, the Owner Participant and the Indenture Trustee each shall have received an opinion addressed to it from Daugherty, Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma, in form and substance satisfactory to each of them. (o) The Pass Through Trustee, the Owner Trustee, the Owner Participant and the Indenture Trustee each shall have received an opinion addressed to it from Paul, Hastings, Janofsky & Walker LLP, special New York counsel for the Original Head Lessee and the Parent Guarantor, in form and substance satisfactory to each of them. (p) The Pass Through Trustee, the Owner Trustee, the Owner Participant and the Indenture Trustee each shall have received an opinion addressed to it from McCann FitzGerald, special Irish counsel for the Parent Guarantor, in form and substance satisfactory to each of them. (q) The Original Head Lessee, the Lessee, and the Parent Guarantor shall have entered into the Underwriting Agreement and the Lessee shall have entered into each of the Pass Through Trust Agreements, the Certificates shall have been issued and sold pursuant to the Underwriting Agreement and the Pass Through Trust Agreements, and the Underwriter shall have - 13 - 17 transferred to the Pass Through Trustee in immediately available funds an amount equal to the aggregate purchase price of the Equipment Notes to be purchased from the Owner Trustee. (r) The Original Head Lessee and the Owner Participant shall each have executed and delivered to the other the Amended and Restated Head Lease TIA. (s) The Sublessor and the Sublessee shall each have executed and delivered to the other the Amended and Restated Sublease TIA. (t) No change shall have occurred after the date of this Agreement in applicable law or regulations thereunder or interpretations thereof by appropriate regulatory authorities or any court that would make it illegal for the Pass Through Trustee to make the payments described in Section 1(a)(ii) or for the Lessee, the Indenture Trustee, the Owner Trustee or the Owner Participant or any other party hereto to participate in the transactions contemplated by this Agreement on the Restatement Date. (u) All approvals and consents of any trustee or holder of any indebtedness or obligations of the Lessee which are required in connection with the Pass Through Trustee's making of the payments described in Section 1(a)(ii) or the Owner Trustee's or the Owner Participant's participation in the transactions contemplated by this Agreement on the Restatement Date shall have been duly obtained. (v) Uniform Commercial Code financing, termination, amendment and continuation statement or statements covering all of the security interests created by or pursuant to the Indenture that are not covered by the recording system established by the Federal Aviation Act shall have been executed and delivered by the Original Head Lessee, the Lessee, the Indenture Trustee and the Owner Trustee, as the case may be, and such financing, termination, amendment and continuation statement or statements or documents to the same purposes shall have been duly filed in all places necessary or advisable, and any additional Uniform Commercial Code financing, termination, amendment and continuation statements deemed advisable by the Original Head Lessee, the Lessee, the Owner Participant or the Indenture Trustee shall have been executed and delivered by the Original Head Lessee, the Lessee, the Indenture Trustee or the Owner Trustee, as the case may be, and duly filed in all places advisable. (w) No change shall have occurred after the date of this Agreement in applicable law or regulations thereunder or interpretations thereof by appropriate regulatory authorities or any court that would adversely affect the tax consequences of the - 14 - 18 transactions contemplated by this Agreement to the Owner Participant, the Owner Trustee or any of their respective Affiliates. Promptly following the recording of Lease Amendment No. 1, the Amended and Restated Lease (including Lease Supplement No. 3) and the First Amended and Restated Indenture (including Trust Indenture Supplement No. 2) pursuant to the Federal Aviation Act, the Original Head Lessee will cause Daugherty, Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma, to deliver to the Pass Through Trustee, the Lessee, the Indenture Trustee, the Owner Participant and the Owner Trustee an opinion as to the due recording of Lease Amendment No. 1, the Amended and Restated Lease, Lease Supplement No. 3, the First Amended and Restated Indenture, Trust Indenture Supplement No. 2 and Trust Supplement No. 2. SECTION 4. Certain Conditions Precedent to the Obligations of the Original Head Lessee and the Parent Guarantor; Certain Conditions Precedent to the Obligations of the Lessee; Conditions Precedent with Respect to the Pass Through Trustee. (a) The obligations of the Original Head Lessee and the Parent Guarantor to participate in the transactions contemplated by this Agreement on the Restatement Date, and to execute and deliver this Agreement are subject to the fulfillment, prior to or on the Restatement Date, of the following conditions precedent: (i) Each of the Original Head Lessee and the Parent Guarantor shall have received counterparts of the following documents executed by each of the parties thereto other than the Original Head Lessee and the Parent Guarantor: (1) this Agreement; (2) Lease Amendment No. 1, the Amended and Restated Lease and Lease Supplement No. 3; (3) the Amended and Restated Head Lease TIA; (4) the Amended and Restated Sublease TIA; (5) the Put Termination Agreement; (6) the Deed of Indemnity; (7) the Underwriting Agreement; (8) Uniform Commercial Code termination statements relating to the Original Head Lease executed by the Owner Trustee and/or the Indenture Trustee and such other releases - 15 - 19 and terminations as it may reasonably request; and (9) that certain letter agreement dated as of the Restatement Date relating to Stipulated Loss Values with respect to the Amended and Restated Lease (the "SLV Letter Agreement"). (ii) Each of the Original Head Lessee and the Parent Guarantor shall have received originals of the following documents: (1) the incumbency certificate of the Lessee referred to in Section 3(c)(1); (2) the resolutions of the Lessee referred to in Section 3(c)(2); (3) the documents referred to in Section 3(e), Section 3(f) and Section 3(g); (4) the opinions referred to in Section 3(i), Section 3(j), Section 3(k), Section 3(l), Section 3(m) and Section 3(n), in each case addressed to each of the Original Head Lessee and the Parent Guarantor and in form and substance satisfactory to each of them; (5) the opinions of Paul, Hastings, Janofsky & Walker LLP and Milbank, Tweed, Hadley & McCloy with respect to certain matters relating to and described in the Prospectus, in each case addressed to the Original Head Lessee and the Parent Guarantor and in form and substance reasonably satisfactory to each of them; and (6) the report referred to in Section 3(h) addressed to each of the Original Head Lessee and the Parent Guarantor. (iii) Each of the Original Head Lessee and the Parent Guarantor shall have received such other documents and evidence with respect to each other party hereto as each of them or its counsel may reasonably request in order to establish the due consummation of the transactions contemplated by this Agreement and the "Refunding Agreements" (as defined in the Registration Statement), the taking of all necessary action in connection therewith and compliance with the conditions herein or therein set forth. - 16 - 20 (b) The obligations of the Lessee to make the payment described in Section 1(a)(i)(A) (if any), to participate in the transactions contemplated by this Agreement on the Restatement Date, and to execute and deliver each of the Pass Through Trust Agreements are subject to the fulfillment, prior to or on the Restatement Date, of the following conditions precedent: (i) The Lessee shall have received counterparts of the following documents executed by each of the parties thereto other than Lessee: (1) this Agreement; (2) Lease Amendment No. 1, the Amended and Restated Lease and Lease Supplement No. 3; (3) the Amended and Restated Sublease TIA; (4) the Put Termination Agreement; (5) the Deed of Indemnity; (6) the Pass Through Trust Agreements; (7) the Underwriting Agreement; (8) Uniform Commercial Code termination statements relating to the Sublease executed by the Original Head Lessee; and (9) the SLV Letter Agreement. (ii) The Lessee shall have received originals of the following documents: (1) the incumbency certificate of the Original Head Lessee and Parent Guarantor referred to in Section 3(c)(1); (2) the resolutions of the Original Head Lessee and Parent Guarantor referred to in Section 3(c)(2); (3) the documents referred to in Section 3(e), Section 3(f) and Section 3(g); (4) the opinions referred to in Section 3(j), Section 3(k), Section 3(l), Section 3(m), Section 3(n), Section 3(o) and Section 3(p), in each case addressed to Lessee and in form and substance satisfactory to Lessee; and - 17 - 21 (5) the opinions of Paul, Hastings, Janofsky & Walker LLP and Milbank, Tweed, Hadley & McCloy with respect to certain matters relating to and described in the Prospectus, in each case addressed to Lessee and in form and substance reasonably satisfactory to Lessee. (iii) The Lessee shall have received such other documents and evidence with respect to each other party hereto as Lessee or its counsel may reasonably request in order to establish the due consummation of the transactions contemplated by this Agreement and the "Refunding Agreements" (as defined in the Registration Statement), the taking of all necessary action in connection therewith and compliance with the conditions herein and therein set forth. (c) The respective obligations of each of the Lessee, the Pass Through Trustee (solely as to clause (ii)), the Original Head Lessee, the Owner Participant, the Owner Trustee and the Indenture Trustee to participate in the transactions contemplated hereby is subject to the receipt by each of them of (i) a certificate signed by an authorized officer of the Pass Through Trustee, dated the Restatement Date, certifying that the representations and warranties contained herein and in the Pass Through Trust Agreements of the Pass Through Trustee are correct as of the Restatement 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) an opinion addressed to each of them of Shipman & Goodwin LLP, special counsel for the Pass Through Trustee, in form and substance satisfactory to each of them, and (iii) such other documents and evidence with respect to the Pass Through Trustee as it may reasonably request in order to establish the due consummation of the transactions contemplated by this Agreement, the taking of all necessary action in connection therewith and compliance with the conditions herein set forth. SECTION 5. Amendment and Restatement of the Original Indenture. Subject to the satisfaction or waiver of the conditions precedent set forth herein, the Owner Participant, by execution and delivery hereof, requests, authorizes and directs the Owner Trustee to execute and deliver the First Amended and Restated Indenture, and the Owner Trustee and the Indenture Trustee, by execution and delivery hereof, agree to execute and deliver the First Amended and Restated Indenture. Each of the Original Head Lessee, the Parent Guarantor and the Lessee, by execution and delivery hereof, consent to such execution and delivery of the First Amended and Restated Indenture. The First Amended and Restated Indenture shall be effective as of the Restatement Date. - 18 - 22 SECTION 6. Amendment and Restatement of the Original Lease. Subject to the satisfaction or waiver of the conditions precedent set forth herein, the Indenture Trustee, the Pass Through Trustee, the Parent Guarantor and the Owner Participant, by execution and delivery hereof, consent to the assignments, delegations, and releases set forth in, and to the amendment and restatement of the Original Lease effected by, and the Owner Participant requests and instructs the Owner Trustee to execute and deliver, Lease Amendment No. 1, and the Owner Trustee, the Original Head Lessee, the Indenture Trustee and the Sublessee agree, by execution and delivery hereof, to execute and deliver Lease Amendment No. 1. The Amended and Restated Lease shall be effective as of the Restatement Date. SECTION 7. Termination of the Participation Agreement; Termination of Sublease, etc. Subject to the satisfaction or waiver of the conditions precedent set forth herein, the Owner Participant, the Owner Trustee, the Original Head Lessee, the Parent Guarantor and the Indenture Trustee, by execution and delivery hereof, agree that, with effect from and including the Restatement Date and except as otherwise provided in Section 15 hereof, the Participation Agreement shall terminate and forever be without force and effect, conferring no rights and imposing no obligations on the parties thereto. Upon the execution and delivery of Lease Amendment No. 1 by each of the parties thereto, the Sublease, the Sublease Guaranty and the Assignment of Sublease shall terminate as and to the extent set forth herein and therein. Lease Amendment No. 1 shall be effective as of the Restatement Date. SECTION 8. Representations and Warranties of the Lessee. The Lessee represents and warrants, as of the Restatement Date, to the Original Head Lessee (except as to the representation and warranty contained in Section 8(i)), the Parent Guarantor (except as to the representation and warranty contained in Section 8(i)), the Pass Through Trustee, the Owner Participant, the Owner Trustee, the Liquidity Provider and the Indenture Trustee that: (a) the Lessee is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has the corporate power and authority to own or hold under lease its properties, has, or had on the respective dates of execution thereof, the corporate power and authority to enter into and perform its obligations under this Agreement, Lease Amendment No. 1, the Lease, the Pass Through Trust Agreements, the Amended and Restated Sublease TIA, the SLV Letter Agreement and any certificate delivered by the Lessee pursuant to the foregoing (the "Lessee Documents") and is duly qualified to do business as a foreign corporation in each jurisdiction where the failure to so qualify would have a material adverse effect on its - 19 - 23 business, operations or condition (financial or otherwise), or on its ability to perform its obligations under the Lessee Documents; (b) the Lessee is a Certificated Air Carrier, and its chief executive office (as such term is used in Article 9 of the Uniform Commercial Code in effect in the State of Arizona) is located at 4000 East Sky Harbor Boulevard, Phoenix, Arizona 85034; (c) the execution and delivery by the Lessee of the Lessee Documents and the performance of the obligations of the Lessee under the Lessee Documents 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 material indebtedness or material obligations of the Lessee, except such as have been duly obtained and are in full force and effect, and do not contravene any law, governmental rule, regulation, judgment or order binding on the Lessee or the certificate of incorporation or by-laws of the Lessee, 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, contract, lease or other agreement in each case having payment obligations in excess of $500,000 to which the Lessee is a party or by which it may be bound or affected; (d) neither the execution and delivery by the Lessee of the Lessee Documents nor the performance of the obligations of the Lessee under the Lessee Documents nor the consummation by the Lessee of any of the transactions contemplated by the Lessee Documents, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action in respect of, the Department of Transportation, the FAA, or any other federal, state, local or foreign governmental authority having jurisdiction, other than those which have already been received and which the Lessee is in compliance with and (i) the registration of the Certificates under the Securities Act of 1933, as amended (the "Securities Act") and the securities laws of any state in which the Certificates may be offered for sale if the laws of such state require such action, (ii) the qualification of the Pass Through Trust Agreements under the Trust Indenture Act of 1939, as amended, (iii) (A) the orders, permits, waivers, exemptions, authorizations and approvals of the regulatory authorities having jurisdiction over the operation of the Aircraft by Lessee required to be obtained on or prior to the Restatement Date, which orders, permits, waivers, exemptions, authorizations and approvals have been duly obtained and - 20 - 24 are, or will on the Restatement Date be in full force and effect, (B) the registration of the Aircraft pursuant to the Federal Aviation Act and (C) such consents, approvals, notices, registrations and other actions required by the terms of the Lessee Documents to the extent required to be given or obtained only after the Restatement Date and (iv) the registrations and filings referred to in Section 8(i); (e) each Lessee Document has been duly executed and delivered by the Lessee and, assuming the due authorization, execution and delivery thereof by the other parties thereto, each Lessee Document constitutes, or when executed will constitute, the legal, valid and binding obligations of the Lessee enforceable against the Lessee in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors or lessors generally and by general principles of equity, whether considered in a proceeding at law or in equity, and except, in the case of the Lease, as may be limited by applicable laws which may affect the remedies provided in the Lease, which laws, however, do not make the remedies provided in the Lease inadequate for the practical realization of the benefits intended to be afforded thereby; (f) except as disclosed in the Prospectus, there are no pending or, to its knowledge, threatened actions or proceedings before any court or administrative agency or regulatory commission or other governmental agency against or affecting the Lessee that are reasonably expected to materially adversely affect the ability of Lessee to enter into or perform its obligations under the Lessee Documents; (g) the Lessee is not an "investment company" or a company controlled by an "investment company" within the meaning of the Investment Company Act of 1940, as amended; (h) on the Restatement Date, the Trust Estate shall be free and clear of any and all Liens (other than Permitted Liens) created by or through the Lessee; (i) except for the registration of the Aircraft pursuant to the Federal Aviation Act, the filing for recordation pursuant to the Federal Aviation Act (with confidential financial terms redacted) of Lease Amendment No. 1, the Amended and Restated Lease, Lease Supplement No. 3, Trust Supplement No. 2, the First Amended and Restated Indenture and Indenture Supplement No. 2, and each of the other documents referred to in Annex A hereto, all with the FAA, the filing of a Uniform Commercial Code ("UCC") amended financing statement with the Secretary of State of the State of Delaware with regard to the Original - 21 - 25 Lease, the filing of UCC termination statements with regard to the Original Head Lessee with the Secretary of State of the States of New York, Connecticut and Arizona, the filing of a protective UCC financing statement with the Secretary of State of the State of Arizona with respect to the Lease, the filing of a UCC termination statement with the Secretary of State of the State of Arizona with respect to the Sublease, and the filing of a UCC termination statement with the Secretary of State of the State of Delaware with respect to the Initial Sublease Assignment (as defined in the Original Lease) all of which financing and termination statements shall have been duly effected as of the Restatement Date (and assignments thereof and continuation statements at periodic intervals), and other than the taking of possession by the Indenture Trustee of the original counterparts of the Original Lease, Lease Amendment No. 1, the Amended and Restated Lease, and all Lease Supplements thereto (to the extent the Lease constitutes chattel paper), and the placing of the Lease identification required by Section 6(e) of the Lease, no further filing or recording of the Lease or of any other document (including any financing statement under Article 9 of the UCC of the State of Delaware, New York or Arizona) and no further action is necessary, under the laws of the United States of America or the States of Delaware, New York and Arizona in order to perfect the Owner Trustee's interest in the Aircraft as against the Lessee and any third parties, or to perfect the security interest in favor of the Indenture Trustee in the Owner Trustee's interest in the Aircraft and in the Lease; (j) all obligations of the Lessee owing to the Lessor in connection with the Lease are at least pari passu with all unsecured and unsubordinated debt obligations of the Lessee; (k) no event has occurred and is continuing which constitutes a Lease Event of Default or would constitute a Lease Event of Default but for the requirement that notice be given or time lapse or both; (l) no event has occurred and is continuing which constitutes an Event of Loss (as defined in the Lease) or would constitute an Event of Loss with the lapse of time; (m) the Lessee has filed or will file, or has caused or will cause to be filed, all federal and state tax returns which are required to be filed and has paid or will pay or has caused or will cause to be paid all taxes shown to be due or payable on said returns and on any assessment received by the Lessee, to the extent such taxes have become due and payable, except for taxes and returns with respect thereto the nonpayment or nonfiling of which, either in any - 22 - 26 case or in the aggregate, could have no material adverse effect on the Lessee, its condition (financial or otherwise), business, operations or prospects, or on its ability to perform its obligations under the Lease or which are being diligently contested by the Lessee in good faith by appropriate proceedings and with appropriate reserves; (n) the financial statements together with the notes related thereto contained in the Registration Statement are complete in all material respects and fairly present the Lessee's financial condition as of December 31, 1996 and the results of its operations for the period covered in conformance with GAAP (except as otherwise noted therein and with which any such change the independent auditors of the Lessee have agreed) and do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein not misleading; since December 31, 1996, there has been no material adverse change in the Lessee's business, operations, condition (financial or otherwise) or prospects which has not been disclosed in writing to the Owner Participant and the Indenture Trustee; (o) on the Restatement Date, all sales, use, documentary duties or other similar Taxes then due and for which the Lessee is responsible pursuant to the Lessee Documents, shall have been paid, other than such Taxes which are being contested by the Lessee in good faith and by appropriate proceedings (and for which the Lessee shall have established such reserves as are required under GAAP) so long as such proceedings or the non- payment of such Taxes do not involve any material danger to the sale, forfeiture or loss of the Aircraft; (p) the Lessee is not a "national" of any designated foreign country within the meaning of the Foreign Assets Control Regulations or the Cuban Assets Control Regulations of the United States Treasury Department, 31 Code of Federal Regulations, Subtitle B, Chapter V, as amended, or of any regulations, interpretations or rulings issued thereunder, and the Lessee is not, and is not acting on behalf of or for the benefit of, an "Iranian Entity" within the meaning of the Iranian Assets Control Regulations of the United States Treasury Department, 31 Code of Federal Regulations, Subtitle B, Chapter V, as amended, and the transactions contemplated by this Agreement are not prohibited by Executive Order 12170, the above-mentioned Iranian Assets Control Regulations or any regulations, interpretations or rulings issued under any thereof; (q) no part of the Rent or other payments made by the Lessee under the Lease or under the other Operative Docu- - 23 - 27 ments will be made out of the assets of any "employee benefit plan" as defined in Section 3(3) of ERISA; (r) no representation or warranty of the Lessee contained in any Lessee Document or other information in writing furnished to the Owner Participant or the Indenture Trustee by the Lessee in connection herewith contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading; there is no fact known to the Lessee (other than matters of a general economic nature) which the Lessee has not disclosed in writing to the Owner Participant or the Indenture Trustee which could impair its ability to perform its obligations under the Lessee Documents; and (s) if the Lessee were to become a debtor under the Bankruptcy Code, the Lessor as lessor of the Aircraft under the Lease, and the Indenture Trustee, as assignee of the Owner Trustee's rights under the Lease pursuant to the Indenture, would be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to the Aircraft. SECTION 9. Representations and Warranties. Each of the parties below represents and warrants, as of the Restatement Date, to each of the other parties to this Agreement and to the Liquidity Provider (except that the representation and warranty set forth in Section 9(f)(8) shall be a representation and warranty of the Original Head Lessee to the Lessee only) as follows: (a) The Indenture Trustee in its individual capacity (and as Indenture Trustee to the extent provided in clause (6) below) represents and warrants that: (1) the Indenture Trustee is a corporation duly organized, validly existing and in good standing under the laws of the State of New York, is a "citizen of the United States" as defined in Section 40102(a)(15) of the Federal Aviation Act and the rules and regulations of the FAA thereunder (as so defined, a "Citizen of the United States") (without making use of a voting trust, voting powers agreement or similar arrangement), will notify promptly all parties to this Agreement if in its reasonable opinion its status as a Citizen of the United States (without making use of a voting trust, voting powers agreement or similar arrangement) is likely to change and will resign as Indenture Trustee as provided in Section 8.02 of the Indenture promptly after it obtains actual knowledge that it has ceased to be such a Citizen of the United States (without making use of a voting trust, voting powers agreement or - 24 - 28 similar arrangement), and has the full corporate power, authority and legal right under the laws of the State of New York and the federal laws of the United States pertaining to its banking, trust and fiduciary powers to execute and deliver each of this Agreement, the Indenture and each other Operative Document to which it is a party and to carry out its obligations under this Agreement, the Indenture and each other Operative Document to which it is a party; (2) neither the execution and delivery by the Indenture Trustee of this Agreement, the Indenture, Lease Amendment No. 1 and each other Operative Document to which it is a party, nor the consummation by it of any of the transactions contemplated hereby or thereby, nor the compliance by it with any of the terms and provisions hereof and thereof, (A) requires or will require any approval of its stockholders, or approval or consent of any trustees or holders of any indebtedness or obligations of it, or (B) violates or will violate its articles of association or by-laws, or contravenes or will contravene any provision of, or constitutes or will constitute a default under, or results or will result in any breach of, or results or will result in the creation of any Lien (other than as permitted under the Operative Documents) upon its property under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sale contract, bank loan or credit agreement, license or other agreement or instrument to which it is a party or by which it is bound, or contravenes or will contravene any law, governmental rule or regulation or any judgment or order applicable to or binding on it of any United States governmental authority or agency governing the trust powers of the Indenture Trustee; (3) this Agreement constitutes, and the Indenture, when executed and delivered by the Indenture Trustee, will constitute, the legal, valid and binding obligations of the Indenture Trustee enforceable against it in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; (4) there are no pending or, to its knowledge, threatened actions or proceedings against the Indenture Trustee, either in its individual capacity or as Indenture Trustee, before any court or administrative agency which, if determined adversely to it, would - 25 - 29 materially adversely affect the ability of the Indenture Trustee, in its individual capacity or as Indenture Trustee, as the case may be, to perform its obligations under the Operative Documents to which it is a party; (5) no consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any State of New York or any United States of America governmental authority or agency regulating the trust powers of the Indenture Trustee is required for the execution and delivery of, or the carrying out by, the Indenture Trustee of any of the transactions contemplated hereby or by the Indenture, Lease Amendment No. 1 or any other Operative Document to which it is a party or by which it is bound, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken; (6) there are no Lenders' Liens (as defined in the Lease) on the Aircraft or any portion of the Trust Estate created by or through the Indenture Trustee in its individual capacity; and (7) it has possession of the chattel paper original counterpart of the Original Lease, Lease Amendment No. 1 and the Lease. (b) Each of the Trust Company (except with respect to clauses (2)(ii), (3), (4)(i) and (6) below, which representations and warranties are made solely by the Owner Trustee) and the Owner Trustee (except with respect to clauses 1(i), (2)(i), 4(ii), (7), (11) and (12) below, which representations and warranties are made solely by the Trust Company) represents and warrants that: (1) (i) the Trust Company is a banking corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has full corporate power and authority to carry on its business as now conducted, has, or had on the respective dates of execution thereof, the corporate power and authority to execute and deliver Trust Supplement No. 2, has the corporate power and authority to carry out the terms of the Trust Agreement, and (ii) each of the Trust Company and the Owner Trustee has, or had on the respective dates of execution thereof (assuming the authorization, execution and delivery of Trust Supplement No. 2 by the Owner Participant), the corporate power and authority to execute and deliver and to carry out the terms of this Agreement, the Indenture, the Equipment Notes, - 26 - 30 Lease Amendment No. 1, the Lease and each other Operative Document (other than the Trust Agreement) to which it is a party; (2) (i) the Trust Company has duly authorized, executed and delivered the Trust Agreement (and, to the extent provided herein to be in its individual capacity, this Agreement) and (assuming the due authorization, execution and delivery of Trust Supplement No. 2 by the Owner Participant) the Trust Agreement (and, to the extent provided herein to be in its individual capacity, this Agreement) constitutes a legal, valid and binding obligation of the Trust Company, enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity, (ii) the Owner Trustee has duly authorized, executed and delivered this Agreement and (assuming the due authorization, execution and delivery of Trust Supplement No. 2 by the Owner Participant) this Agreement and the Trust Agreement constitute, and the Indenture and the Lease, when entered into, will constitute, legal, valid and binding obligations of the Owner Trustee, enforceable against it in accordance with its terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; (3) assuming the due authorization, execution and delivery of Trust Supplement No. 2 by the Owner Participant, the Owner Trustee has duly authorized, and on the Restatement Date shall have duly issued, executed and delivered to the Indenture Trustee for authentication, the Equipment Notes pursuant to the terms and provisions hereof and of the Indenture, and, upon such issuance, execution and delivery by the Owner Trustee and authentication by the Indenture Trustee in accordance with the terms of the Indenture, each Equipment Note issued on the Restatement Date will constitute the valid and binding obligation of the Owner Trustee and will be entitled to the benefits and security afforded by the Indenture in accordance with the terms of such Equipment Note and the Indenture; (4) (i) neither the execution and delivery by the Owner Trustee of this Agreement, the Original Trust - 27 - 31 Agreement, Trust Supplement No. 2, the Original Indenture, the Indenture, the Original Lease, Lease Amendment No. 1, the Lease, the Equipment Notes, or any other Operative Document to which it is a party, nor the consummation by it of any of the transactions contemplated hereby or thereby, nor the compliance by it with any of the terms and provisions hereof or thereof, contravenes or will contravene any judgment or order applicable to or binding on it, and (ii) neither the execution and delivery by the Trust Company of this Agreement, the Original Trust Agreement, Trust Supplement No. 2, the Original Indenture, the Indenture, the Original Lease, Lease Amendment No. 1, the Lease, the Equipment Notes, or any other Operative Document to which it is a party, nor the consummation by it of any of the transactions contemplated hereby or thereby, nor the compliance by it with any of the terms and provisions hereof or thereof, (A) requires or will require any approval of its stockholders, or approval or consent of any trustees or holders of any indebtedness or obligations of it, or (B) violates or will violate its articles of association or by-laws, or contravenes or will contravene any law, governmental rule or regulation of the State of Delaware or any United States governmental authority or agency governing the trust powers of the Trust Company, or any judgment or order applicable to or binding on it; (5) no consent, approval, order or authorization of, giving of notice to, or registration with, or taking of any other action in respect of, any state or local governmental authority or agency or any State of Delaware, State of New York or any United States of America governmental authority or agency regulating the trust powers of the Trust Company is required for the execution and delivery of, or the carrying out by, the Trust Company or the Owner Trustee, as the case may be, of any of the transactions contemplated hereby or by the Trust Agreement, the Indenture, the Lease, Lease Amendment No. 1, the Equipment Notes or any other Operative Document to which it is a party or by which it is bound, other than any such consent, approval, order, authorization, registration, notice or action as has been duly obtained, given or taken or which is described in Section 8(d); (6) there exists no Lessor's Lien or Head Lessor's Lien (each as defined in the Lease) (including for this purpose Liens that would be Lessor's Liens but for the first proviso in the definition of Lessor's Liens) attributable to the Owner Trustee; - 28 - 32 (7) there exists no Lessor's Lien or Head Lessor's Lien (including for this purpose Liens that would be Lessor's Liens but for the first proviso in the definition of Lessor's Liens) attributable to the Trust Company; (8) there are no Taxes payable by the Owner Trustee or the Trust Company imposed by the State of Delaware or any political subdivision thereof in connection with the prepayment of the Original Certificates or the issuance of the Equipment Notes,or the execution and delivery by it of any of the instruments referred to in clauses (1), (2), (3) and (4) above, that, in each case, would not have been imposed if the Trust Estate were not located in the State of Delaware and the Trust Company had not (a) had its principal place of business in, (b) performed (in its individual capacity or as Owner Trustee) any or all of its duties under the Operative Documents in, and (c) engaged in any activities unrelated to the transactions contemplated by the Operative Documents in, the State of Delaware; (9) there are no pending or, to its knowledge, threatened actions or proceedings against the Owner Trustee, either in its individual capacity or as Owner Trustee, before any court or administrative agency which, if determined adversely to it, would materially adversely affect the ability of the Owner Trustee, in its individual capacity or as Owner Trustee, as the case may be, to perform its obligations under any of the instruments referred to in clauses (1), (2), (3) and (4) above; (10) both its chief executive office, and the place where its records concerning the Aircraft and all its interests in, to and under all documents relating to the Trust Estate (other than such as may be maintained and held by the Indenture Trustee pursuant to the Indenture), are located in Wilmington, Delaware. Owner Trustee, in its individual capacity or as Owner Trustee, agrees that it will not change the location of such office to a location outside of Delaware, without prior written notice to all parties hereto; (11) it is a Citizen of the United States (without making use of a voting trust agreement, voting powers agreement or similar arrangements); and (12) there has not occurred any event which constitutes (or to the best of its knowledge would, - 29 - 33 with the passage of time or the giving of notice or both, constitute) an Event of Default as defined in the Indenture which has been caused by or relates to the Trust Company and which is presently continuing. (c) The Owner Participant represents and warrants that: (1) it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has the partnership power and authority to carry on its present business and operations and to own or lease its properties, has, or had on the respective dates of execution thereof, as the case may be, the partnership power and authority to enter into and to perform its obligations under this Agreement, the Trust Agreement, the SLV Letter Agreement and the Amended and Restated Head Lease TIA; this Agreement, the SLV Letter Agreement and Trust Supplement No. 2 have been duly authorized, executed and delivered by it; assuming the due authorization, execution and delivery hereof and thereof by the other parties hereto and thereto, this Agreement, the Trust Agreement, the SLV Letter Agreement and the Amended and Restated Head Lease TIA constitute the legal, valid and binding obligations of the Owner Participant enforceable against it in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; and the Managing Partner is duly incorporated, validly existing and in good standing under the laws of the State of Delaware, has the corporate power and authority to carry on its present business and operations and to own or lease its properties, has, or had on the respective dates of execution thereof, as the case may be, the corporate power and authority to execute and deliver this Agreement, the Trust Agreement, the SLV Letter Agreement and the Amended and Restated Head Lease TIA on behalf of the Owner Participant; (2) neither (A) the execution and delivery by the Owner Participant of this Agreement, the Trust Agreement, the SLV Letter Agreement, the Amended and Restated Head Lease TIA or any other Operative Document to which it is a party nor (B) compliance by it with all of the provisions hereof or thereof, (x) will contravene any law or order of any court or governmental authority or agency applicable to or binding on the Owner Participant (it being understood that no - 30 - 34 representation or warranty is made with respect to laws, rules or regulations relating to aviation or to the nature of the equipment owned by the Owner Trustee other than such laws, rules or regulations relating to the citizenship requirements of the Owner Participant under applicable law), or (y) will contravene the provisions of, or constitutes or has constituted or will constitute a default under, the Partnership Agreement or any indenture, mortgage, contract or other agreement or instrument to which the Owner Participant is a party or by which it or any of its property may be bound or affected, except where such contravention or default would not result in any liability to any other party hereto or have a material adverse effect on the rights or on the remedies of the other parties hereto or on its ability to perform its obligations hereunder or thereunder; (3) no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body (other than as required by the Federal Aviation Act or the regulations promulgated thereunder) is or was required, as the case may be, for the due execution, delivery or performance by it of this Agreement, the Trust Agreement and the Amended and Restated Head Lease TIA (it being understood that no representation or warranty is made with respect to laws, rules or regulations relating to aviation or to the nature of the equipment owned by the Owner Trustee other than the laws, rules or regulations relating to aircraft lease transactions generally or to the citizenship requirements of the Owner Participant under the Federal Aviation Act); (4) there are no pending or, to its knowledge, threatened actions or proceedings against the Owner Participant or any of its partners before any court or administrative agency or arbitrator which, if determined adversely to the Owner Participant or such partner(s), would materially adversely affect the Owner Participant's ability to perform its obligations under this Agreement, the Trust Agreement, the SLV Letter Agreement or the Amended and Restated Head Lease TIA; (5) on the Restatement Date, the Trust Estate shall be free of Lessor's Liens and Head Lessor's Liens attributable to the Owner Participant and its partners (including for this purpose Liens that would be Lessor's Liens but for the first proviso in the definition of Lessor's Liens); and - 31 - 35 (6) each of its partners is a Citizen of the United States (without making use of a voting trust agreement, voting powers agreement or similar arrangement). If at any time the Owner Participant or any partner of the Owner Participant has ceased to be, or the Owner Participant shall have actual knowledge that the Owner Participant or any partner of the Owner Participant is likely to cease to be, such a citizen, and (i) the Aircraft shall be or would thereupon become ineligible for registration in the name of Owner Trustee under the Federal Aviation Act as in effect at such time (without regard to the "based and primarily used" provisions thereof) and the regulations then applicable thereunder, or (ii) the Aircraft is registered in a jurisdiction other than the United States of America, in circumstances in which the preceding clause (i) does not apply and the Lessee or any Permitted Sublessee at any time proposes to register the Aircraft in the United States of America, then Owner Participant shall (at its own expense and without any reimbursement or indemnification from the Lessee or any Permitted Sublessee) (A) immediately either (1) transfer in accordance with Section 10 hereof all of its right, title and interest in and to the Trust Agreement, the Trust Estate, this Agreement and the Amended and Restated Head Lease TIA or (2) take such other action, including, without limitation, the establishment of a voting trust or voting powers agreement (in which case Owner Participant shall remain the beneficial owner of the Trust Estate), as may be necessary to prevent the deregistration of the Aircraft under the Federal Aviation Act or to maintain such registration of the Aircraft or to make possible such registration of the Aircraft in the United States of America and to prevent Indenture Trustee, the Holders of the Equipment Notes, the Lessee or any Permitted Sublessee from being adversely affected as a result thereof and (B) indemnify the Lessee, the Indenture Trustee, the Holders of the Equipment Notes and any Permitted Sublessee, from and against any and all Claims incurred or suffered as a result of such partner's or partners' failure to be such a citizen or loss of such citizenship, including, without limitation, as a result of the Aircraft's becoming ineligible or ceasing to remain eligible for such registration. (d) The Pass Through Trustee represents, warrants and covenants that: (1) the Pass Through Trustee is duly organized, validly existing and in good standing under the federal laws of the United States of America, and has the full - 32 - 36 corporate power, authority and legal right under the federal laws of the United States of America pertaining to its banking, trust and fiduciary powers to execute and deliver each of the Pass Through Trust Agreements, the Intercreditor Agreement, and this Agreement and to perform its obligations under this Agreement, the Pass Through Trust Agreements and the Intercreditor Agreement; (2) this Agreement has been, and when executed and delivered by the Pass Through Trustee, each of the Pass Through Trust Agreements and the Intercreditor Agreement will have been, duly authorized, executed and delivered by the Pass Through Trustee; this Agreement constitutes, and when executed and delivered by the Pass Through Trustee, each of the Pass Through Trust Agreements and the Intercreditor Agreement, will constitute, the legal, valid and binding obligations of the Pass Through Trustee enforceable against it in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; (3) none of the execution, delivery and performance by the Pass Through Trustee of any of the Pass Through Trust Agreements, the Intercreditor Agreement or this Agreement, the purchase by the Pass Through Trustee of the Equipment Notes pursuant to this Agreement, or the issuance of the Certificates pursuant to the Pass Through Trust Agreements, contravenes any law, rule or regulation of the State of Connecticut or any United States governmental authority or agency regulating the Pass Through Trustee's banking, trust or fiduciary powers or any judgment or order applicable to or binding on the Pass Through Trustee nor contravenes or results in any breach of, or constitutes a default under, the Pass Through Trustee's articles of association or by-laws or any agreement or instrument to which the Pass Through Trustee is a party or by which it or any of its properties may be bound; (4) neither the execution and delivery by the Pass Through Trustee of any of the Pass Through Trust Agreements, the Intercreditor Agreement or this Agreement, nor the consummation by the Pass Through Trustee of any of the transactions contemplated hereby or thereby, requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action with respect to, any State - 33 - 37 of Connecticut governmental authority or agency or any federal governmental authority or agency regulating the Pass Through Trustee's banking, trust or fiduciary powers; (5) assuming that the trusts created by the Pass Through Trust Agreements will not be taxable as corporations, but, rather, each will be characterized as a grantor trust under subpart E, Part I of Subchapter J of the Code for federal income tax purposes, there are no Taxes payable by the Pass Through Trustee imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the acquisition, possession or ownership by the Pass Through Trustee of any of the Equipment Notes (other than franchise or other taxes based on or measured by any fees or compensation received by the Pass Through Trustee for services rendered in connection with the transactions contemplated by any of the Pass Through Trust Agreements), and prior to the exercise of remedies upon the occurrence of an Indenture Event of Default, there are no Taxes payable by the Pass Through Trustee imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Pass Through Trustee of this Agreement, any of the Pass Through Trust Agreements or the Intercreditor Agreement (other than franchise or other Taxes based on or measured by any fees or compensation received by the Pass Through Trustee for services rendered in connection with the transactions contemplated by any of the Pass Through Trust Agreements), and such trusts will not be subject to any Taxes imposed by the State of Connecticut or any political subdivision or taxing authority thereof; upon the exercise of remedies following the occurrence of an Indenture Event of Default, there will be no Taxes payable by the Pass Through Trustee imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Pass Through Trustee of this Agreement, any of the Pass Through Trust Agreements or the Intercreditor Agreement (other than franchise or other Taxes based on or measured by any fees or compensation received by the Pass Through Trustee for services rendered in connection with the transactions contemplated by any of the Pass Through Trust Agreements), and the trusts created by the Pass Through Trust Agreements will not be subject to any Taxes imposed by the State of Connecticut or any political subdivision thereof, solely because the Pass Through Trustee maintains an office in, and administers the trusts created - 34 - 38 by the Pass Through Trust Agreements in, the State of Connecticut; (6) there are no pending or threatened actions or proceedings against the Pass Through Trustee before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Pass Through Trustee to perform its obligations under this Agreement, the Intercreditor Agreement or any Pass Through Trust Agreement; (7) except for the issue and sale of the Certificates contemplated hereby, the Pass Through Trustee has not directly or indirectly offered any Equipment Notes for sale to any Person or solicited any offer to acquire any Equipment Notes from any Person, nor has the Pass Through Trustee authorized anyone to act on its behalf to offer directly or indirectly any Equipment Notes for sale to any Person, or to solicit any offer to acquire any Equipment Notes from any Person; and the Pass Through Trustee is not in default under any Pass Through Trust Agreement; and (8) the Pass Through Trustee is not directly or indirectly controlling, controlled by or under common control with the Owner Participant, the Owner Trustee, the Underwriter or the Lessee. (e) The Subordination Agent represents and warrants that: (1) the Subordination Agent is a duly organized national banking association, validly existing and in good standing with the Comptroller of the Currency under the federal laws of the United States of America and has the full corporate power, authority and legal right under the federal laws of the United States of America pertaining to its banking, trust and fiduciary powers to execute and deliver each of the Liquidity Facilities, the Intercreditor Agreement and this Agreement and to perform its obligations under this Agreement, the Liquidity Facilities and the Intercreditor Agreement; (2) this Agreement has been, and when executed and delivered by the Subordination Agent, each of the Liquidity Facilities and the Intercreditor Agreement will have been, duly authorized, executed and delivered by the Subordination Agent; this Agreement constitutes, and when executed and delivered by the Subordination Agent, each of the Liquidity Facilities and the Inter- - 35 - 39 creditor Agreement, will constitute, the legal, valid and binding obligations of the Subordination Agent enforceable against it in accordance with their respective terms, except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; (3) none of the execution, delivery and performance by the Subordination Agent of any of the Liquidity Facilities, the Intercreditor Agreement and this Agreement or the performance by the Subordination Agent of this Agreement, contravenes any law, rule or regulation of the State of Connecticut or any United States governmental authority or agency regulating the Subordination Agent's banking, trust or fiduciary powers or any judgment or order applicable to or binding on the Subordination Agent and do not contravene or result in any breach of, or constitute a default under, the Subordination Agent's articles of association or by-laws or any agreement or instrument to which the Subordination Agent is a party or by which it or any of its properties may be bound; (4) neither the execution and delivery by the Subordination Agent of any of the Liquidity Facilities, the Intercreditor Agreement or this Agreement nor the consummation by the Subordination Agent of any of the transactions contemplated hereby or thereby requires the consent or approval of, the giving of notice to, the registration with, or the taking of any other action with respect to, any State of Connecticut governmental authority or agency or any federal governmental authority or agency regulating the Subordination Agent's banking, trust or fiduciary powers; (5) there are no Taxes payable by the Subordination Agent imposed by the State of Connecticut or any political subdivision or taxing authority thereof in connection with the execution, delivery and performance by the Subordination Agent of this Agreement, any of the Liquidity Facilities or the Intercreditor Agreement (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities) solely because the Subordination Agent maintains an office and administers its trust business in the State of - 36 - 40 Connecticut, and there are no Taxes payable by the Subordination Agent imposed by the State of Connecticut or any political subdivision thereof in connection with the acquisition, possession or ownership by the Subordination Agent of any of the Equipment Notes solely because the Subordination Agent maintains an office and administers its trust business in the State of Connecticut (other than franchise or other taxes based on or measured by any fees or compensation received by the Subordination Agent for services rendered in connection with the transactions contemplated by the Intercreditor Agreement or any of the Liquidity Facilities); (6) there are no pending or threatened actions or proceedings against the Subordination Agent before any court or administrative agency which individually or in the aggregate, if determined adversely to it, would materially adversely affect the ability of the Subordination Agent to perform its obligations under this Agreement, the Intercreditor Agreement or any Liquidity Facility; (7) the Subordination Agent has not directly or indirectly offered any Equipment Note for sale to any Person or solicited any offer to acquire any Equipment Note from any Person, nor has the Subordination Agent authorized anyone to act on its behalf to offer directly or indirectly any Equipment Note for sale to any Person, or to solicit any offer to acquire any Equipment Note from any Person; and the Subordination Agent is not in default under any Liquidity Facility; and (8) the Subordination Agent is not directly or indirectly controlling, controlled by or under common control with the Owner Participant, the Owner Trustee, the Underwriter or the Lessee. (f) The Original Head Lessee represents and warrants that: (1) it is duly incorporated, validly existing and in good standing under the laws of the State of Connecticut and has the corporate power and authority to carry on its present business and operations and to own or lease its properties, has the corporate power and authority to enter into and to perform its obligations under this Agreement, Lease Amendment No. 1, the Amended and Restated Head Lease TIA, the Amended and Restated Sublease TIA and the SLV Letter Agreement (collectively, the "Original Head Lessee Transaction - 37 - 41 Documents"); each Original Head Lessee Transaction Document has been duly authorized, and upon the execution and delivery thereof will constitute, the legal, valid and binding obligations of the Original Head Lessee enforceable against it in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; (2) neither (A) the execution and delivery by the Original Head Lessee of this Agreement and each of the other Original Head Lessee Transaction Documents nor (B) compliance by it with all of the provisions hereof or thereof, (x) will contravene any law or order of any court or governmental authority or agency applicable to or binding on the Original Head Lessee, or (y) will contravene the provisions of, or constitutes or has constituted or will constitute a default under, its certificate of incorporation or by-laws or any indenture, mortgage, contract or other agreement or instrument to which the Original Head Lessee is a party or by which it or any of its property may be bound or affected, except where such contravention or default would not result in any liability to any other party hereto or have a material adverse effect on the rights or on the remedies of the other parties hereto or on its ability to perform its obligations hereunder or thereunder; (3) no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body (other than as required by the Federal Aviation Act or the regulations promulgated thereunder) is or was required, as the case may be, for the due execution, delivery or performance by the Original Head Lessee of this Agreement and each of the other Original Head Lessee Transaction Documents; (4) except as set forth in the Parent Guarantor's most recent Form 20-F filed with the Commission, there are no pending or, to its knowledge, threatened actions or proceedings against the Original Head Lessee before any court or administrative agency or arbitrator which, if determined adversely to the Original Head Lessee, would materially adversely affect the Original Head Lessee's ability to perform its obligations under this Agreement or any other Original Head Lessee Transaction Documents; - 38 - 42 (5) on the Restatement Date, the Trust Estate, the Aircraft, the Airframe, each Engine and each Part shall be free and clear of any and all Sublessor's Liens (as defined in the Sublease); (6) on the Delivery Date, the Owner Trustee received good title to the Aircraft free and clear of all Liens, except the rights of the Original Head Lessee under the Original Lease, the rights of the Sublessee under the Sublease, the Lien of the Original Indenture, the beneficial interest of the Owner Participant in the Aircraft, and Permitted Liens under the Original Lease; (7) title to the Buyer Furnished Equipment for the Aircraft has been transferred to the Owner Trustee in accordance with Section 8(y) of the Participation Agreement. As of the Restatement Date, there are no existing Claims against Parent Guarantor or Original Head Lessee with respect to Buyer Furnished Equipment; and (8) except for the registration of the Aircraft pursuant to the Federal Aviation Act, the filing for recordation pursuant to the Federal Aviation Act (with confidential financial terms redacted) of Lease Amendment No. 1, the Amended and Restated Lease, Lease Supplement No. 2, Trust Supplement No. 2, the First Amended and Restated Indenture and Indenture Supplement No. 2, and each of the other documents referred to in Annex A hereto, all with the FAA, the filing of a Uniform Commercial Code ("UCC") amended financing statement with the Secretary of State of the State of Delaware with regard to the Original Lease, the filing of UCC termination statements with regard to the Original Head Lessee with the Secretary of State of the States of New York, Connecticut and Arizona, the filing of a protective UCC financing statement with the Secretary of State of the State of Arizona with respect to the Lease, the filing of a UCC termination statement with the Secretary of State of the State of Arizona with respect to the Sublease, and the filing of a UCC termination statement with the Secretary of State of the State of Delaware with respect to the Initial Sublease Assignment (as defined in the Original Lease) all of which financing and termination statements shall have been duly effected as of the Restatement Date (and assignments thereof and continuation statements at periodic intervals), and other than the taking of possession by the Indenture Trustee of the original counterparts of the Original Lease, Lease Amendment No. 1, the Amended and Restated Lease, and all Lease - 39 - 43 Supplements thereto (to the extent the Lease constitutes chattel paper), and the placing of the Lease identification required by Section 6(e) of the Lease, no further filing or recording of the Lease or of any other document (including any financing statement under Article 9 of the UCC of the State of Delaware, New York or Arizona) and no further action is necessary, under the laws of the United States of America or the States of Delaware, New York and Arizona in order to perfect the Owner Trustee's interest in the Aircraft as against the Lessee and any third parties, or to perfect the security interest in favor of the Indenture Trustee in the Owner Trustee's interest in the Aircraft and in the Lease. (g) The Parent Guarantor represents and warrants that: (1) it is duly organized and validly existing under the laws of Ireland and has the corporate power and authority to enter into and to perform its obligations under this Agreement; this Agreement has been duly authorized and constitutes the legal, valid and binding obligations of the Parent Guarantor enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the rights of creditors generally and by general principles of equity, whether considered in a proceeding at law or in equity; (2) neither (A) the execution and delivery by the Parent Guarantor of this Agreement nor (B) compliance by it with all of the provisions hereof (x) will contravene any law or order of any court or governmental authority or agency applicable to or binding on the Parent Guarantor, or (y) will contravene the provisions of, or constitutes or has constituted or will constitute a default under, its Memorandum and Articles of Association or any indenture, mortgage, contract or other agreement or instrument to which the Parent Guarantor is a party or by which it or any of its property may be bound or affected, except where such contravention or default would not result in any liability to any other party hereto or have a material adverse effect on the rights or on the remedies of the other parties hereto or on its ability to perform its obligations hereunder or thereunder; (3) no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body (other than as required by the Federal Aviation Act or the regulations promulgated - 40 - 44 thereunder) is or was required, as the case may be, for the due execution, delivery or performance by the Parent Guarantor of this Agreement; (4) except as set forth in the Parent Guarantor's most recent Form 20-F filed with the Commission, there are no pending or, to its knowledge, threatened actions or proceedings against the Parent Guarantor before any court or administrative agency or arbitrator which, if determined adversely to the Parent Guarantor, would materially adversely affect the Parent Guarantor's ability to perform its obligations under this Agreement; (5) on the Restatement Date, the Trust Estate, the Aircraft, the Airframe, each Engine and each Part shall be free and clear of any and all Sublessor's Liens (as defined in the Sublease); and (6) The representations and warranties of the Original Head Lessee contained in this Agreement are true and correct in all respects on the date made (provided that the representation and warranty with respect to Section 9(f)(8) shall be only for the benefit of the Lessee). SECTION 10. Transfer of Owner Participant's Interest. Owner Participant shall not (i) directly or indirectly sell, assign, convey or otherwise transfer (whether by operation of law, consolidation, merger, sale of assets or otherwise) any of its right, title or interest in and to the Trust Estate, the Aircraft, the Lease, this Agreement, the Trust Agreement, the Amended and Restated Head Lease TIA or any other Operative Document or any proceeds therefrom or (ii) sell, transfer or otherwise dispose of (in one or more related transactions) all or more than 75% of its property or assets (based on the book value of such property and assets) unless such sale, transfer or other disposition is made at the end of the lease term for any such property or assets; provided that, subject to the conditions set forth below, (1) Owner Participant may transfer to a Transferee (as defined below) all (but not less than all) of its right (except for such rights accruing prior to transfer), title and interest as an entirety in and to the Trust Estate, the Aircraft, this Agreement, the Trust Agreement, the Amended and Restated Head Lease TIA and each other Operative Document to which Owner Participant is a party or by which Owner Participant is bound and (2) Owner Participant may sell, transfer or otherwise dispose of all or substantially all of its property or assets in a manner that would otherwise be prohibited by clause (ii) above if, prior to any such sale, transfer or other disposition, Owner Participant transfers to a Transferee (as defined below) all (but not less than all) of its right (except for such rights accruing - 41 - 45 prior to transfer), title and interest as an entirety in and to the Trust Estate, the Aircraft, this Agreement, the Trust Agreement, the Amended and Restated Head Lease TIA and each other Operative Document to which Owner Participant is a party or by which Owner Participant is bound; and provided further, that, so long as [________________] shall be the Owner Participant hereunder, nothing in this Section 10 shall restrict the right of any partner of [_________________] to sell, assign, convey or otherwise transfer any of its right, title or interest in [_______________]. Each such transfer shall be subject to the following conditions, and Owner Participant agrees for the express benefit of each party hereto that any such transfer will comply with such conditions: (i) the Person to whom such transfer is to be made (a "Transferee") is either (A) a bank, trust company or other financial institution with a combined capital, surplus and undivided profits of, or a corporation with a tangible net worth of, in either case at least $60,000,000, (B) any partnership in which such bank, trust company, financial institution, or corporation (or a direct or indirect subsidiary of such bank, trust company, financial institution or corporation) is a general partner if such bank, trust company, financial institution or corporation furnishes to Owner Trustee, Indenture Trustee, Original Head Lessee and Lessee an agreement or agreements of such bank, trust company, financial institution or corporation guaranteeing such partnership's obligations as Owner Participant contained in this Agreement, the Trust Agreement, the Amended and Restated Head Lease TIA and each other Operative Document to which Owner Participant is a party or by which it is bound, which guarantee shall be substantially in the form attached as Exhibit A hereto, (C) any direct or indirect wholly-owned subsidiary of such bank, trust company, financial institution or corporation if such bank, trust company, financial institution or corporation furnishes to Owner Trustee, Indenture Trustee, Original Head Lessee and Lessee an agreement or agreements of such bank, trust company, financial institution or corporation guaranteeing such subsidiary's obligations as Owner Participant contained in this Agreement, the Trust Agreement, the Amended and Restated Head Lease TIA and each other Operative Document to which Owner Participant is a party or by which it is bound, which guarantee shall be substantially in the form attached as Exhibit A hereto or (D) an Affiliate or a subsidiary of Owner Participant if Owner Participant furnishes to Owner Trustee, Indenture Trustee, Original Head Lessee and Lessee an agreement whereby Owner Participant will guarantee such Affiliate's or subsidiary's obligations as Owner Participant contained in this Agreement, the Trust Agreement, the Amended and Restated Head Lease TIA and each other Operative Document to - 42 - 46 which Owner Participant is a party or by which it is bound, which guarantee shall be substantially in the form attached as Exhibit A hereto; (ii) Owner Trustee, Indenture Trustee, Original Head Lessee and Lessee shall have received at least 15 days' prior written notice of such transfer specifying the name and address of any proposed transferee and specifying the facts necessary to determine whether such proposed transferee qualifies as a "Transferee" under clause (i) above and does not violate clause (vii) below; provided that if such Transferee is an Affiliate or a subsidiary of Owner Participant, such notice may be given promptly following rather than prior to such transfer if such Transferee meets the net worth requirement set forth above on its own account without a guarantee and otherwise meets the requirements of this Section 10; (iii) upon giving effect to such transfer, such Transferee is a Citizen of the United States and such Transferee shall deliver to Lessee an affidavit to such effect; (iv) such Transferee has the requisite power and authority and legal right to enter into and carry out the transactions contemplated hereby; (v) such Transferee enters into an agreement in substantially the form attached as Exhibit B hereto whereby such Transferee confirms that it shall be deemed a party to this Agreement, the Trust Agreement, the Amended and Restated Head Lease TIA and each other Operative Document to which Owner Participant is a party or by which Owner Participant is bound, and in which such Transferee shall agree to be bound by and undertake the obligations of Owner Participant in the Operative Documents and shall make representations and warranties comparable to those of Owner Participant contained herein; (vi) such transfer does not violate any provision of the Federal Aviation Act or any rules or regulations promulgated thereunder, or create a relationship that would be in violation thereof, or violate any provisions of the Securities Act or any other applicable Federal, state or other law, rule or regulation; (vii) such Transferee is not an airline, a commercial air carrier, an air freight forwarder, any Person engaged in the business of parcel transport by air, or a subsidiary or an Affiliate of any thereof or other similar Person; - 43 - 47 (viii) an opinion of counsel of the Transferee confirming the matters referred to in clauses (iv) and (vi) above (with appropriate reliance on certificates of corporate officers or public officials as to matters of fact) and confirming that the agreement referred to in clause (v) above is the legal, valid, binding and enforceable obligation of the Transferee and that the guarantee referred to in clause (i)(B), (C) or (D) above, if any, is the legal, valid, binding and enforceable obligation of the Transferee's guarantor shall be provided, at least 3 days prior to such transfer, to Lessee, Owner Trustee, Original Head Lessee and Indenture Trustee, which shall be in form and substance reasonably satisfactory to each of them; and (x) the terms of the Operative Documents and the Amended and Restated Head Lease TIA shall not be altered. Upon any such transfer, except as the context otherwise requires, such Transferee shall be deemed "Owner Participant" for all purposes hereof and of the Trust Agreement, the Amended and Restated Head Lease TIA and each other Operative Document to which Owner Participant is a party or by which Owner Participant is bound, and shall be deemed to have made the original participation in the Aircraft previously made by Owner Participant; and except as the context otherwise requires, each reference in this Agreement, the Trust Agreement, the Amended and Restated Head Lease TIA and each other Operative Document to "Owner Participant" shall thereafter be deemed to include such Transferee as provided in this Section 10. No transfer shall release Owner Participant from its obligations hereunder, under the Trust Agreement, the Amended and Restated Head Lease TIA and under the other Operative Documents, except to the extent expressly assumed by the Transferee in accordance with this Section 10, provided, that notwithstanding such an assumption, in no event shall Owner Participant be released from its obligations hereunder or under any of the other Operative Documents with respect to claims under this Agreement or under the Trust Agreement or the Amended and Restated Head Lease TIA by or against Owner Participant which have accrued or been made prior to the date of such transfer. The transferor Owner Participant shall pay the reasonable expenses of each party hereto related to any such transfer. Each party hereto agrees, upon the request of Owner Participant, to use reasonable efforts to cooperate at no cost or expense to it with Owner Participant in complying with its obligations under the provisions of clause (A) of paragraph (6) of Section 9(c), provided that such cooperation shall not be subject to the indemnity in Section 13 of the Lease. The Lessee shall have no obligation to prevent any such deregistration or assist in maintaining or otherwise enhancing the Aircraft's eligibility for registration by restricting the use of the Aircraft. - 44 - 48 SECTION 11. Re-Registration of the Aircraft. The Indenture Trustee agrees, that if the Owner Participant consents thereto, which consent shall not be unreasonably withheld, at any time after the Restricted Use Period, Lessee may, in connection with effecting a Permitted Sublease elect to effect a change in registration of the Aircraft, at Lessee's cost and expense, so long as (a) the country of registry of the Aircraft is a country listed on Exhibit C hereto (or such other country as the Owner Participant approves) and (b) the following conditions are met: (i) unless the country of registry is Taiwan, the United States of America maintains normal diplomatic relations with the country of registry of the Aircraft, and if the country of registry is Taiwan, the United States of America maintains diplomatic relations at least as good as those in effect on the Restatement Date; and (ii) the Owner Trustee, the Owner Participant and the Indenture Trustee shall have received favorable opinions (subject to customary exceptions) addressed to each such party, from counsel of recognized reputation qualified in the laws of the relevant jurisdiction and reasonably acceptable to the Owner Participant to the effect of the following and as to such other matters as the Owner Participant may reasonably request: (A) the Owner Trustee's ownership interest in the Aircraft and interest in the Lease and any Permitted Sublease shall be recognized under the laws of such jurisdiction, (B) the obligations of Lessee, and the rights and remedies of the Owner Trustee, under the Lease shall remain valid, binding and (subject to customary bankruptcy and equitable remedies exceptions and to other exceptions customary in foreign opinions generally) enforceable under the laws of such jurisdiction (or the laws of the jurisdiction to which the laws of such jurisdiction would refer as the applicable governing law), (C) after giving effect to such change in registration, the Lien of the Indenture on the Owner Trustee's right, title and interest in and to the Aircraft, the Lease and any Permitted Sublease shall continue as a valid and duly perfected security interest (and will not adversely affect the validity of the opinions stated in paragraphs 5(a) and 5(b) of the opinion letter delivered by Freshfields on the Restatement Date in connection with the transactions contemplated by this Agreement) and all filing, recording or other action necessary to protect the same and the Owner Trustee's ownership interest in the Aircraft shall have been accomplished (or, if such opinion cannot be given at the time of such proposed change in registration because such change in registration is not yet effective, (1) the opinion shall detail what filing, recording or other action is necessary and (2) the Owner Trustee and the Indenture - 45 - 49 Trustee shall have received a certificate from Lessee that all possible preparations to accomplish such filing, recording and other action shall have been done, and such filing, recording and other action shall be accomplished and a supplemental opinion to that effect shall be delivered to the Owner Trustee and the Indenture Trustee on or prior to the effective date of such change in registration), (D) it is not necessary, solely as a consequence of such change in registration and without giving effect to any other activity of the Owner Trustee, the Owner Participant or the Indenture Trustee (or any Affiliate thereof), as the case may be, for the Owner Trustee, the Owner Participant or the Indenture Trustee to qualify to do business in such jurisdiction, (E) there is no tort liability of the owner of an aircraft not in possession thereof under the laws of such jurisdiction (it being agreed that, in the event such latter opinion cannot be given in a form satisfactory to the Owner Participant, such opinion shall be waived if insurance reasonably satisfactory to the Owner Participant is provided to cover such risk), (F) (unless Lessee shall have agreed, or pursuant to the Lease shall have been required, to provide insurance covering the risk of requisition of use of such Aircraft by the government of such jurisdiction so long as such Aircraft is registered under the laws of such jurisdiction) the laws of such jurisdiction require fair compensation by the government of such jurisdiction payable in currency freely convertible into Dollars for the loss of use of such Aircraft in the event of the requisition by such government of such use. In addition, as a condition precedent to any such change in registration, (i) the insurance required by Section 12 of the Lease shall be in full force and effect at the time of such change in registration after giving effect to such change in registration and the Owner Trustee and the Indenture Trustee shall have received a certificate of the type described in Section 12(f) of the Lease, and (ii) the aircraft maintenance standards of the new country of registry shall be not materially less stringent from those of the United States of America or not materially less stringent from those of the United Kingdom and the Owner Trustee and the Indenture Trustee shall have received a certificate to such effect signed by the President, any Executive Vice President or any Senior Vice President of Lessee which certificate shall, as among the parties hereto, be presumed to be correct as to the matters stated therein absent conclusive evidence to the contrary. Lessee shall pay all reasonable costs, expenses, fees, and recording and registration taxes, including - 46 - 50 the reasonable fees and expenses of counsel to the Owner Trustee, the Owner Participant and the Indenture Trustee, and other charges in connection with any such change in registration. SECTION 12. Quiet Enjoyment. Each of the Trust Company, Owner Trustee, Owner Participant (as to itself and as to Owner Trustee), Indenture Trustee in its individual capacity and as Indenture Trustee and on behalf of the Note Holders, the Pass Through Trustee and the Subordination Agent severally covenants and agrees that during the Term, so long as no Lease Event of Default shall have occurred and be continuing and the Lease shall not have been declared or deemed in default, no action shall be taken or caused to be taken by it or a Person lawfully claiming by, through or on behalf of it to interfere with the right of Lessee or any Permitted Sublessee to the possession, use, operation and quiet enjoyment of and other rights with respect to the Aircraft under the Lease, and all rents, revenues, profits and income therefrom, in accordance with the terms of the Lease; provided that the Trust Company, Owner Trustee and Owner Participant shall not be liable for any such interference by Indenture Trustee, Pass Through Trustee, holders of any Equipment Notes, or any other Person lawfully claiming by, through or on behalf of them. SECTION 13. Liens. Each of the Trust Company, Owner Trustee and Owner Participant severally covenants and agrees with each other party hereto that it shall not cause or permit to exist a Lessor's Lien or Head Lessor's Lien attributable to it with respect to the Aircraft or any other portion of the Trust Estate or the Indenture Estate. Each of Trust Company, Owner Trustee and Owner Participant severally agrees that it will promptly, at its own expense (and without any right of indemnification or reimbursement from Lessee), take such action as may be necessary duly to discharge any such Lessor's Lien or Head Lessor's Lien attributable to it and to make restitution to the Trust Estate and the Indenture Estate for any diminution of the assets thereof resulting therefrom and will indemnify and hold harmless Lessee and each Indemnitee against any claims incurred or suffered by any such Person and any reduction in amounts payable out of, or diminution in the assets of, the Trust Estate or the Indenture Estate resulting from any such Lessor's Lien or Head Lessor's Lien attributable to it. For all purposes of this Agreement and the other Operative Documents, any Lessor's Lien or Head Lessor's Lien arising as a result of the nonpayment of any Tax imposed on or measured by the net income of the Trust Estate or the trust created by the Trust Agreement that is not indemnifiable by Lessee or Original Head Lessee shall be deemed to be attributable to Owner Participant, and Owner Participant shall be responsible for all Lessor's Liens attributable to Owner Participant and Owner Trustee. - 47 - 51 Each of the Indenture Trustee, Pass Through Trustee and Subordination Agent severally covenants and agrees with each other party hereto that it shall not cause or permit to exist a Trustee's Lien (as defined below) attributable to it with respect to the Aircraft or any other portion of the Trust Estate or the Indenture Estate. Each of Indenture Trustee, Pass Through Trustee and Subordination Agent severally agrees that it will promptly, at its own expense (and without any right of indemnification or reimbursement from Lessee), take such action as may be necessary duly to discharge any such Trustee's Lien attributable to it and to make restitution to the Trust Estate and the Indenture Estate for any diminution of the assets thereof resulting therefrom and will indemnify and hold harmless Lessee and each Indemnitee against any claims incurred or suffered by any such Person and any reduction in amounts payable out of, or diminution in the assets of, the Trust Estate or the Indenture Estate resulting from any such Trustee's Lien attributable to it. For purposes of this paragraph, "Trustee's Lien" means any Lien or disposition of title attributable to Indenture Trustee in its individual capacity (and not as Indenture Trustee), Pass Through Trustee in its individual capacity (and not as Pass Through Trustee) or Subordination Agent in its individual capacity (and not as Subordination Agent) on or in respect of (as the case may be) the Aircraft or any other portion of the Trust Estate or the Trust Indenture Estate arising as a result of (i) Claims against such Person not related to its interest in the Aircraft or the administration of the Trust Estate or the Trust Indenture Estate pursuant to the Indenture, whether under Section 9-207(2)(e) of the Uniform Commercial Code or otherwise, (ii) acts or omissions of such Person not contemplated hereunder or under the other Operative Documents, or acts or omissions of such Person which are in violation of any of the Operative Documents, (iii) Taxes imposed on or Claims against such Person which are excluded from indemnification by Lessee, or (iv) Claims against such Person arising out of the voluntary or involuntary transfer by such Person of all or any portion of its interest in the Aircraft, the Airframe, any Engine, the Trust Estate, the Trust Indenture Estate or the Operative Documents (except a Claim resulting from the exercise of remedies under and in accordance with the Indenture or for a transfer provided for in the Operative Documents). Each of the Original Head Lessee and Parent Guarantor jointly and severally covenants and agrees with each other party hereto that it shall not cause or permit to exist a Sublessor's Lien (as defined in the Sublease) attributable to it or other Lien or disposition of title created by or through Original Head Lessee, Parent Guarantor or any Affiliate of either thereof which would have constituted a Sublessor's Lien had the Sublease remained in effect with respect to the Aircraft or any other portion of the Trust Estate or the Indenture Estate. Each of the Original Head Lessee and Parent Guarantor severally agrees that - 48 - 52 it will promptly, at its own expense (and without any right of indemnification or reimbursement from Lessee), take such action as may be necessary duly to discharge any such Sublessor's Lien attributable to it or other Lien or disposition of title created by or through Original Head Lessee, Parent Guarantor or any Affiliate of either thereof which would have constituted a Sublessor's Lien had the Sublease remained in effect and to make restitution to the Trust Estate and the Indenture Estate for any diminution of the assets thereof resulting therefrom and will indemnify and hold harmless Lessee and each Indemnitee against any claims incurred or suffered by any such Person and any reduction in amounts payable out of, or diminution in the assets of, the Trust Estate or the Indenture Estate resulting from any such Sublessor's Lien attributable to it or other Lien or disposition of title created by or through Original Head Lessee, Parent Guarantor or any Affiliate of either thereof which would have constituted a Sublessor's Lien had the Sublease remained in effect. In no event will Lessee be liable for any Claims resulting from, pertaining to, arising from, or related to the granting, creation or existence of a Lessor's Lien, a Head Lessor's Lien, a Lenders' Lien, or a Sublessor's Lien (including, without limitation, Claims against Lessor and Original Head Lessee with respect to Buyer Furnished Equipment) or other Lien or disposition of title created by or through Original Head Lessee, Parent Guarantor or any Affiliate of either thereof which would have constituted a Sublessor's Lien had the Sublease remained in effect. The Parent Guarantor covenants and agrees that it shall cause the Original Head Lessee to perform its obligations under this Section 13. SECTION 14. Certain Additional Provisions Relating to Original Head Lessee, Parent Guarantor, Trust Company, Owner Trustee and Owner Participant. (a) Each of Owner Participant and Trust Company hereby agrees with Lessee and Indenture Trustee (i) to comply with the terms of the Trust Agreement, (ii) not to amend, supplement, or otherwise modify the Trust Agreement except in accordance with the terms thereof, provided that any such amendment, supplement or modification shall not adversely affect the Lessee or the Lien of the Indenture, and (iii) not to terminate or revoke the Trust Agreement except in accordance with the terms thereof, provided that any such termination or revocation shall not adversely affect the Lessee or the Lien of the Indenture. (b) Notwithstanding anything to the contrary in the Trust Agreement or Section 14(a) hereof, but subject always to the provisions of Section 14(c) hereof, Owner Participant shall not consent to or direct a change in the situs of the Trust - 49 - 53 Estate so long as a successor Owner Trustee meeting the requirements of the Trust Agreement is reasonably available at the present situs of the Trust Estate (A) unless the Indenture Trustee, the Original Head Lessee and Lessee shall have been given 30 days' prior notice thereof and (B) if, within 15 days after notice of such a proposed change is given to Lessee and the Original Head Lessee, either (1) Lessee or Original Head Lessee delivers to Owner Participant and Owner Trustee (at the expense of Owner Participant) an opinion of counsel, which counsel shall be reasonably satisfactory to Owner Participant and Owner Trustee, to the effect that such proposed change in the situs of the Trust Estate would have an adverse effect on the rights or obligations of Lessee or Original Head Lessee or (2) Lessee or Original Head Lessee delivers to Owner Participant and Owner Trustee (at the expense of Owner Participant) an opinion of counsel, which counsel shall be reasonably satisfactory to Owner Participant and Owner Trustee, to the effect that such proposed change in the situs of the Trust Estate would cause an increase in the amount for which Lessee may be required to indemnify any Person pursuant to the provisions of Section 10 of the Lease or for which Original Head Lessee is required to indemnify any Person pursuant to the provisions of the Amended and Restated Head Lease TIA, unless any and all Persons entitled to indemnification pursuant to Section 10 of the Lease or applicable provision of the Amended and Restated Head Lease TIA shall waive indemnification under Section 10 of the Lease or applicable provision of the Amended and Restated Head Lease TIA for any adverse tax or other consequences to it of such a change in the situs of the Trust Estate, (C) unless Indenture Trustee receives from Owner Participant an opinion of counsel, which counsel shall be reasonably satisfactory to Indenture Trustee, to the effect that such proposed change in the situs of the Trust Estate would not have an adverse effect on the validity or priority of the Lien of the Indenture and that such Uniform Commercial Code and FAA filings as are required to maintain the validity and priority of the Lien of Indenture have been made, and (D) such change does not affect the registration of the Aircraft. (c) Owner Participant agrees that if, at any time, the Trust Estate has become, or in Lessee's good faith opinion will become, subject to any Taxes for which it is indemnified pursuant to Section 10 of the Lease and if, as a consequence thereof, Lessee should request that the situs of the trust be moved to another state in the United States of America from the state in which it is then located, the situs of the trust shall be moved and Owner Participant will take whatever action may be requested by Lessee that is reasonably necessary to accomplish such removal; provided that (A) Lessee shall provide such additional tax indemnification with respect to such change of situs and request of Lessee as Original Head Lessee, Owner Participant or the Indenture Trustee (subject to the exclusions set forth in Section 10(b) of the Lease and the exclusions in the Amended and - 50 - 54 Restated Head Lease TIA) may reasonably request, (B) promptly after notice thereof Owner Participant has not notified Lessee and provided reasonable evidence of an adverse effect on Owner Participant's rights or obligations under the Trust Agreement, (C) Indenture Trustee shall have received an opinion of counsel selected by Lessee, which counsel shall be reasonably satisfactory to Indenture Trustee, to the effect that the validity and priority of the Lien of the Indenture will not be adversely affected by such action, and that such Uniform Commercial Code and FAA filings as are required to maintain the validity and the priority of the Lien of the Indenture have been made, (D) Owner Participant and Indenture Trustee shall have received an opinion or opinions of counsel selected by Owner Participant to the effect that, with customary exceptions, (I) the trust, as thus removed, shall remain a validly established trust, (II) any amendments to the Trust Agreement or the Indenture necessitated by such removal shall have been duly authorized, executed and delivered by the parties thereto and shall constitute the legal, valid and binding obligations of such parties, enforceable in accordance with their terms, (III) if such removal involves the replacement of Owner Trustee, an opinion of counsel to such successor Owner Trustee in form and substance reasonably satisfactory to Indenture Trustee and to Owner Participant covering the matters described in the opinion described in Section 3(j) hereof, and (IV) covering such other matters as Owner Participant or the Indenture Trustee may reasonably request, and (E) Lessee shall indemnify and hold harmless on an after tax basis Owner Trustee, Owner Participant and their respective Affiliates and Indenture Trustee against any and all reasonable and actual costs and expenses including reasonable attorneys' fees and disbursements, registration, recording or filing fees and other Taxes incurred by Owner Trustee, Owner Participant and their respective Affiliates, or Indenture Trustee in connection with such change of situs and shall indemnify and hold harmless Owner Participant, Owner Trustee and their respective Affiliates, and Indenture Trustee on an after tax basis (subject to the exclusions set forth in Section 10(b) of the Lease and the Amended and Restated Sublease TIA) from and against any increase in Taxes borne by such Person that results from such change in situs. In no event shall any change in situs of the trust affect Original Head Lessee's rights or obligations under the Amended and Restated Head Lease TIA. (d) Owner Trustee or any successor may resign or be removed by Owner Participant, a successor Owner Trustee may be appointed, and a corporation may become Owner Trustee under the Trust Agreement, only in accordance with the provisions of Article X of the Trust Agreement. Owner Participant agrees promptly to appoint a successor Owner Trustee in the event that Owner Participant has actual knowledge that Owner Trustee is not in compliance with its covenants contained herein. No successor Owner Trustee shall be appointed unless Lessee and Indenture - 51 - 55 Trustee shall have given written consent thereto, which consent shall not be unreasonably withheld. Owner Participant will not instruct Owner Trustee to terminate any Operative Document or take any action thereunder in violation of the terms thereof. Owner Participant shall not transfer any interest in the Trust Estate except in compliance with Section 10 hereof and the Trust Company shall not permit Owner Trustee to engage in any business other than owning and leasing the Aircraft as contemplated hereby. Lessee shall pay expenses on an after tax basis relating to the resignation or, if requested by Lessee, the removal of Owner Trustee, provided that the Owner Participant shall pay expenses relating to the removal of the Owner Trustee, if such removal was solely at the request of the Owner Participant. (e) The Trust Company agrees that if at any time it shall obtain actual knowledge that it has ceased to be or will likely cease to be a Citizen of the United States, it will promptly resign as Owner Trustee (if and so long as such citizenship is necessary under such Federal Aviation Act or any other law to permit the continued registration of the Aircraft in the name of the Lessor or, if it is not necessary, if and so long as Owner Trustee's citizenship would have any material adverse effect on any holder of Equipment Notes, the Lessee or any Permitted Sublessee), effective upon the appointment of the successor Owner Trustee in accordance with Section 10.1 of the Trust Agreement. (f) The Owner Participant hereby instructs the other parties hereto to deal directly with the Managing Partner as managing partner of the Owner Participant and the Owner Participant agrees that the other parties hereto will be entitled to rely conclusively on any consent, waiver, approval or other action taken by the Managing Partner as managing partner of the Owner Participant. SECTION 15. Certain Retained Rights and Releases. (a) Each of Owner Trustee, Indenture Trustee, Lessee and Owner Participant hereby agrees and consents to and confirms that it is bound by the terminations, assignments, delegations, releases and amendments set forth in or contemplated by Lease Amendment No. 1 and the Amended and Restated Lease. (b) Each of Parent Guarantor, Original Head Lessee and Lessee agree as among themselves that the following rights, benefits, obligations and liabilities (such rights, benefits, obligations and liabilities are, collectively, the "Retained Sublease Rights and Obligations"), shall survive the termination of the Sublease and the Sublease Guaranty: (i) Lessee, Original Head Lessee and Parent Guarantor shall retain all rights, benefits, obligations and liabilities under the Sublease, including that Sublessee shall remain liable for all of its obligations under Sections 10 and 13 of the Sublease, with - 52 - 56 respect to the period up to (but excluding) the Restatement Date and each of Parent Guarantor, Original Head Lessee and Lessee shall retain all rights and liabilities under any provision of the Sublease which by the express terms thereof survives the termination or expiration thereof (including, without limitation, any such liability arising from and including the Restatement Date under the Sublease in respect of the period up to (but excluding), or acts or omissions or circumstances arising prior to (but excluding), the Restatement Date), (ii) all rights, benefits, obligations and liabilities under the Sublease TIA (which rights, benefits, obligations and liabilities are amended and restated as of the Restatement Date) and (iii) Original Head Lessee and Parent Guarantor shall remain liable to Sublessee under the Sublease and the Sublease Guaranty for Sublessor's Liens (as therein defined); all of which rights, benefits, obligations and liabilities shall expressly survive the termination of the Sublease and the Sublease Guaranty. In furtherance of the foregoing, it is agreed that (x) Original Head Lessee shall continue to be liable to the Sublessee as and to the extent provided hereunder for removal of Sublessor's Liens and (y) Parent Guarantor is hereby released from any and all obligations and liabilities under the Sublease Guaranty, other than in respect of the obligations and liabilities of the Original Head Lessee in respect of Sublessor's Liens as provided above. (c) Each of the Lessee, Owner Trustee and Owner Participant agree as among themselves that the following rights, benefits, obligations and liabilities shall survive the termination of the Sublease: Lessee, and Owner Trustee, Owner Participant and the other "Indemnitees" (as such term is defined in the Sublease) other than Original Head Lessee and Parent Guarantor, shall retain all rights, benefits, obligations and liabilities under the Sublease, including that Sublessee shall remain liable for all of its obligations under Sections 10 and 13 of the Sublease, with respect to the period up to (but excluding) the Restatement Date and each of Lessee, Owner Trustee and Owner Participant shall retain all rights and liabilities under any provision of the Sublease which by the express terms thereof survives the termination thereof (including, without limitation, any such liability arising on or after the Restatement Date under the Sublease in respect of the period up to (but excluding), or acts or omissions or circumstances arising prior to (but excluding), the Restatement Date), all of which rights, benefits, obligations and liabilities shall expressly survive the termination of the Sublease. In furtherance of the foregoing, it is agreed by Sublessee that the indemnities contained in Sections 10 and 13 of the Sublease are expressly made for the benefit of and shall be enforceable by each Indemnitee (as such term is defined in the Sublease). - 53 - 57 (d) Except with respect to the Sublease and the Sublease TIA to the extent provided in Section 15(b) and (c) hereof, it is expressly understood and agreed by each of the parties hereto that the Original Head Lessee and the Parent Guarantor shall, as of the Restatement Date, have no liabilities or obligations under the "Operative Documents" (as defined in the Original Head Lease as in effect immediately prior to (but excluding) the Restatement Date and excluding the Head Lease TIA (which rights, benefits, obligations and liabilities are amended and restated as of the Restatement Date)) and are released from all such obligations and liabilities, except the Original Head Lessee and the Parent Guarantor pursuant to the Parent Head Lease Guaranty (i) shall continue to be liable to the parties hereto for the removal of any Sublessor's Liens and (ii) (without releasing Sublessor as provided in the Sublease) each of the Original Head Lessee, the Parent Guarantor, the Owner Trustee, the Indenture Trustee and the Owner Participant agree as among themselves and for the benefit of the other "Indemnitees" (as such term is defined in the Original Head Lease) that all rights, benefits, obligations and liabilities under Sections 7(c) and 7(d) of the Participation Agreement with respect to the period up to (but excluding) the Restatement Date and under any other provision of the Participation Agreement which by the express terms thereof survives the termination thereof (including, without limitation, any such liability arising from and including the Restatement Date under the Participation Agreement in respect of the period up to (but excluding), or acts or omissions or circumstances arising prior to (but excluding), the Restatement Date) shall survive the termination of the Participation Agreement, the Original Head Lease and the Parent Head Lease Guaranty (the foregoing surviving rights, benefits, obligations and liabilities of Parent Guarantor and Original Head Lessee, are, collectively, the "Retained Head Lease Rights and Obligations"). In furtherance of the foregoing, the parties hereto consent and agree that the Parent Guarantor is hereby released from any and all "Obligations" under and as defined in the Parent Head Lease Guaranty, except in respect of the Retained Head Lease Rights and Obligations and except in respect of the Amended and Restated Head Lease TIA, the "Obligations" in respect of which shall continue in full force and effect in accordance with the Parent Head Lease Guaranty and are hereby ratified and confirmed by the Parent Guarantor. SECTION 16. Certain Additional Obligations of the Lessee, the Owner Trustee, the Owner Participant and the Indenture Trustee. Each of Lessee, Owner Trustee, Owner Participant and Indenture Trustee hereby covenants and agrees for the benefit of each other that it will be bound by the terms of the other Operative Documents to which it or its applicable trustee is a party, and comply with and perform its agreements, covenants and indemnities set forth in the other Operative Documents (the provisions of which are hereby incorporated herein) to which it - 54 - 58 or its applicable trustee is a party, as amended, supplemented or otherwise modified from time to time as permitted hereby. SECTION 17. Lessee Protection of Title. Each of the Owner Trustee and the Indenture Trustee agrees to execute and deliver such documents or other instruments as the Lessee may reasonably request to enable the Lessee to perform its obligations under Section 15 of the Lease for the benefit of such Person. SECTION 18. Jurisdictional and Related Matters. (a) Jurisdiction. Each of Owner Participant, Owner Trustee, Trust Company, Indenture Trustee, Original Head Lessee, Parent Guarantor and Lessee (i) hereby irrevocably submits for itself and its property to the nonexclusive jurisdiction of the courts of the State of New York in New York County, and to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement, the Lease or any other Operative Document or any of the transactions contemplated hereby or thereby, and (ii) hereby waives, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, to the extent permitted by applicable law, any immunity (including, without limitation, sovereign immunity), that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper, or that this Agreement, the Lease or any other Operative Document or any of the transactions contemplated hereby or thereby may not be enforced in or by such courts. (b) Service of Process. Lessee generally consents to service of process by registered mail, return receipt requested, addressed to it at 4000 East Sky Harbor Blvd., Phoenix, Arizona 85034 or such other office of Lessee as from time to time may be designated by Lessee in writing to Owner Trustee, Original Head Lessee, Owner Participant and Indenture Trustee. Parent Guarantor hereby appoints Paul, Hastings, Janofsky & Walker LLP, Attention: John Howitt/Leigh Ryan, located at 399 Park Avenue, New York, New York 10022, as its agent for service of process, and covenants and agrees that service of process in any suit, action or proceeding may be made upon it at the office of such agent or such other office of Parent Guarantor or such other agent, as from time to time may be designated by Parent Guarantor in writing to Owner Trustee, Owner Participant and Indenture Trustee. Original Head Lessee hereby generally consents to service of process by registered mail, return receipt requested, addressed to it c/o GPA Corporation at 83 Wooster Heights Road, Danbury, Connecticut 06810 or such other office of Original Head Lessee as from time to time may be designated by Original Head Lessee in writing to Owner Trustee, Owner Participant and - 55 - 59 Indenture Trustee. Owner Participant generally consents to service of process by registered mail, return receipt requested, addressed to it c/o [______________________________] or such other office of Owner Participant as from time to time may be designated by Owner Participant in writing to Owner Trustee, Original Head Lessee, Lessee and Indenture Trustee. Owner Trustee generally consents to service of process by registered mail, return receipt requested, addressed to it at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001 or such other office of Owner Trustee as from time to time may be designated by Owner Trustee in writing to Owner Participant, Original Head Lessee, Lessee and Indenture Trustee. Indenture Trustee generally consents to service of process by registered mail, return receipt requested, addressed to it at 450 West 33rd Street, 15th Floor, New York, New York 10001 or such other office of Indenture Trustee as from time to time may be designated in writing to Owner Participant, Original Head Lessee, Owner Trustee and Lessee. (c) Judgments. A final judgment (the enforcement of which has not been stayed) against Owner Participant, Owner Trustee, Lessee, Original Head Lessee, Parent Guarantor and Indenture Trustee obtained in any suit in the court of the State of New York in New York County or in the United States District Court for the Southern District of New York shall be conclusive, and, to the extent permitted by applicable law, may be enforced in other jurisdictions by suit on the judgment, a certified or true copy of which shall be conclusive evidence of the fact and of the amount of any indebtedness or liability of Lessee therein described; provided that the plaintiff at its option may bring suit, or institute other judicial proceedings against, Lessee or any of its assets in the courts of any country or place where Lessee or such assets may be found. SECTION 19. Limitation on Recourse. The provisions of Section 2.03(a) of the Indenture are hereby incorporated herein by reference mutatis mutandis as fully and with the same force and effect as if set forth in full. SECTION 20. Notices. Unless otherwise specifically provided herein, all notices required or permitted by the terms of this Agreement shall be in English and in writing, and shall be sent to the Original Head Lessee, the Parent Guarantor, the Lessee, the Owner Participant, the Owner Trustee, the Pass Through Trustee, the Subordination Agent or the Indenture Trustee, at their respective addresses or facsimile numbers set forth below the signatures of such parties at the foot of this Agreement and any such notice shall become effective when received. SECTION 21. Expenses. (a) Subject to receipt by the Original Head Lessee of invoices therefor in reasonable detail, - 56 - 60 all of the reasonable out-of-pocket costs, fees and expenses incurred by the Lessee, the Owner Trustee, the Owner Participant, the Pass Through Trustee, the Subordination Agent, the Liquidity Provider, the Indenture Trustee and the Original Certificate Holders in connection with the transactions contemplated by this Agreement, the other Operative Documents, the Lease, the Pass Through Trust Agreements, the Intercreditor Agreement, the Liquidity Facilities and the Underwriting Agreement (except, in each case, as otherwise provided therein) shall be paid by the Original Head Lessee, including, without limitation: (1) the reasonable fees, expenses and disbursements allocable to the Equipment Notes issued under the Indenture of (A) Kelley Drye & Warren LLP, special counsel for the Indenture Trustee, (B) Shipman & Goodwin LLP, special counsel for the Pass Through Trustee and the Subordination Agent, (C) Morris, James, Hitchens & Williams, special counsel for the Owner Trustee, (D) Daugherty, Fowler & Peregrin, special counsel in Oklahoma City, Oklahoma and (E) Milbank, Tweed, Hadley & McCloy, special counsel for the Underwriter; (2) the reasonable fees, expenses and disbursements of White & Case, special counsel for the Owner Participant; (3) the reasonable fees, expenses and disbursements of Andrews & Kurth L.L.P. and Latham & Watkins, special counsel for the Lessee; (4) underwriting fees and commissions; (5) the initial fees and expenses of the Liquidity Provider, the Pass Through Trustee, the Indenture Trustee, the Owner Trustee and the Subordination Agent; (6) the costs of filing and recording documents with the FAA and filing Uniform Commercial Code financing statements in the United States of America; and (7) the reasonable fees, expenses and disbursements of White & Case, special counsel for the Liquidity Provider. (b) In the event that the transactions contemplated by this Section 21 and the agreements referred to herein are not consummated, the Original Head Lessee shall bear and pay all costs, expenses and fees referred to in this Section 21. (c) The Lessee agrees to pay the amounts it is obligated to pay under Section 21(j) of the Lease. SECTION 22. Reliance of Liquidity Provider. Each of the parties hereto agrees and acknowledges that the Liquidity - 57 - 61 Provider shall be a third party beneficiary of each of the representations and warranties made herein by such party, and that the Liquidity Provider may rely on such representations and warranties to the same extent as if such representations and warranties were made to the Liquidity Provider directly. The terms of this Agreement shall inure to the benefit of the Liquidity Provider, its successors and permitted assigns. SECTION 23. Miscellaneous. (a) Provided that the transactions contemplated hereby have been consummated, and except as otherwise provided for herein, the representations and warranties herein of the Original Head Lessee, the Parent Guarantor, the Lessee, the Owner Trustee, the Indenture Trustee, the Owner Participant, the Subordination Agent and the Pass Through Trustee shall survive the execution and delivery of this Agreement. This Agreement may be executed in any number of counterparts (and each of the parties hereto shall not be required to execute the same counterpart). Each counterpart of this Agreement, including a signature page executed by each of the parties hereto, shall be an original counterpart of this Agreement, but all of such counterparts together shall constitute one instrument. Neither this Agreement nor any of the terms hereof may be terminated, amended, supplemented, waived or modified orally, but only by an instrument in writing signed by each party hereto; and no such termination, amendment, supplement, waiver or modification shall be effective unless a signed copy thereof shall have been delivered to each party hereto. The index preceding this Agreement and the headings of the various Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof. The terms of this Agreement shall be binding upon, and shall inure to the benefit of, the Original Head Lessee and its successors and permitted assigns, the Parent Guarantor and its successors and permitted assigns, the Lessee and its successors and permitted assigns, the Pass Through Trustee and its successors as Pass Through Trustee (and any additional trustee appointed) under any of the Pass Through Trust Agreements, the Indenture Trustee and its successors as Indenture Trustee (and any additional Indenture Trustee appointed) under the Indenture, the Subordination Agent and its successors as Subordination Agent under the Intercreditor Agreement, the Owner Trustee and its successors as Owner Trustee under the Trust Agreement, and the Owner Participant and its successors and permitted assigns. No purchaser or holder of any Equipment Notes shall be deemed to be a successor or assign of any holder of the Original Certificates. (b) Upon the release of the Aircraft from the lien of the Indenture and the termination of the Indenture pursuant to and in accordance with Section 10.01 thereof, each requirement in the Operative Documents that the consent of Indenture Trustee be - 58 - 62 obtained or that the Indenture Trustee be given notice shall be of no further force and effect. (c) The Lessee agrees for the express benefit of the Indenture Trustee to perform its obligations under Section 8(k) of the Lease. (d) The parties hereto agree for the benefit of the Lessee that the Lessee can rely on the options, elections, determinations, consents, approvals, waivers and notices given, exercised or made by the Owner Trustee under the Lease to the extent reserved to the Owner Trustee pursuant to Section 5.10(d) of the Indenture. (e) Notwithstanding anything to the contrary in any Operative Document, the parties hereto hereby agree that the Put Termination Agreement and the Deed of Indemnity (as such terms are defined herein) shall not constitute Operative Documents or Financing Documents. SECTION 24. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK. SECTION 25. Effectiveness. The parties hereto agree that this Agreement shall be effective among all such parties on and as of the Restatement Date. - 59 - 63 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. AMERICA WEST AIRLINES, INC. By: ------------------------------------ Name: Title: Address: 4000 East Sky Harbor Blvd. Phoenix, Arizona 85034 Telex: 755089 (Answerback: AMERWEST) Telephone: (602) 693-5785 Telecopier: (602) 693-5904 Attention: Senior Vice President - Legal Affairs GPA LEASING USA SUB I, INC. By: ------------------------------------- Name: Title: Address: c/o GPA Corporation 83 Wooster Heights Road Danbury, Connecticut 06810 Telephone: (203) 830-4760 Telecopier: (203) 830-4764 Attention: Company Secretary GPA GROUP plc By: ------------------------------------ Name: Title: Address: GPA House Shannon, County Clare, Ireland Telephone: 011-353-61360-051 Telecopier: 011-353-61360-000 Attention: Company Secretary 64 WILMINGTON TRUST COMPANY, not in its individual capacity, except as expressly provided herein, but solely as Owner Trustee By: ----------------------------------- Name: Title: Address: Rodney Square North 1100 North Market Street Wilmington, Delaware 19890-0001 Telephone: (302) 651-1000 Telecopier: (302) 651-8882 Attention: Corporate Trust Administration [_____________________________] By: ------------------------------------ Name: Title: Address: Telephone: Telecopier: Attention: 65 THE CHASE MANHATTAN BANK, not in its individual capacity, except as otherwise provided herein, but solely as Indenture Trustee By: ------------------------------------ Name: Andrew M. Deck Title: Vice President Address: 450 West 33rd Street 15th Floor New York, New York 10001 Telephone: (212) 946-3348 Telecopier: (212) 946-8160 Attention: Corporate Trust Department FLEET NATIONAL BANK, not in its individual capacity, except as otherwise provided herein, but solely as Subordination Agent By: ------------------------------------ Name: Philip G. Kane, Jr. Title: Vice President Address: 777 Main Street CTMO 0238 Hartford, Connecticut 06115 Telephone: (860) 986-4545 Telecopier: (860) 986-7920 Attention: Corporate Trust Administration FLEET NATIONAL BANK, not in its individual capacity, except as otherwise provided herein, but solely as Pass Through Trustee By: ------------------------------------ Name: Philip G. Kane, Jr. Title: Vice President Address: 777 Main Street CTMO 0238 Hartford, Connecticut 06115 Telephone: (860) 986-4545 Telecopier: (860) 986-7920 Attention: Corporate Trust Administration 66 SCHEDULE I to Refunding Agreement PASS THROUGH TRUST AGREEMENTS 1. Pass Through Trust Agreement, dated as of June ___, 1997 between America West Airlines, Inc. and Fleet National Bank, as supplemented by Trust Supplement No. 1997-1A, dated June ___, 1997. 2. Pass Through Trust Agreement, dated as of June ___, 1997 between America West Airlines, Inc. and Fleet National Bank, as supplemented by Trust Supplement No. 1997-1B, dated June ___, 1997 3. Pass Through Trust Agreement, dated as of June ___, 1997 between America West Airlines, Inc. and Fleet National Bank, as supplemented by Trust Supplement No. 1997-1C, dated June ___, 1997. 4. Pass Through Trust Agreement, dated as of June ___, 1997 between America West Airlines, Inc. and Fleet National Bank, as supplemented by Trust Supplement No. 1997-1D, dated June ___, 1997. 67 SCHEDULE II to Refunding Agreement EQUIPMENT NOTES, PASS THROUGH TRUSTS AND PURCHASE PRICE
Interest Rate Principal Purchase Pass Through Trusts and Maturity Amount Price - ------------------- ------------ ------ -----
68 SCHEDULE III to Refunding Agreement HOLDERS OF EQUIPMENT NOTES Payment Instructions Fleet National Bank, 777 Main Street, Hartford, Connecticut 06115, Attn: Philip Kane, Corporate Trust Administration, Ref. AWA, for the account of Fleet National Bank Account No. ABA # ______________________, ACCT. # ________________________. 69 EXHIBIT A to REFUNDING AGREEMENT TRANSFEREE'S PARENT GUARANTEE [GPA 1989 BN-11] TRANSFEREE'S PARENT GUARANTEE [GPA 1989 BN-11], dated as of ____________ by _________________, a ________________________ corporation ("Guarantor") to and for the benefit of Indenture Trustee (individually and as trustee), the Original Head Lessee, Owner Trustee and Lessee referred to in the Refunding Agreement described below (collectively, together with their permitted successors and assigns, "Beneficiaries" and, individually, a "Beneficiary"). WITNESSETH: WHEREAS, [_______________] ("Transferor"), is the Owner Participant under that certain Refunding Agreement [GPA 1989 BN-11], dated as of June ___, 1997 among Lessee, Original Head Lessee, Parent Guarantor, Owner Trustee, Transferor, Pass Through Trustee, Subordination Agent and Indenture Trustee, as amended, modified or supplemented from time to time (the "Refunding Agreement"); WHEREAS, Transferor wishes to transfer, except to the extent expressly reserved to Transferor, all of its right, title and interest in and to the Refunding Agreement, the Trust Estate, the other Operative Documents to which Transferor is a party, certain other agreements, instruments and documents in its capacity as Owner Participant under the Refunding Agreement and all proceeds therefrom as set forth in the Assignment and Assumption Agreement dated the date hereof between Transferor and _____________________, a ________________________ corporation ("Transferee"); and WHEREAS, the terms of the Refunding Agreement provide that the aforementioned transfer is conditioned upon the execution and delivery of this Guarantee by Guarantor; NOW, THEREFORE, Guarantor hereby agrees with and for the benefit of Beneficiaries as follows: 1. Definitions. As used in this Guarantee, terms defined in the Refunding Agreement are used herein as therein defined, unless otherwise defined herein. 2. Guarantee. (a) Guarantor hereby unconditionally and irrevocably guarantees to Beneficiaries and their respective successors, endorsees, transferees and assigns, the prompt and complete payment by Transferee when due (whether at the stated maturity, by acceleration or otherwise) of, and the faithful performance of, and compliance with, all payment obligations of Transferee under the Refunding Agreement, the Amended and Restated Head 70 Lease TIA, and each other Operative Document to which Owner Participant is a party and each other Operative Document to which Transferee is a party or by which either is bound (collectively, the "Relevant Documents"), strictly in accordance with the terms thereof and the timely performance of all other obligations of Transferee thereunder (such payment and other obligations, the "Obligations"), and Guarantor further agrees to pay any and all expenses (including, without limitation, all fees and disbursements of counsel) that may be paid or incurred by Beneficiaries in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, Guarantor under this Guarantee. (b) No payment or payments made by Transferee, Guarantor, any other guarantor or any other Person or received or collected by any Beneficiary from Transferee, Guarantor, any other guarantor or any other person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of Guarantor hereunder until the Obligations are paid and performed in full. (c) If for any reason any Obligation to be performed or observed by Transferee (whether affirmative or negative in character) shall not be observed or performed, or if any amount payable by Transferee referred to in Section 1(a) hereof shall not be paid promptly when due and payable, Guarantor shall promptly perform or observe or cause to be performed or observed each such Obligation or undertaking and shall forthwith pay such amount at the place and to the person or entity entitled thereto pursuant to the Relevant Documents regardless of whether or not Lessee, Original Head Lessee, Owner Trustee, Pass Through Trustee, Subordination Agent, Indenture Trustee, or anyone on behalf of any of them shall have instituted any suit, action or proceeding or exhausted its remedies or taken any steps to enforce any rights against Transferee or any other person or entity to compel any such performance or to collect all or any part of such amount pursuant to the provisions of the Relevant Documents or at law or in equity, or otherwise, and regardless of any other condition or contingency. 3. No Subrogation. Notwithstanding any payment or payments made by Guarantor hereunder or any setoff or application of funds of Guarantor by any Beneficiary, Guarantor shall not be entitled to be subrogated to any of the rights of any Beneficiary against Transferee or any collateral, security or guarantee or right of set-off held by any Beneficiary for the payment of the Obligations, nor shall Guarantor seek or be entitled to seek any reimbursement from Transferee in respect of payments made by Guarantor hereunder, until all amounts and performance owing to Beneficiaries by Transferee on account of the Obligations are paid and performed in full. - 2 - 71 4. Amendments, etc., with respect to the Obligations; Waiver of Rights. The Guarantor shall remain fully obligated hereunder notwithstanding that, without any reservation of rights against the Guarantor and without notice to or further assent by the Guarantor, any demand for payment or performance of any of the Obligations made by any Beneficiary may be rescinded by such party and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by any Beneficiary and any Relevant Document and/or any collateral security document or other guarantee or document in connection therewith, may be amended, modified, supplemented or terminated, in whole or in part, as the parties thereto may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by any Beneficiary for the payment or performance of the Obligations may be sold, exchanged, waived, surrendered or released. No Beneficiary shall have any obligation to protect, secure, perfect or insure any lien at any time held by it as security for the Obligations or for this Guarantee or any property subject thereto. When making any demand hereunder against the Guarantor, a Beneficiary may, but shall be under no obligation to, make a similar demand on the Transferee or any other guarantor, and any failure by a Beneficiary to make any such demand or to collect any payments from the Transferee or any such other guarantor or any release of the Transferee or such other guarantor shall not relieve the Guarantor of its obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of any Beneficiary against the Guarantor. For purposes hereof, "demand" shall include the commencement and continuance of any legal proceedings. The Guarantor represents and warrants that it owns, directly or indirectly, at least the portion of the capital stock of the Transferee required by the Refunding Agreement and that, except as otherwise provided in Section 5 hereof, its obligations hereunder shall continue unimpaired, even if the Guarantor no longer owns, directly or indirectly, such portion of the capital stock of the Transferee. 5. Transfer of Interest in Transferee. Guarantor shall not assign, convey or otherwise transfer to any person any of its interest in Transferee unless in connection therewith, Guarantor assigns its rights and obligations hereunder to a guarantor which meets the requirements of Section 10 of the Refunding Agreement; provided that nothing contained in this Section 5 shall be construed to prohibit any merger, consolidation or other corporate restructuring of Transferee or Guarantor so long as the resulting corporation meets the requirements of Section 10 of the Refunding Agreement and assumes the obligations of the corporation merged or consolidated into. - 3 - 72 6. Guarantee Absolute and Unconditional. The Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by any Beneficiary upon this Guarantee or acceptance of this Guarantee; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guarantee; and all dealings between the Transferee or the Guarantor and any Beneficiary shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guarantee. The Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Transferee or the Guarantor with respect to the Obligations. The Guarantor understands and agrees that this Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment and performance (and not merely of collectibility) without regard to (a) the validity, regularity or enforceability of any Relevant Document, any of the Obligations or any collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by any Beneficiary, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) that may at any time be available to or be asserted by the Transferee against any Beneficiary, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Transferee or the Guarantor) that constitutes, or might be construed to constitute, an equitable or legal discharge of the Transferee for the Obligations, or of the Guarantor under this Guarantee, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against the Guarantor, any Beneficiary may, but shall be under no obligation to, pursue such rights and remedies as it may have against the Transferee or any other person or entity or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by any Beneficiary to pursue such other rights or remedies or to collect any payments from the Transferee or any such other person or entity or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Transferee or any such other person or entity or any such collateral security, guarantee or right of offset, shall not relieve the Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of any Beneficiary against the Guarantor. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantor and the successors and assigns thereof, and shall inure to the benefit of the Beneficiaries, and their respective successors, endorsees, transferees and assigns, until all of the Obligations and the Obligations of the Guarantor under this Agreement shall have been satisfied by payment and performance in full. The Guarantor further agrees that, without limiting the generality of this Guarantee, if any Beneficiary (or any assignee thereof) shall be prevented by applicable law from exercising its remedies (or any of them) against the Transferee - 4 - 73 under any Operative Document, such Beneficiary (or any assignee thereof) shall be entitled to receive hereunder from the Guarantor, upon demand therefor, the sums that would have otherwise been due from the Transferee had such remedies been able to be exercised. 7. Reinstatement. This Guarantee shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by any Beneficiary upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Transferee or the Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Transferee or the Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made. The Guarantor shall not commence any "case" (as defined in Title 11 of the United States Code) against the Transferee. 8. Payments. The Guarantor hereby guarantees that payments hereunder shall be paid without set-off, counterclaim, deduction or withholding, and shall be made in U.S. Dollars. If any payment hereunder is subject to deduction or withholding, Guarantor shall pay an additional amount such that, after deduction of all amounts required to be deducted or withheld, the net amount actually received will equal the amount that would have been received had such deduction or withholding not been required. 9. Representations and Warranties. The Guarantor hereby represents and warrants that: (a) the Guarantor is a [type of legal personality] duly organized, validly existing and in good standing under the laws of the jurisdiction of its [organization] and has the [corporate] power and authority and the legal right to own and operate its property, to lease the property it operates and to conduct the business in which it is currently engaged; (b) the Guarantor has the [corporate] power and authority and the legal right to execute and deliver, and to perform its obligations under, this Guarantee, and has taken all necessary [corporate] action to authorize its execution, delivery and performance of this Guarantee; (c) this Guarantee constitutes a legal, valid and binding obligation of the Guarantor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally; - 5 - 74 (d) the execution, delivery and performance of this Guarantee will not violate any provision of any requirement of law or contractual obligation of the Guarantor and will not result in or require the creation or imposition of any lien on any of the properties or revenues of the Guarantor pursuant to any requirement of law or contractual obligation of the Guarantor; (e) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or governmental authority and no consent of any other person (including, without limitation, any stockholder or creditor of the Guarantor) is required in connection with the execution, delivery, performance, validity or enforceability of this Guarantee; (f) no litigation, investigation or proceeding of or before any arbitrator or governmental authority is pending or, to the knowledge of the Guarantor, threatened by or against the Guarantor or against any of its properties or revenues (i) with respect to this Guarantee or any of the transactions contemplated hereby or (ii) that could have a material adverse effect on the business, operations, property or financial or other condition of the Guarantor; (g) the balance sheet of the Guarantor as at _________________ and the related statement of income and retained earnings for the fiscal year then ended (copies of which have heretofore been furnished to each Beneficiary) have been prepared in accordance with generally accepted accounting principles applied consistently throughout the period involved, are complete and correct and present fairly the financial condition of the Guarantor as at such date and the results of its operations for such fiscal year; since such date there has been no material adverse change in the business, operations, property or financial or other condition of the Guarantor; the Guarantor has no material contingent obligation, contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment that is not reflected in the foregoing statements or in the notes thereto; and](1) (h) the Guarantor is [type of legal personality] with a [combined capital, surplus and undivided profits] [tangible net worth] of at least $60,000,000. 10. Severability. Any provision of this Guarantee that 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 - --------------------------- (1) This representation is not applicable if Transferee is a wholly-owned subsidiary of the Owner Participant. - 6 - 75 remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 11. No Waiver; Cumulative Remedies. No Beneficiary shall by any act (except by a written instrument pursuant to Section 13 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of any Beneficiary, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by a Beneficiary of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that such Beneficiary would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. 12. Integration. This Guarantee represents the entire agreement of Guarantor with respect to the subject matter hereof and there are no promises or representations by any Beneficiary relative to the subject matter hereof not reflected herein. 13. Amendments and Waivers. None of the terms or provisions of this Guarantee may be waived, amended or supplemented or otherwise modified except by a written instrument executed by Guarantor and each Beneficiary. 14. Section Headings. The Section headings used in this Guarantee are for convenience of reference only and not to affect the construction hereof or be taken into consideration in the interpretation hereof. 15. Successors and Assigns. This Guarantee shall be binding upon the successors and assigns of Guarantor and shall inure to the benefit of Beneficiaries and their respective successors and assigns. 16. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. 17. Notices. All notices, requests and demands to or upon the Guarantor or any Beneficiary to be effective shall be in writing or by telegraph, telex or telecopy and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand, or, in the case of mail, two days after deposit in the postal system, first class postage pre-paid, or, in the case of telegraphic notice, when sent, answerback received, addressed to (a) in the case of the - 7 - 76 Guarantor, the address provided on the signature page hereof, and (b) in the case of any Beneficiary, the address provided for such party in the Refunding Agreement. - 8 - 77 IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be duly executed and delivered by its duly authorized officer as of the day and the year first above written. [NAME OF GUARANTOR] By: --------------------------------- Title: - 9 - 78 EXHIBIT B to REFUNDING AGREEMENT ASSIGNMENT AND ASSUMPTION AGREEMENT [GPA 1989 BN-11] ASSIGNMENT AND ASSUMPTION AGREEMENT [GPA 1989 BN-11] ("Assignment") dated as of _____________, between ______________, a ___________ corporation ("Assignor") and ________________, a __________ corporation ("Assignee") entered into for the benefit of Indenture Trustee, Owner Trustee, Original Head Lessee and Lessee referred to in the Refunding Agreement mentioned below. WITNESSETH: WHEREAS, the parties hereto desire to effect (a) the transfer by Assignor to Assignee of all of the right, title and interest of the Assignor (except as reserved below) in, under and with respect to, among other things, (i) the Refunding Agreement, dated as of June ___, 1997, among America West Airlines, Inc., Assignor, GPA Leasing USA Sub I, Inc., GPA Group plc, Wilmington Trust Company, as Owner Trustee, Fleet National Bank, as Pass Through Trustee, [_______________], as Owner Participant, Fleet National Bank, as Subordination Agent, and The Chase Manhattan Bank, as Indenture Trustee, as amended, modified or supplemented from time to time (the "Refunding Agreement"), (ii) the Trust Agreement identified in the Refunding Agreement, (iii) the Trust Estate (as defined in the Trust Agreement), (iv) the Amended and Restated Head Lease TIA identified in the Refunding Agreement, (v) the Lease, (vi) the proceeds therefrom and (vii) the Indenture (as defined in the Refunding Agreement) and (b) the assumption by Assignee of the obligations of Assignor accruing thereunder; NOW, THEREFORE, it is hereby agreed as follows: 1. Definitions. Capitalized terms used herein without definition shall have the meaning ascribed thereto in the Refunding Agreement. For purposes of this Assignment, the defined term "Operative Document" shall have the meaning ascribed thereto in the Refunding Agreement and shall be deemed to include the Amended and Restated Head Lease TIA. 2. Assignment. Assignor has sold, conveyed, assigned, transferred and set over, and does hereby sell, convey, assign, transfer and set over, unto Assignee, as of the date hereof, all of its right, title and interest in, under and with respect to the Refunding Agreement, the Trust Agreement, the Trust Estate, the Amended and Restated Head Lease TIA, the Lease, the Indenture, all of the other Operative Documents to which Assignor is a party or any other contract, agreement, document or instrument relating to the Trust Estate by which Assignor is bound, and any proceeds therefrom, together with all other documents and instruments evidencing any of such right, title and interest (collectively, the "Relevant Documents"), except such rights of Assignor as have accrued to Assignor prior to the date 79 hereof (including specifically, but without limitation, the right to receive any amounts due or accrued to Assignor under the Trust Agreement as of a date prior to such date and the right to receive any indemnity payment pursuant to the Refunding Agreement, the Amended and Restated Head Lease TIA or the Lease with respect to events occurring prior to such date). 3. Assumption. Assignee hereby undertakes all of the duties and obligations of Assignor whenever accrued (other than duties and obligations of Assignor required to be performed by it on or prior to the date hereof under the Relevant Documents to which Owner Participant is a party and any of the other Relevant Documents by which Assignor is bound or any other contract, agreement, document or other instrument relating to the Trust Estate to which Assignor is a party or by which it is bound), pursuant to the Trust Agreement and any of the other Relevant Documents by which Assignor is bound or any other contract, agreement, document or other instrument relating to the Trust Estate to which Assignor is a party or by which it is bound, and hereby confirms that it shall be deemed a party to the Trust Agreement and shall be bound by each of the other Relevant Documents and each other contract, agreement, document or other instrument relating to the Trust Estate to which Assignor is a party or by which it is bound as if therein named as Trustor. 4. Release of Assignor. Except for liabilities not assumed as provided in Section 3 hereof, upon the execution of this Assignment and Assumption Agreement, Assignor shall have no further duty or obligation under the Relevant Documents to which Owner Participant is a party or under any of the other Relevant Documents by which Assignor is bound or under any other contract, agreement, document or other instrument relating to the Trust Estate to which Assignor is a party or by which it is bound; provided, however, that Assignor shall in no event be released from any obligation under the Relevant Documents with respect to Claims or other claims thereunder by or against Assignor which have accrued or been made prior to the date of transfer. 5. Appointment as Attorney-in-Fact. In furtherance of the within assignment, Assignor hereby constitutes and appoints Assignee, and its successors and assign, the true and lawful attorneys of Assignor, with full power of substitution, in the name of Assignee or in the name of Assignor but on behalf of and for the benefit of and at the expense of Assignee, to collect for the account of Assignee all items sold, transferred or assigned to Assignee pursuant hereto; to institute and prosecute, in the name of Assignor or otherwise, but at the expense of Assignee, all proceedings that Assignee may deem proper in order to collect, assert or enforce any claim, right or title of any kind in or to the items sold, transferred or assigned; to defend and compromise at the expense of Assignee any and all actions, suits or proceedings as to title to or interest in any of the property acquired by Assignee; and to do all such acts and things in relation thereto at the expense of Assignee as Assignee shall - 2 - 80 reasonably deem advisable. Assignor hereby acknowledges that this appointment is coupled with an interest and is irrevocable by Assignor in any manner or for any reason. 6. Payments. Assignor hereby covenants and agrees to pay over to Assignee, if and when received following the date hereof, any amounts (including any sums payable as interest in respect thereof) paid to or for the benefit of Assignor that, under Section 2 hereof, belong to Assignee, and Assignee hereby covenants and agrees to pay over to Assignor, if and when received following the date hereof, any amounts (including any sums payable as interest in respect thereof) paid to or for the benefit of Assignee that, under Section 2 hereof, belong to Assignor. 7. Investment Purpose. Assignee hereby represents that it is acquiring the Trust Estate interests and other interests hereby assigned to it without a view to the distribution or resale of either thereof. 8. Representations and Warranties. Assignee represents and warrants that: (a) it has all requisite power and authority and legal right to enter into and carry out the transactions contemplated hereby and to carry out and perform the transactions of Owner Participant as contemplated by the Relevant Documents; (b) on the date hereof it is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Federal Aviation Act and the rules and regulations of the FAA thereunder; (c) on and as of the date hereof, the representations and warranties of Owner Participant set forth in Section 9 of the Refunding Agreement mutatis mutandis and as set forth in any other Agreement to which Owner Participant is a party are true and correct as to Assignee; (d) it is a permitted Transferee under Section 10 of the Refunding Agreement; (e) Assignee or its guarantor has a [combined capital, surplus and undivided profits] [tangible net worth] of not less than $60,000,000. 9. Governing Law. This Assignment and Assumption Agreement shall be governed by and construed in accordance with the laws of the State of New York. - 3 - 81 IN WITNESS WHEREOF, the parties hereto have executed this Assignment and Assumption Agreement as of the day and year first above written. [ASSIGNOR] By: ----------------------------------- Title: [ASSIGNEE] By: ----------------------------------- Title: - 4 - 82 EXHIBIT C to REFUNDING AGREEMENT LIST OF COUNTRIES Australia Canada Denmark Finland France Germany Iceland Ireland Japan Luxembourg Netherlands New Zealand Norway Singapore South Korea Sweden Switzerland United Kingdom 83 EXHIBIT D to REFUNDING AGREEMENT FORM OF INSURANCE BROKER'S REPORT [to come] 84 ANNEX A to REFUNDING AGREEMENT FAA DOCUMENTS Documents Filed on the Restatement Date (a) Trust Agreement Supplement [GPA 1989 BN-11] No. 2 dated June __, 1997 (the "Trust Agreement Supplement") between the Owner Trustee and the Owner Participant, amending the Trust Agreement, which Trust Agreement Supplement was filed with the FAA at _____ p.m., C.D.T. on June __, 1997; (b) Amended and Restated Trust Indenture and Security Agreement [GPA 1989 BN-11] dated as of June __, 1997 (the "Amended and Restated Indenture") between the Owner Trustee and the Indenture Trustee, amending and restating the Original Indenture with attached thereto Trust Agreement and Indenture Supplement No. 2 [GPA 1989 BN-11] dated June __, 1997 (the "Indenture Supplement"), with respect to the Aircraft, which Amended and Restated Indenture with the Indenture Supplement attached was filed with the FAA at _____ p.m., C.D.T. on June __, 1997; (c) Assignment and Amendment No. 1 and Sublease Termination Agreement dated as of June __, 1997 (the "Lease Amendment") among the Original Head Lessee, as assignor, the Owner Trustee, as lessor, the Lessee, as successor lessee, and the Indenture Trustee, which (i) assigns certain right, title and interest of the Original Head Lessee in and to the Original Head Lease to the Lessee, (ii) terminates the Sublease and (iii) releases the Sublease Collateral Assignment, which Lease Amendment was filed with the FAA at _____ p.m., C.D.T. on June __, 1997; and (d) Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-11] dated as of December 18, 1989, amended and restated as of June __, 1997 (the "Amended and Restated Lease") between the Owner Trustee, as lessor, and the Lessee, as successor lessee, amending and restating the Original Head Lease with Lease Supplement [GPA 1989 BN-11] No. 3 dated June __, 1997 (the "Lease Supplement") between the Owner Trustee, as lessor, and the Lessee, as successor lessee, with respect to the Aircraft, attached thereto, which Amended and Restated Lease with the Lease Supplement attached was filed with the FAA at _____ p.m., C.D.T. on June __, 1997. 85 Description of Indenture Trust Indenture and Security Agreement [GPA 1989 BN-11] dated as of December 19, 1989 between Wilmington Trust Company, as trustee under Trust Agreement [GPA 1989 BN-11] dated as of December 19, 1989, and Manufacturers Hanover Trust Company, as indenture trustee, which was recorded by the Federal Aviation Administration on January 3, 1990 and assigned Conveyance No. V78689, as supplemented by the following described instrument:
Date of FAA FAA Instrument Instrument Recording Date Conveyance No. - ---------- ---------- -------------- -------------- Indenture Supplement No. 1 12/29/89 01/03/90 V78689
- 2 - 86 Description of Lease Aircraft Lease Agreement [GPA 1989 BN-11] dated as of December 19, 1989 between Wilmington Trust Company, as trustee under Trust Agreement [GPA 1989 BN-11] dated as of December 19, 1989, as lessor, and GPA Leasing USA Sub I, Inc., as lessee, which was recorded by the Federal Aviation Administration on January 3, 1990 and assigned Conveyance No. V78690, as supplemented and amended by the following described instruments:
Date of FAA FAA Instrument Instrument Recording Date Conveyance No. - ---------- ---------- -------------- -------------- Lease Supplement [GPA 1989 BN-11] No. 1 12/29/89 01/03/90 V78690 Lease Supplement [GPA 1989 BN-11] No. 2 01/05/95 03/09/95 DD007547
- 3 - 87 Description of Sublease Aircraft Sublease Agreement [GPA 1989 BN-11] dated as of September 21, 1990 between GPA Leasing USA Sub I, Inc., as sublessor, and America West Airlines, Inc., as sublessee, which was recorded by the Federal Aviation Administration on October 2, 1990 and assigned Conveyance No. F53828, as supplemented and amended by the following described instruments:
Date of FAA FAA Instrument Instrument Recording Date Conveyance No. - ---------- ---------- -------------- -------------- Sublease Supplement No. 1 09/28/90 10/02/90 F53828 Amendment No. 1 to Aircraft Sublease Agreement [GPA 1989 as of BN-11] 06/25/91 07/18/91 H77072 Amendment No. 2 to Aircraft Sublease Agreement [GPA 1989 as of BN-11] 08/26/91 10/02/91 DD001724
- 4 - EX-4.16 14 AMENDED & RESTATED AIRCRAFT LEASE AGREEMENT 1 EXHIBIT 4.16 THE RIGHTS OF LESSOR UNDER THIS AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT [GPA 1989 BN-8] AND IN THE AIRCRAFT COVERED HEREBY WILL BE OR HAVE BEEN ASSIGNED TO, AND ARE OR WILL BE SUBJECT TO A SECURITY INTEREST IN FAVOR OF, THE CHASE MANHATTAN BANK, FORMERLY KNOWN AS CHEMICAL BANK, SUCCESSOR BY MERGER TO MANUFACTURERS HANOVER TRUST COMPANY, AS INDENTURE TRUSTEE UNDER AN AMENDED AND RESTATED TRUST INDENTURE AND SECURITY AGREEMENT [GPA 1989 BN-8] DATED AS OF JUNE ___, 1997. AS PROVIDED IN SECTION 21(e) HEREOF, TO THE EXTENT, IF ANY, THAT THIS AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT 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 AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT MAY BE CREATED THROUGH THE TRANSFER OF POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE CHASE MANHATTAN BANK, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGE THEREOF. - -------------------------------------------------------------------------------- AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT [GPA 1989 BN-8] Dated as of December 19, 1989 Amended and Restated as of June __, 1997 between WILMINGTON TRUST COMPANY, not in its individual capacity except as otherwise expressly provided herein, but solely as Owner Trustee under a Trust Agreement [GPA 1989 BN-8] dated as of December 19, 1989, as amended Lessor and AMERICA WEST AIRLINES, INC. Lessee One Airbus A320-231 Aircraft Manufacturer's Serial No.66 U.S. Registration No. N627AW - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page Section 1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 2. Agreement to Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 3. Delivery and Acceptance; Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 (a) Time of Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 (b) [Intentionally Left Blank] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 (c) Acceptance of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 (d) Term of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 4. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 (a) Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 (b) Minimum Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 (c) Date, Place and Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 (d) Prohibition Against Setoff, Counterclaim, Etc. . . . . . . . . . . . . . . . . . . . . . . 24 Section 5. Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 (a) Warranties and Disclaimer of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 26 (b) Representations and Warranties of Lessor . . . . . . . . . . . . . . . . . . . . . . . . . 27 (c) No Amendments to Financing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 (d) Suppliers' Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 6. Possession and Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 (a) Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 (b) Reciprocal Recognition of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 (c) Lawful Insured Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 (d) Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 (e) Registration and Insignia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 7. Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 8. Additional Covenants of Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 (a) Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 (b) Maintenance of Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 (c) Maintenance of Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 (d) Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 (e) Consolidation, Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 (f) Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 (g) Place of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 (h) Certain Limitations on Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 (i) Section 1110 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 (j) Permits and Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 (k) Security Opinion; Annual Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 (l) Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
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Page ---- Section 9. Replacement of Parts; Alterations, Modifications and Additions . . . . . . . . . . . . . . . . . . . . . 50 (a) Replacement of Parts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 (b) Alterations, Modifications and Additions . . . . . . . . . . . . . . . . . . . . . . . . . 51 (c) Pooling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 10. General Tax Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 (a) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 (b) Exclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 (c) Covered Income Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 (d) Reports and Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 (e) After-Tax Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 (f) Tax Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 (g) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 (h) Contest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 (i) Refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 (j) Diligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 (k) Affiliated Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 (l) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Section 11. Loss, Damage and Requisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 (a) Event of Loss with Respect to the Airframe . . . . . . . . . . . . . . . . . . . . . . . . 66 (b) Event of Loss with Respect to an Engine . . . . . . . . . . . . . . . . . . . . . . . . . . 69 (c) Conveyance of Replacement Airframe . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 (d) Application of Proceeds and Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 (e) Requisition for Use by Government with Respect to the Aircraft . . . . . . . . . . . . . . 74 (f) Application in Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Section 12. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 (a) Public Liability and Property Damage Insurance. . . . . . . . . . . . . . . . . . . . . . 75 (b) Insurance Against Loss or Damage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 (c) Application of Insurance Proceeds for an Event of Loss . . . . . . . . . . . . . . . . . . 80 (d) Application of Insurance Proceeds for Other than an Event of Loss . . . . . . . . . . . . . 81 (e) Application in Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 (f) Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 (g) Reinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 (h) Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 (i) Amounts Held . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 (j) After the Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 (k) Governmental Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Section 13. General Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Section 14. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
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Page ---- Section 15. Protection of Title and Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Section 16. Return of Aircraft and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 (a) Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 (b) Status Upon Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 (c) Engines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 (d) Records and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 (e) Condition of Aircraft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 (f) Final Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 (g) Aircraft Records and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 (h) Corrections and Subsequent Corrections . . . . . . . . . . . . . . . . . . . . . . . . . . 98 (i) Functional Flight Check . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 (j) Export Certificate of Airworthiness . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 (k) Service Bulletin and Modification Kits . . . . . . . . . . . . . . . . . . . . . . . . . . 99 (l) Storage Upon Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 (m) Resale/Release Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Section 17. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 Section 18. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 Section 19. Security for Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Section 20. Renewal Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 Section 21. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 (a) Severability, Amendment, and Construction . . . . . . . . . . . . . . . . . . . . . . . . . 110 (b) GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 (c) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 (d) Lessor's Right to Perform for Lessee . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 (e) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 (f) Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 (g) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 (h) Investment of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 (i) Entire Agreement; Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 (j) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 (k) Federal Bankruptcy Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 (l) U.S. Registration Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 (m) Submission to Jurisdiction; Service of Process; Waiver of Forum Non Conveniens; Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 (n) Limitation on Recourse . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 (o) Successor Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 (p) Article 2-A of the UCC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
iii 5 ANNEXES Annex I - Description of Original Head Lease EXHIBITS Exhibit A - Stipulated Loss Values Exhibit B - Aircraft Records and Documents Exhibit C - Definitions and Values Exhibit D-1 - Lease Supplement No. 3 Exhibit D-2 - Letter of Credit Exhibit E - Return Condition Requirements Exhibit F-1 - Foreign Air Carriers Exhibit F-2 - Permitted Foreign Sublessee Domiciles iv 6 AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT THIS AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT dated as of December 19, 1989 and amended and restated as of June __, 1997 is entered into between WILMINGTON TRUST COMPANY, not in its individual capacity except as otherwise expressly provided herein, but solely as Owner Trustee under a Trust Agreement [GPA 1989 BN-8] dated as of December 19, 1989, as amended, and with its principal place of business at Rodney Square North, Wilmington, Delaware 19890 (together with its successors and permitted assigns, "Lessor"), and AMERICA WEST AIRLINES, INC., a Delaware corporation, with its chief executive office at 4000 East Sky Harbor Boulevard, Phoenix, Arizona 85034 (together with its successors and permitted assigns, "Lessee"). W I T N E S S E T H: WHEREAS, Lessor and Lessee desire to amend and, solely for the convenience of the parties, restate in its entirety the Original Head Lease (as hereinafter defined) as of the Restatement Date (as hereinafter defined) as hereinafter set forth; NOW, THEREFORE, in consideration of the mutual promises herein contained, Lessor and Lessee agree as follows: Section 1. Definitions. The following terms shall have the following respective meanings for all purposes of this Lease (including the Recitals) and shall be equally applicable to both the singular and the plural forms of the terms defined herein: As used herein, the terms "Assigned Sublease", "Equipment Notes", "Excepted Payments", "Foreign Lease Agreement", "Foreign Lender", "Foreign Lessor", "Indenture Supplement", "Note Holder", "Pass Through Trust", "Pass Through Trust Agreement", "Pass Through Trustee", "Past Due Rate", "Principal Amount", "Refinancing Transaction", "Refunding Agreement", "Restatement Date", "Sublease Assignment", "Trust Company" and "Trust Indenture Estate" shall have the meanings specified in the Indenture; the terms "Intercreditor Agreement", "Liquidity Facility", "Liquidity Provider" and "Subordination Agent" shall have the meanings specified in the Intercreditor Agreement (as defined in the Pass Through Trust Agreement); and the terms "OP Guarantee", "Lease Amendment No. 1" and "SLV Letter 7 Agreement" shall have the meanings specified in the Refunding Agreement. "Affiliate" shall mean, with respect to any specified Person, any other Person which, directly or indirectly, owns or controls, is controlled by or is under common control with such specified Person. Control will be deemed to exist based on (i) ownership of 25% or more of the voting securities of a Person or (ii) the power to direct or elect or cause the direction or election of the management and policies of a Person whether by contract or otherwise. "Airbus Industrie" shall mean Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of the French Republic, and its successors and assigns. "Aircraft" shall mean the Airframe leased hereunder and described in Lease Supplement No. 1 (or any airframe from time to time substituted for such Airframe pursuant to Section 11(a)(i) hereof) together with the (i) two IAE Model V2500 Engines described in Lease Supplement No. 1 (or any Engine substituted therefor hereunder) with respect to such Airframe, whether or not any such initial or substituted Engines may from time to time no longer be installed on the Airframe or may be installed on any other airframe, (ii) Parts or components thereof, (iii) spare parts or ancillary equipment or devices furnished therewith under this Lease (including any separate equipment described on one or more Lease Supplements hereto), (iv) the Aircraft Records and Documents and all other logs, manuals and records with respect to such Aircraft, and (v) all substitutions, replacements and renewals of any and all thereof. "Aircraft Records and Documents" shall mean the items identified in Exhibit B hereto, all of which shall be maintained in the English language. "Airframe" shall mean (a) the Airbus Industrie model A320-231 aircraft (except Engines or engines from time to time installed thereon) described in Lease Supplement No. 1 and leased by Lessor to Lessee hereunder, and any such model aircraft (except Engines or engines from time to time installed thereon) which may from time to time be substituted for such aircraft (except Engines or engines from time to time installed thereon) pursuant to Section 11(a)(i); and (b) any and all Parts so long as the same shall be incorporated or installed on or attached to the Airframe, or so long as title thereto shall remain vested in Lessor in -2- 8 accordance with the terms of Section 9 hereof after removal from the Airframe or, so long as the Foreign Lease Agreement is in effect, in Foreign Lessor in accordance with Section 13 of the Foreign Lease Agreement; provided, however, that at such time as an aircraft (except Engines or engines from time to time installed thereon) shall be deemed part of the property leased hereunder in substitution for the Airframe pursuant to the applicable provisions hereof and the replacement Airframe shall have been subjected to the Lien of the Indenture (if the Lien of the Indenture has not been discharged) and shall be subject to the Foreign Lease Agreement, the replaced Airframe shall cease to be the Airframe hereunder. "Appraisal Procedure" shall mean the following procedure for determining the "fair market sales value" or "fair market rental value" of the Aircraft, Airframe, an Engine or a Part. Except as provided in Section 18, "fair market sales value" or "fair market rental value" shall mean the value that would be obtained in an arm's-length transaction between an informed and willing seller or lessor, as the case may be, and an informed and willing buyer or lessee, as the case may be, both under no compulsion to sell and purchase or to lease (and other than a lessee in possession or a used equipment scrap dealer), as the case may be, as such value is determined by an appraisal which assumes: (i) that such Aircraft, such Airframe, such Engine or such Part is unencumbered by this Lease (or any sublease) or any of the other Operative Documents or any of the Financing Documents and the terms thereof; (ii) that such Aircraft, Airframe, Engine or Part has been maintained in all respects in accordance with the terms of this Lease (whether or not in fact in such condition), (iii) that such Aircraft, Airframe, Engine or Part meets the return conditions specified in Section 16 and Exhibit E (whether or not in fact meeting such conditions) and (iv) that Lessee has removed the Removable Parts entitled to be removed under Section 9(b) (it being agreed that no such removal is permitted in connection with an appraisal pursuant to Section 18) and replaced any part which was removed from the Aircraft as a result of such Removable Part being installed; provided, however, that costs of removal from the location of current use and costs of sale shall not be a consideration in determining such value except in connection with any determination of "fair market sales value" or "fair market rental value" pursuant to Section 18; and provided, further, that any determination of "fair market sales value" or "fair market rental value" pursuant to Section 18 shall be on an "as is, where is" basis in its actual condition and -3- 9 location subject to this Lease and any sublease and any and all Liens thereon (other than a Lessor's Lien or Lenders' Lien). Lessor and Lessee shall, except for any appraisal pursuant to Section 18 in which case only Lessor shall select such appraiser (which appraiser does not have to be acceptable to Lessee), select an independent nationally-recognized aircraft appraiser, mutually acceptable to each of them, who shall make the determination as to the "fair market sales value" or "fair market rental value" of such Aircraft, Airframe, Engine or Part for which such appraisal is to be conducted. If Lessor and Lessee fail to agree upon a mutually acceptable appraiser within ten (10) days, then each of Lessor and Lessee shall select an appraiser and such determination shall be made by such appraisers (if either party shall fail to appoint an appraiser within ten (10) days after notice from the other party of the selection of its appraiser, then the appraisal made by the other party's appraiser shall be determinative). If the two appraisers chosen pursuant to the preceding sentence fail to agree upon a determination of the "fair market sales value" or "fair market rental value" of such Aircraft, Airframe, Engine or Part within twenty (20) days after their appointment, then such appraisers shall mutually choose a third appraiser within ten (10) days thereafter, provided that if such appraisers fail to mutually choose a third appraiser within said 10-day period, such appointment shall be made by the American Arbitration Association (or any successor) in New York, New York, and the three appraisers so chosen shall each make such determination. The appraisal determined by each of the three appraisers chosen pursuant to the preceding sentence shall be averaged and the appraisal furthest from the average of the three appraisals shall be disregarded. The appraisal determined by each of the two remaining appraisers shall be averaged and such average shall be the appraised "fair market sales value" or "fair market rental value" of such Aircraft, Airframe, Engine or Part. Lessee shall bear all the fees and expenses of the Appraisal Procedure. "Approved Broker" shall mean any reputable insurance broker of recognized responsibility and standing experienced in aircraft insurance. "Approved Insurers" shall mean any reputable and creditworthy insurance company of recognized responsibility and standing experienced in aircraft insurance. "At Offshore" shall have the meaning specified in the Indenture. -4- 10 "Basic Rent" for the Aircraft shall mean the Basic Rent specified in Exhibit C and payable throughout the Basic Term for the Aircraft pursuant to Section 4(a)(i). "Basic Rent Payment Date" shall mean each day determined in accordance with Exhibit C upon which a payment of Basic Rent becomes payable. If a Basic Rent Payment Date shall fall on a day which is not a Business Day, any payment due on such Basic Rent Payment Date shall be made on the next succeeding Business Day. "Basic Term" shall mean the period specified in Lease Supplement No. 3. "Business Day" shall mean any day other than a Saturday, Sunday or other day on which banking institutions in New York, New York or Hartford, Connecticut are authorized or required by Law to be closed. "Buyer Furnished Equipment" shall mean the equipment which was to be furnished by Braniff, Inc. or, if applicable, Original Head Lessee and installed on the Aircraft pursuant to Clause 18 of the Purchase Agreement, and any similar equipment furnished to Lessee. "Certificated Air Carrier" shall mean any corporation (except the United States Government) domiciled in the United States of America and holding a Certificate of Convenience and Necessity issued under Section 41102(a) of the Federal Aviation Act by the Department of Transportation or any predecessor or successor agency thereto, or, in the event such Certificates shall no longer be issued, any corporation (except the United States Government) domiciled in the United States of America and legally engaged in the business of transporting for hire passengers or cargo by air predominantly to, from or between points within the United States of America, and, in either event, operating commercial jet aircraft, which also is a citizen of the United States (as defined in Section 40102 of the Federal Aviation Act) holding an air carrier operating certificate issued by the Secretary of Transportation pursuant to chapter 447 of the Federal Aviation Act for aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of cargo so as to fall within the purview of 11 U.S.C. Section 1110 or any analogous statute. "Civil Reserve Air Fleet Program" shall mean the Civil Reserve Air Fleet Program administered by the United States Government and authorized under 10 U.S.C. Section 9511, et -5- 11 seq., as amended, or any substantially similar or substitute program of the United States Government. "Claims" shall have the meaning specified in Section 13. "Code" shall mean the Internal Revenue Code of 1986, as amended and the rules and regulations promulgated thereunder. "Commonly Controlled Person" shall mean an entity, whether or not incorporated, which is under common control with Lessee within the meaning of Section 414(b) or (c) of the Code. "Consent and Guaranty" shall mean the Amended and Restated Consent and Guaranty of Airbus Industrie, dated as of May 1, 1985, as amended and restated as of December 30, 1988, in the form attached to the Purchase Agreement. "Default" shall mean an event or condition which would constitute an Event of Default with the lapse of time or the giving of notice or both. "Delivery Date" shall mean December 29, 1989, being the date the Aircraft was delivered to and accepted by the Original Head Lessee as Lessee hereunder for all purposes of this Lease. "$" and "dollars" shall mean the lawful currency of the United States of America. "Engine" shall mean (i) each of the two IAE Model V2500 engines listed by manufacturer's serial number in Lease Supplement No. 1 and initially installed on the Airframe covered by such Lease Supplement, whether or not from time to time thereafter no longer installed on the Airframe or installed on any other aircraft or airframe, and (ii) any replacement engine which may from time to time be substituted, pursuant to Section 6(a), 11(a), 11(b) or 16(c), for any Engine leased hereunder; together in each case with any and all Parts incorporated or installed in or attached thereto or any and all Parts removed therefrom so long as title thereto after removal from such Engine shall remain vested in Lessor in accordance with the terms of Section 9 hereof (or so long as the Foreign Lease Agreement is in effect, in Foreign Lessor in accordance with Section 13 of the Foreign Lease Agreement). Except as otherwise set forth herein, at such time as a replacement engine shall be -6- 12 so substituted and leased hereunder and the replacement engine shall have been subjected to the Lien of the Indenture (if the Lien of the Indenture has not been discharged) and shall have been subjected to the Foreign Lease Agreement if in effect, such replaced Engine shall cease to be an Engine hereunder. The term "Engines" means, as of any date of determination, both Engines then leased hereunder. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, as from time to time in effect. "Event of Default" shall have the meaning specified in any one or more clauses in Section 17. "Event of Loss" shall mean any of the following events with respect to the Aircraft, Airframe or either Engine: (a) loss of such property or the use thereof due to theft or disappearance for a period in excess of sixty (60) consecutive days, but in no event later than the last day of the Term; (b) destruction or damage of such property that renders repair uneconomic or such property permanently unfit for normal use by Lessee (or, if a Permitted Sublease is in effect, the Permitted Sublessee) for any reason whatsoever; (c) any loss or disappearance of or damage to or destruction of such property which results in an insurance settlement with respect to such property on the basis of an actual or a constructive total loss; (d) the condemnation, confiscation, appropriation, seizure or requisition of title to any such property by any Governmental Entity which results in the loss of title by Lessor for ten (10) days or more but excluding requisition for use or hire which does not involve requisition of title; (e) the condemnation, confiscation, appropriation, seizure or requisition of the use of any such property by any Governmental Entity (other than a requisition for use by the federal government of the United States or any instrumentality or agency thereof bearing the full faith and credit of the United States of America), which in any such case shall have resulted in the loss of possession thereof by Lessee for a period in excess of the earlier of ninety (90) consecutive days or the last day of the Term (or for such shorter period ending on the date which is the next Business Day after the date of receipt of an insurance settlement with respect to such property on the basis of a total loss); (f) the requisition for use of such property by the federal government of the United States or any agency or instrumentality thereof bearing the full faith and credit of the United States of America, which purports -7- 13 to or does continue beyond the Term; (g) as a result of any law, rule, regulation, order or other action by the FAA, the Department of Transportation or any other Governmental Entity having jurisdiction, the use of such Aircraft, Airframe or Engine in the normal course of Lessee's (or, if a Permitted Sublease is in effect, the Permitted Sublessee's) business of air transportation of passengers shall have been prohibited for a period of six (6) consecutive months, unless Lessee (or the Permitted Sublessee), 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 such normal use of such item of equipment by Lessee (or the Permitted Sublessee), or, in any event, if such normal use shall have been so prohibited by any such Governmental Entity for a period of twelve (12) consecutive months or is continuing on the last day of the Term; or (h) as otherwise provided herein. 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 which is a part of such Aircraft. An Event of Loss with respect to an Engine shall not, absent an Event of Loss with respect to the Airframe, be deemed an Event of Loss with respect to the Airframe. "Excluded Property" shall have the meaning set forth in Section 9(b) hereto. "Expiration Date" shall mean the date specified in Lease Supplement No. 3, on which date the Basic Term of this Lease shall expire. "FAA" shall mean the Federal Aviation Administration of the United States Department of Transportation or any successor agency. "FAA Bills of Sale" shall mean, collectively, (i) the Bill of Sale for the Aircraft on AC Form 8050-2, dated the Delivery Date, from Manufacturer's Subsidiary to AT Offshore, and (ii) the Bill of Sale for the Aircraft on AC Form 8050-2, dated the Delivery Date, from AT Offshore to Lessor. "Federal Aviation Act" shall mean the sections of Title 49 of the United States Code relating to aviation, as amended and in effect from time to time, or any similar legislation of the United States of America enacted in substitution or replacement thereof. -8- 14 "Financials" shall mean Lessee's most recent fiscal year-end audited consolidated balance sheet and statements of income and cash flow for the period then ending, copies of which for the fiscal year ended December 31, 1996, have been provided to Lessor prior to the date hereof. "Financing Documents" shall mean the Lease Agreement, each Lease Supplement, the Lease Amendment No. 1, the Trust Agreement, each Trust Supplement, the Indenture, each Indenture Supplement, the Foreign Lease Documents, the Refunding Agreement, the Equipment Notes issued under the Indenture, the Intercreditor Agreement, each Liquidity Facility, each Pass Through Trust Agreement and each supplement thereto and any certificate delivered or entered into in accordance with the foregoing, as amended, supplemented or otherwise modified. "Foreign Air Carrier" shall mean any air carrier listed in Exhibit F-1, as amended, supplemented or otherwise modified from time to time, whose principal place of business and legal domicile at the time of entering into the applicable sublease is located in a country listed on Exhibit F-2, as amended, supplemented or otherwise modified from time to time, and not prohibited by the terms of the insurance then in effect, with which the United States has diplomatic or, such as in the case of Taiwan, similar relations, in each case which is obligated under the applicable sublease to perform all maintenance required by applicable foreign governmental standards made mandatory to the Aircraft by such jurisdiction and, to the extent not inconsistent therewith, all FAA-airworthiness directives and other requirements made mandatory to the Aircraft by the FAA. "Foreign Lease Documents" shall mean the Foreign Financing Documents, as defined in the Indenture. "Foreign Lessee" shall mean GPA HK-320-B, Limited. "GAAP" shall mean United States generally accepted accounting principles and practices consistently applied as in effect from time to time, which shall include the official interpretations thereof by the Financial Accounting Standards Board. All accounting terms not otherwise defined herein shall have the meanings assigned to such terms in accordance with GAAP. -9- 15 "Governmental Entity" shall mean and include (i) any national government, political subdivision thereof, or local jurisdiction therein; (ii) any board, commission, department, division, organ, instrumentality, court, or agency of any thereof, however constituted; and (iii) any association, organization, or institution of which any entity described in (i) or (ii) above is a member or to whose jurisdiction any such entity is subject or in whose activities any such entity is a participant but only to the extent that any entity described in clause (i), (ii) or (iii) has jurisdiction over Lessor, Lessee, Indenture Trustee, Note Holders, any sublessee, the Aircraft or its operations. "Head Lessor's Lien" shall mean a "Lessor's Lien" under and as defined in the Original Head Lease. "IAE" shall mean IAE International Aero Engines AG, a company organized and existing under the laws of Switzerland. "Indemnitee" shall mean Foreign Lessor, Foreign Lessee, Foreign Lender, Lessor (in its individual capacity and as trustee under the Trust Agreement), the Trust Estate, Owner Participant, the general partners (and not the limited partners, if any) of Owner Participant, the Trust Indenture Estate, Indenture Trustee (in its individual capacity and as trustee under the Indenture), each Pass Through Trust, each Pass Through Trustee (in its individual capacity and as trustee under the Pass Through Trusts), the Subordination Agent and each Liquidity Provider, and their respective successors and permitted assigns, and any combination thereof and their respective officers, directors, agents, servants, employees, subsidiaries, Affiliates and shareholders. "Indenture" shall mean the First Amended and Restated Trust Indenture and Security Agreement [GPA 1989 BN-8] dated as of June __, 1997, as the same may be further amended, supplemented or modified from time to time, between Indenture Trustee and Lessor. The term "Indenture" shall also include the Indenture Supplements entered into pursuant to the terms of the Indenture. "Indenture Trustee" shall mean the bank or trust company serving as Indenture Trustee under the Indenture, and its successors and assigns. -10- 16 "Interest Rate" shall mean (i) with respect to the portion of any payment of Rent that may be required by the Indenture to be paid to the holders of any outstanding Equipment Notes issued thereunder, a per annum rate of interest equal to the Past Due Rate applicable thereto under and as defined in the Indenture computed on the basis of a 360-day year and twelve 30-day months and (ii) with respect to any other amount, a per annum rate of interest equal to the sum of the rate of interest publicly announced by Citibank, N.A., at its principal office in New York City, as its prime or similar base rate from time to time in effect from the date the amount becomes due to the date it is paid in full, plus 2%, computed on the basis of a year of 365 or 366 days, as the case may be, and actual number of days elapsed. "Law" shall mean and include (i) any statute, rule, decree, constitution, regulation, order, judgment or other directive of any Governmental Entity; (ii) any treaty, pact, compact or other agreement to which any Governmental Entity is a signatory or party; (iii) any judicial or administrative interpretations of the application of any Law described in (i) or (ii) above; and (iv) except where expressly excluded herein, any amendment or revision of any Law described in (i), (ii), or (iii) above. "Lease Agreement," "this Lease Agreement," "this Lease," "this Agreement," "herein," "hereunder," "hereby," "hereof" or other like words shall mean this Lease as originally executed and as amended, supplemented or otherwise modified from time to time, including, without limitation, by one or more Lease Supplements, as a whole and not to any particular Section or other subdivision, and any reference to a "Section" or an "Exhibit" shall refer to a Section or an Exhibit of this Lease, as so amended, supplemented or modified, unless expressly provided to the contrary. "Lease Identification" shall have the meaning set forth in Section 6(e) hereto. "Lease Supplement" shall mean Lease Supplement No. 1, Lease Supplement No. 2 and Lease Supplement No. 3 and each subsequent Lease Supplement entered into hereunder. "Lease Supplement No. 1" shall mean Lease Supplement [GPA 1989 BN-8] No. 1 dated the Delivery Date between Lessor and Original Head Lessee, as Lessee. -11- 17 "Lease Supplement No. 2" shall mean Lease Supplement [GPA 1989 BN-8] No. 2 dated December 29, 1994 between Lessor and Original Head Lessee, as Lessee. "Lease Supplement No. 3" shall mean Lease Supplement [GPA 1989 BN-8] No. 3, substantially in the form of Exhibit D-1 hereto, entered into between Lessor and Lessee on the Restatement Date for the purpose of confirming the leasing of the Aircraft hereunder. "Lenders' Lien" shall mean any Lien or disposition of title attributable to Indenture Trustee in its individual capacity (and not as Indenture Trustee) on or in respect of (as the case may be) the Aircraft or any other portion of the Trust Estate or the Trust Indenture Estate arising as a result of (i) Claims against Indenture Trustee in its individual capacity (and not as Indenture Trustee) not related to its interest in the Aircraft or the administration of the Trust Estate or the Trust Indenture Estate pursuant to the Indenture, whether under Section 9-207(2)(e) of the Uniform Commercial Code or otherwise, (ii) acts or omissions of Indenture Trustee in its individual capacity (and not as Indenture Trustee) not contemplated hereunder or under the other Operative Documents, or acts or omissions of Indenture Trustee in its individual capacity (and not as Indenture Trustee) which are in violation of any of the Operative Documents, or (iii) Taxes imposed on or Claims against Indenture Trustee in its individual capacity (and not as Indenture Trustee) which are excluded from indemnification by Lessee, or (iv) Claims against Indenture Trustee in its individual capacity (and not as Indenture Trustee) arising out of the voluntary or involuntary transfer by Indenture Trustee in its individual capacity (and not as Indenture Trustee) of all or any portion of its interest in the Aircraft, the Airframe, any Engine, the Trust Estate, the Trust Indenture Estate or the Operative Documents (except a Claim resulting from the exercise of remedies under and in accordance with the Indenture or for a transfer provided for in the Operative Documents). "Lessee" shall have the meaning set forth in the Recitals hereto. "Lessor" shall have the meaning set forth in the Recitals hereto. "Lessor's Lien" shall mean any Lien or disposition of title affecting the Aircraft, the Airframe, any Engine or any Part arising as a result of (i) any claim against -12- 18 Lessor, Owner Participant, any partner of the Owner Participant, Trust Company or any of their Affiliates not related to the transactions contemplated by this Lease or the other Operative Documents, the Financing Documents, the Foreign Lease Documents or the Purchase Documents; (ii) any affirmative act of Lessor, Owner Participant, any partner of the Owner Participant, Trust Company or any of their Affiliates not expressly contemplated by this Lease or the other Operative Documents, the Financing Documents or the Purchase Documents or not permitted without consent (which consent has not been granted) by any party hereto or thereto or that is in violation of any term of this Lease or the other Operative Documents, the Financing Documents or the Purchase Documents; (iii) Taxes imposed against the Trust Estate, Trust Company, Lessor, Owner Participant, any partner of the Owner Participant or any of their Affiliates or the consolidated group of taxpayers of which any of them is a member which are not to be indemnified against by Lessee under the Operative Documents, the Purchase Documents or the Financing Documents or by Original Head Lessee under the Original Head Lease Tax Indemnification Agreement; (iv) claims against the Trust Estate, Trust Company, Owner Participant, any partner of the Owner Participant or Lessor or any of their Affiliates arising out of the transfer of all or any part of their respective interest in the Aircraft, the Airframe, either Engine, the Trust Estate, the Operative Documents or the Financing Documents other than any transfers or dispositions pursuant to Sections 2, 6, 9, 11, 16, 18, 19 or 20 (except Liens resulting from a transfer not permitted by such Section) of this Lease or pursuant to Section 10 of the Refunding Agreement or pursuant to similar types of provisions in the Foreign Lease Agreement; provided, however, that there shall be excluded from this definition and Lessor shall not be required to remove any Lien which would otherwise constitute a Lessor's Lien, if it is being diligently contested in good faith so long as neither such proceedings nor Lien involves a material danger of the sale, forfeiture or loss of the Aircraft or adversely affects Lessee's rights under Section 21(f); and provided, further, that Lessor's Liens shall not include the Lien of the Indenture or Lenders' Liens or Liens contemplated by the Foreign Lease Documents. "Lien" shall mean any mortgage, chattel mortgage, pledge, lien, charge, encumbrance, lease, exercise of rights, security interest, lease in the nature of a security interest, statutory right in rem, or claim of any kind, including any thereof arising under any conditional sale -13- 19 agreement, equipment trust agreement or title retention agreement. "Lien of the Indenture" shall mean the Lien created by the Indenture on the Trust Indenture Estate. "Maintenance Program" shall mean (i) the America West Maintenance Program approved by the FAA for America West Airbus model A320-231 aircraft in effect on the date hereof or as modified with the approval of the FAA without affecting, or any other FAA approved maintenance program which does not affect, the return condition standards set forth in Section 16 and Exhibit E or (ii) if the Aircraft is subject to a Permitted Sublease to a Foreign Air Carrier, any other maintenance program for the Aircraft which is approved by the aviation authority of the country of registry and complies with the requirements applicable to maintenance of the Aircraft contained in the definition of Foreign Air Carrier. The Maintenance Program shall encompass scheduled maintenance, condition monitored maintenance, and on-condition maintenance of the Airframe, Engines, and components of the Aircraft, including, but not limited to, servicing, testing, preventive maintenance, repairs, structural inspections, structure life improvements, system checks, overhauls, approved modifications, service bulletins, engineering orders, airworthiness directives, and corrosion control inspections and treatments. All modifications and supplements to the Maintenance Program shall be provided to Lessor upon its reasonable request and Lessor shall be given reasonable access to the Maintenance Program upon its request. "Manufacturer" shall mean, collectively, Manufacturer's Subsidiary, IAE, Airbus Industrie or, as the case may be, any one or more thereof as may be applicable in any given circumstance, together in each case with any subcontractor or supplier thereof. "Manufacturer's Subsidiary" shall mean AVSA, S.A.R.L., a French societe a responsabilite limitee, which as of the date hereof is owned by Airbus Industrie. "Maximum Foreign Use Percentage" shall have the meaning specified in Exhibit C. "Mortgage Convention" shall mean the Convention for the International Recognition of Rights in Aircraft, signed (ad referendum) at Geneva, Switzerland, on June 19, 1948, and amended from time to time, but excluding the terms -14- 20 of any adhesion thereto or ratification thereof containing reservations to which the United States of America does not accede. "Net Worth" shall mean, with respect to any Person, such Person's stockholders' equity minus any intangible assets. "Operative Documents" shall mean this Lease, each Lease Supplement, any sublease, the Tax Indemnification Agreement, the Financing Documents, the SLV Letter Agreement, and any certificate delivered or entered into pursuant to the foregoing, as amended, supplemented or otherwise modified. "Original Head Lease" shall mean this Aircraft Lease Agreement [GPA 1989 BN-8], with respect to the Aircraft, dated as of December 19, 1989, between Lessor, as lessor, and the Original Head Lessee, as lessee, as amended, supplemented or otherwise modified and as in effect immediately prior to the Restatement Date, as more particularly described in Annex I attached hereto. "Original Head Lease Tax Indemnification Agreement" shall mean the Head Lease Tax Indemnification Agreement [GPA 1989 BN-8], dated as of December 19, 1989, and amended and restated as of the Restatement Date, between the Original Head Lessee and Owner Participant, as amended, supplemented or otherwise modified from time to time. "Original Head Lessee" shall mean GPA Leasing USA Sub I, Inc., a Connecticut corporation. "Original Sublease" shall mean the Initial Sublease (as defined in the Original Head Lease) as in effect immediately prior to the Restatement Date. "Other Leases" shall mean the Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-7] amended and restated as of the Restatement Date between Wilmington Trust Company as Owner Trustee, Lessor, and America West Airlines, Inc. as Lessee, the Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-9] amended and restated as of the Restatement Date between Wilmington Trust Company as Owner Trustee, Lessor, and America West Airlines, Inc. as Lessee and the Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-11] amended and restated as of the Restatement Date between Wilmington Trust Company as Owner Trustee, Lessor, -15- 21 and America West Airlines, Inc. as Lessee, each as amended, supplemented or otherwise modified from time to time. "Other Letters of Credit" shall mean any and all letters of credit pursuant to Section 8(l) of the Other Leases. "Owner Participant" shall mean _______________, as Owner Participant under the Trust Agreement, and its successors and permitted assigns. "Owner Trustee" shall mean Wilmington Trust Company, as Owner Trustee under the Trust Agreement, and its successors and assigns. "Parent" shall mean GPA Group plc, a public limited company organized and existing under the laws of Ireland. "Partial Assignment" shall mean the A320 Partial Assignment, Assumption, Release and Amendment Agreement, dated as of December 30, 1988, among Parent, Braniff, Inc., and Manufacturer's Subsidiary, as amended, supplemented or otherwise modified. "Participation Agreement" shall mean the Participation Agreement [GPA 1989 BN-8], dated as of December 19, 1989, among Original Head Lessee, Parent, Owner Participant, Owner Trustee, Indenture Trustee and the "Lender" named therein, as amended, supplemented or otherwise modified from time to time and as in effect immediately prior to the Restatement Date. "Parts" shall mean all appliances, components, parts, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (excluding complete Engines or engines), including Buyer Furnished Equipment, which may now or from time to time be incorporated or installed in or attached to or were provided by the Manufacturer with the Airframe or any Engine or so long as title thereto shall remain vested in Lessor in accordance with the terms of Section 9 hereof after removal from such Airframe or Engine or, so long as the Foreign Lease Agreement is in effect, Foreign Lessor in accordance with Section 13 of the Foreign Lease Agreement. Except as otherwise set forth herein, at such time as a replacement part shall be substituted for a Part in accordance with Section 9 hereof, the Part so replaced shall cease to be a Part hereunder. -16- 22 "Payment Location" shall have the meaning set forth in Exhibit C, as the same may be changed from time to time by Lessor as provided in Section 4(c). "Permitted Lien" shall mean any Lien referred to in clauses (i) through (vii) of the first sentence of Section 14 hereof. "Permitted Sublease" shall have the meaning specified in Section 6(a)(iii)(1). "Permitted Sublessee" shall mean a Certificated Air Carrier or, after the Restricted Use Period, (a) any Foreign Air Carrier, (b) the United States Government or an agency or instrumentality thereof which bears the full faith and credit of the United States of America or (c) any other Person approved in writing by the Owner Participant and the Indenture Trustee. "Person" shall mean and include any individual person, corporation, partnership, firm, joint stock company, joint venture, trust, estate, unincorporated organization, association, Governmental Entity, or organization or association of which any of the above is a member or a participant. "Purchase Agreement" shall mean the Amended and Restated Airbus A310/A320 Purchase Agreement, dated as of May 1, 1985, as amended and restated as of December 30, 1988 (insofar as the same relates to Model A320 Aircraft), between Manufacturer's Subsidiary and Braniff, Inc., including the Consent and Guaranty, together with Letter Agreements, Exhibits and Appendices thereto, as partially assigned to Parent pursuant to the Partial Assignment, to which Airbus Industrie, as guarantor, has consented, and as the same may from time to time be further amended, supplemented or otherwise modified to the extent permitted by the terms thereof. "Purchase Documents" shall mean the Purchase Agreement, the Partial Assignment and any other agreement, document or certificate delivered or entered into pursuant to the foregoing, as amended, supplemented or otherwise modified. "Removable Part" shall have the meaning set forth in Section 9(b). -17- 23 "Renewal Rent" shall mean the rent payable pursuant to Section 20. "Renewal Rent Payment Date" shall mean each day determined in accordance with Exhibit C upon which a payment of Renewal Rent becomes payable. If a Renewal Rent Payment Date shall fall on a day which is not a Business Day, any payment due on such Renewal Rent Payment Date shall be made on the next succeeding Business Day. "Renewal Term" shall mean the period described in Section 20 following the end of the Basic Term if Lessee shall have exercised its renewal option in accordance with Section 20. "Rent" shall mean Basic Rent or Renewal Rent, as the case may be, and Supplemental Rent, collectively. "Replacement Airframe" and "Replacement Engine" shall have the meanings specified in accordance with their description in Section 11. "Replacement Period" shall have the meaning specified in Section 11. "Responsible Officer" shall mean, with respect to Lessee, any of the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer or Controller. "Restricted Use Period" shall have the meaning specified in Exhibit C. "Return Occasion" shall mean the event that occurs when possession of the Aircraft is to be returned from Lessee to Lessor at the end of the Term of this Lease or upon Lessor taking possession pursuant to Section 18 or for any other reason. "Specified Investments" shall mean (i) direct obligations of the United States Government, the obligations of which bear the full faith and credit of the United States; (ii) obligations fully guaranteed by the United States; (iii) certificates of deposit issued by any commercial bank incorporated under the laws of the United States or one of the States thereof (but not exceeding $10,000,000 in principal amount or deposits at any given time for any one bank) having a combined capital surplus and undivided income of at least $750,000,000 and having a rating of "B" or better from Thompson BankWatch, Inc.; -18- 24 (iv) repurchase agreements (but not exceeding $10,000,000 in principal amount or deposits at any given time for any one bank) with any financial institution having combined capital surplus and undivided income of at least $750,000,000 and fully collateralized by an obligation of the type described in clauses (i) through (iii) as collateral pursuant to which an entity referred to in clause (iii) above or another financial institution having a net worth of at least $750,000,000 and having a rating of "B" or better from Thompson BankWatch, Inc. is obligated to repurchase any such obligation not later than ninety (90) days after the purchase of any such obligation; and (v) money market funds which invest solely in obligations described in clause (i) or (ii); provided that if all of the above investments are unavailable, the entire amounts to be invested may be used to purchase Federal funds from an entity described in clause (iii) above; and provided further that no investment shall be eligible as a "Specified Investment" unless the final maturity or date of return of such investment is on or before the date which is ninety (90) days from the date of purchase thereof. "Stipulated Loss Value" shall mean as of the applicable date during the Basic Term the amount set forth on Exhibit A hereto and, thereafter, the amount described in Section 20 (it being understood and agreed that the amounts set forth in Exhibit A take into account fully the amount and application of each installment of Basic Rent or Renewal Rent on each Stipulated Loss Value Date [(other than a Stipulated Loss Value Date that is a Basic Rent Payment Date or Renewal Rent Payment Date) so that no additional credit of such Basic Rent or Renewal Rent is to be made in respect thereof except as expressly provided herein on a Basic Rent Payment Date or a Renewal Rent Payment Date)]. In the event that it is necessary to determine a separate Stipulated Loss Value for the Airframe or an Engine, such Stipulated Loss Value shall be based on the ratio that the original cost to Lessor of the Airframe or such Engine bears to Lessor's Cost (as set forth in the Original Head Lease) for the Aircraft. "Stipulated Loss Value Date" shall mean each monthly date listed, or with respect to any Renewal Term determined as set forth, on Exhibit A hereto. "Supplemental Rent" shall mean any and all amounts, liabilities and obligations other than Basic Rent and Renewal Rent which Lessee assumes or agrees to pay to Lessor or any other Indemnitee hereunder or under any other Operative Document, including, without limitation, (i) any -19- 25 payment of Stipulated Loss Value and any payment provided for in Section 11 or 18; (ii) any payment of indemnity required by Section 10 or 13 hereof; (iii) any payment of an amount equal to average daily Basic Rent or Renewal Rent in connection with an extension of the Term of this Lease as a result of (a) an incipient Event of Loss and the operation of Section 11 hereof or (b) the need to correct any failure of the Aircraft to satisfy the requirements of Section 16 and Exhibit E hereof; (iv) [Intentionally Left Blank]; (v) an amount equal to any payment due to the Owner Trustee in respect of fees or expenses as provided in Section 21(j) hereof; (vi) an amount equal to any payment due to the Indenture Trustee in respect of fees or expenses as provided in the Indenture and/or Section 21(j) hereof; (vii) the Pro Rata Share of any payment due to any Pass Through Trustee in respect of fees or expenses pursuant to the Pass Through Trust Agreement; (viii) the Pro Rata Share of any payment due to the Subordination Agent in respect of fees, compensation, costs or expenses pursuant to the Intercreditor Agreement; (ix) an amount equal to the amount specified in clause (b) of the fourth paragraph of Section 2.02 of the Indenture; and (x) to the extent permitted by applicable Law, interest at the Interest Rate calculated: (1) on any part of any installment of Basic Rent or Renewal Rent, or average daily Basic Rent referred to in clause (iii) of this definition of "Supplemental Rent", as the case may be, not paid on the due date thereof for the period for which the same shall be overdue and (2) on any Supplemental Rent not paid when due hereunder from and including the due date until the same shall be paid. As used herein, "Pro Rata Share" means as of any date of determination a fraction the numerator of which is the aggregate Principal Amount then outstanding of the Equipment Notes issued under the Indenture and the denominator of which is the aggregate principal balance then outstanding of all "equipment notes" issued under the Indentures (as defined in the Intercreditor Agreement). "Tax Indemnification Agreement" shall mean the Amended and Restated Sublease Tax Indemnification Agreement [GPA 1989 BN-8], dated as of September 21, 1990, and as amended and restated as of the Restatement Date between Original Head Lessee and Lessee, as the same may be amended, supplemented or otherwise modified from time to time. "Taxes" shall have the meaning specified in Section 10(a). -20- 26 "Taxing Authority" shall have the meaning specified in Section 10(a). "Term" shall mean, collectively, the Basic Term specified in Lease Supplement No. 3 and, if Lessee extends the Term in accordance with Section 20, the Renewal Term, in either case as extended or deemed extended as a result of the occurrence of an event described in clause (iii) to the definition of "Supplemental Rent" in this Lease, for which the Aircraft is leased hereunder pursuant to Section 2. "Trust Agreement" shall mean the Trust Agreement [GPA 1989 BN-8] dated as of December 19, 1989 as amended by Trust Supplement No. 1 and as further amended by Trust Supplement No. 2 between Lessor, in its individual capacity, and Owner Participant, as beneficiary, as the same may be amended, supplemented or otherwise modified from time to time. The term "Trust Agreement" shall also include each Trust Supplement. "Trust Estate" shall have the meaning specified in the Trust Agreement. "Trust Supplement" shall mean Trust Supplement No. 1 and Trust Supplement No. 2 and each subsequent Trust Supplement entered into thereunder and any further supplement to the Trust Agreement. "Trust Supplement No. 1" shall mean Trust Agreement Supplement [GPA 1989 BN-8] No. 1 dated the Delivery Date between Lessor and Owner Participant for the purpose of bringing the Aircraft and the Original Head Lease into the Trust Estate. "Trust Supplement No. 2" shall mean Trust Agreement Supplement [GPA 1989 BN-8] No. 2 dated the Restatement Date between Lessor and Owner Participant conforming the references in the Trust Agreement to this Agreement. "United States Government" shall mean the federal government of the United States of America and any board, commission, department, division, organ, instrumentality, court or agency thereof. "Wet Lease" shall mean any arrangement whereby Lessee agrees to furnish the Aircraft or the Airframe and Engine or engines installed thereon at that time to a third party pursuant to which such Aircraft or the Airframe and -21- 27 Engine or engines (i) shall be operated solely by regular employees of Lessee possessing all current certificates and licenses required under the Federal Aviation Act (it is understood that cabin attendants need not be regular employees of Lessee) and Lessee otherwise maintains operational control and possession thereof, and (ii) shall be maintained by Lessee in accordance with its normal maintenance practices and this Lease, and otherwise the insurance required hereunder shall be maintained and the Aircraft shall be used and operated in accordance with this Lease. Section 2. Agreement to Lease. Lessor hereby agrees to lease the Aircraft to Lessee, and Lessee hereby agrees to lease the Aircraft from Lessor, on the terms and subject to the conditions set forth in this Lease. Section 3. Delivery and Acceptance; Term. (a) Time of Delivery. The Aircraft was delivered to Lessee, and Lessee accepted delivery of the Aircraft, on December 29, 1989. (b) [Intentionally Left Blank] (c) Acceptance of Aircraft. The Aircraft leased hereunder was delivered to Lessee "AS IS," "WHERE IS" and SUBJECT TO EACH AND EVERY DISCLAIMER OF WARRANTY AND REPRESENTATION AS SET FORTH IN SECTIONS 5(a) AND (b) HEREOF. Lessee hereby agrees that it has accepted the Aircraft for all purposes of this Lease and Lessee's acceptance of the Aircraft was conclusive evidence that, as between Lessor and Lessee, the Aircraft was in all respects satisfactory to Lessee and was in compliance with this Lease. (d) Term of Lease. The Basic Term of this Lease shall commence on the Delivery Date and shall continue until the Expiration Date; provided, however, that the Term of this Lease may be earlier terminated pursuant to the provisions hereof. Section 4. Rent. (a) Rent. Lessee covenants and agrees to pay the following as Rent hereunder: -22- 28 (i) Basic Rent. The Basic Rent, as set forth in Exhibit C throughout the Basic Term hereof, in consecutive installments, in arrears as set forth on Schedule I attached to Exhibit C, due and payable on each Basic Rent Payment Date to the Lessor; and (ii) Supplemental Rent. Any and all Supplemental Rent, which shall be due and payable ten (10) Business Days after demand unless otherwise specifically provided, except for Supplemental Rent constituting interest on overdue amounts, which shall be due and payable on demand. In the event of any failure on the part of Lessee to pay any Supplemental Rent when due, Lessor shall have all rights, powers and remedies provided for herein or by law or equity or otherwise in the case of nonpayment of Basic Rent or Renewal Rent. Lessee's obligation to pay Supplemental Rent which is due and owing pursuant to the terms hereof shall survive the expiration or termination of Lessee's obligation to pay Basic Rent or Renewal Rent hereunder. (b) Minimum Payments. Notwithstanding any provision in this Lease or in any other Operative Document to the contrary, under all circumstances and in any event, (i) the Stipulated Loss Value, together with the payment of Supplemental Rent and all other Rent then due hereunder, as of any time and as of the date of any payment thereof shall (both before and after giving effect to any reductions therefrom) be in an amount at least sufficient to pay in full as of such time or date the aggregate unpaid principal amount of the Equipment Notes then outstanding and all accrued and unpaid interest (assuming interest has been timely paid) thereon, and (ii) Basic Rent payable on any Basic Rent Payment Date shall at least equal the aggregate amount of principal and interest due and payable on the Equipment Notes on such Basic Rent Payment Date. It is agreed, however, that no installment of Basic Rent or Stipulated Loss Value shall be increased or adjusted by reason of (A) any attachment or diversion of Rent on account of any Lessor's Lien or Lenders' Lien, (B) any modification of the terms of the Equipment Notes or the other Financing Documents made without the prior written consent of Lessee or (C) the acceleration of any Equipment Note due to the occurrence of any "Indenture Event of Default" (as defined in the Indenture) which does not constitute an Event of Default hereunder. It is further agreed that nothing in this Lease or any other Operative Document shall be deemed to constitute a guaranty of the value, utility or useful life of the Aircraft or a guaranty in respect of interest, -23- 29 principal or any other amounts payable in respect of or under the Equipment Notes. (c) Date, Place and Method of Payment. If any date on which a payment of Rent becomes due and payable is not a Business Day, the Rent otherwise due on such date shall be due and payable on the next succeeding Business Day. All Basic Rent, Renewal Rent and Supplemental Rent payable under this Lease shall be paid by wire transfer in immediately available currency of the United States of America, no later than 12:00 p.m. (noon), New York City time, on the date payable hereunder, and, so long as the Lien of the Indenture shall not have been discharged, to or as directed by Indenture Trustee in accordance with the payment instructions set forth in Exhibit C hereto or at such other address in the City of New York or Hartford, Connecticut as Indenture Trustee may direct by thirty (30) days prior written notice to Lessee, except for all Excepted Payments. All Excepted Payments, and, upon discharge of the Lien of the Indenture, all payments of Rent thereafter made hereunder, shall be paid in such immediately available funds no later than 12:00 p.m. (noon), New York City time, on the date payable hereunder, to Lessor or to Owner Participant, as appropriate, in accordance with the payment instructions set forth in Exhibit C or at such other address as Lessor may direct by thirty (30) days prior written notice to Lessee. (d) Prohibition Against Setoff, Counterclaim, Etc. This Lease is a net lease. Lessee's obligations to pay all Rent and to perform all other obligations hereunder are absolute and unconditional and shall not be affected or reduced by any circumstances, including, without limitation, (i) any setoff, counterclaim, recoupment, defense, or other right which Lessee may have against Lessor, Original Head Lessee, Owner Participant, Indenture Trustee, any Note Holder, any Manufacturer, any Person providing services with respect to the Aircraft, or any other Person, for any reason whatsoever (whether in connection with the transactions contemplated hereby or otherwise), including, without limitation, any breach by Lessor of its representations, warranties or covenants contained herein or in the other Operative Documents; (ii) any defect in the title, airworthiness, eligibility for registration under the Federal Aviation Act, condition, design, operation, or fitness for use of, or any damage to or loss or destruction of, the Aircraft (subject to the provisions of Section 11(a)(ii) hereof), any interruption or cessation in the use of or possession thereof by or availability to Lessee for -24- 30 any reason whatsoever, whether arising out of or related to an act or omission of Lessee, Lessor, Original Head Lessee, Owner Participant, Indenture Trustee, any Note Holder, any Manufacturer, any Person providing services with respect to the Aircraft or any other Person; (iii) any Liens with respect to the Aircraft; (iv) the invalidity or unenforceability or lack of due authorization or other infirmity of this Lease or any sublease or any absence of right, power or authority of Lessor, Original Head Lessee, Lessee or Indenture Trustee to enter into this Lease or the Indenture, as the case may be; (v) any insolvency, bankruptcy, reorganization, or similar proceedings by or against Lessor, Original Head Lessee, Lessee, any sublessee, Indenture Trustee or any Note Holder; (vi) any Taxes; or (vii) any other circumstance or happening of any nature whatsoever, whether or not similar to any of the foregoing; it being the expressed intention of Lessor and Lessee that all Rent payable hereunder shall be payable in all events, unless the obligation to pay the same shall be terminated pursuant to the express provisions of this Agreement. Except as expressly set forth elsewhere in this Agreement, 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, abate, cancel, quit, reduce, defer, suspend or surrender this Lease or the Aircraft or any obligation imposed upon Lessee hereunder or under the other Operative Documents (including, without limitation, payment of Rent), except in accordance with the terms hereof. Each payment of Rent made by Lessee shall be final. Lessee will not seek to recover all or any part of any payment of Rent for any reason whatsoever except manifest error. If for any reason whatsoever this Lease shall be terminated in whole or in part by operation of Law, except as specifically provided herein, Lessee waives all rights (if any) to any diminution in its Rent obligations hereunder and nonetheless agrees to pay to Indenture Trustee or Lessor as provided in Section 4(c) hereof an amount equal to each Basic Rent or Renewal Rent, as the case may be, payment and any Supplemental Rent payment at the time such payments would have become due and payable in accordance with the terms hereof had this Lease not been terminated in whole or in part, and so long as such payments are made and all other terms and conditions hereof are complied with by Lessee, -25- 31 Lessor and Lessee will deem this Lease to remain in full force and effect. The foregoing shall not, however, be construed as a waiver of Lessee's other rights to seek damages, specific performance, other remedies at law or equity or any combination thereof, as against the Original Head Lessee, Lessor, Indenture Trustee or any other Person having an interest herein through the Original Head Lessee, Lessor, Indenture Trustee or any other Person as shall be liable therefor, on account of any failure of the Original Head Lessee, Lessor, Indenture Trustee or any other such Person to perform its express obligations under this Lease and the other Operative Documents, or to enforce any judgment obtained therefor. Section 5. Representations, Warranties and Covenants. (a) Warranties and Disclaimer of Warranties. THE AIRCRAFT WAS DELIVERED AND IS BEING LEASED BY LESSOR TO LESSEE "AS IS" AND "WHERE IS". LESSEE EXPRESSLY AGREES THAT IT TOOK THE AIRCRAFT ON SUCH BASIS. LESSOR HAS NOT AND SHALL NOT BE DEEMED TO HAVE MADE, BY VIRTUE OF HAVING LEASED THE AIRCRAFT UNDER THIS LEASE OR BY HAVING ACQUIRED THE AIRCRAFT OR DONE OR FAILED TO DO ANY ACT OR ACQUIRED OR FAILED TO ACQUIRE ANY STATUS UNDER OR IN RELATION TO THIS LEASE, AND NEITHER LESSOR NOR OWNER PARTICIPANT HAS MADE, AND LESSOR FOR ITSELF AND OWNER PARTICIPANT, HEREBY SPECIFICALLY DISCLAIMS, ANY GUARANTY, REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE (EXCEPT AS HEREINBELOW PROVIDED), AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY, OR FITNESS FOR USE FOR A PARTICULAR OR ANY PURPOSE OF THE AIRCRAFT, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT, THE ABSENCE THEREFROM OF LATENT OR OTHER DEFECTS WHETHER OR NOT DISCOVERABLE, THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT OR AS TO ANY OTHER GUARANTY, REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT, INCLUDING WITHOUT LIMITATION ANY LIABILITY IN TORT, OBLIGATION OR LIABILITY ARISING FROM NEGLIGENCE, STRICT LIABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE OR DEALING OR USAGE OR TRADE, OR LOSS OR INTERRUPTION OF USE, PROFIT, OR BUSINESS, OR OTHER CONSEQUENTIAL DAMAGES; AND LESSEE HEREBY WAIVES, RELEASES, RENOUNCES AND DISCLAIMS EXPECTATION OF OR RELIANCE UPON ANY SUCH GUARANTY, REPRESENTATION OR WARRANTIES. NEITHER LESSOR NOR ANY OTHER INDEMNITEE SHALL HAVE ANY RESPONSIBILITY OR LIABILITY TO LESSEE OR ANY OTHER PERSON, REGARDLESS OF ANY -26- 32 NEGLIGENCE (OTHER THAN ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT WHICH IS NOT ATTRIBUTABLE TO ITS INTEREST IN THE AIRCRAFT) OF LESSOR OR ANY OTHER INDEMNITEE, AND LESSEE HEREBY WAIVES, RELEASES, RENOUNCES AND DISCLAIMS ANY RIGHTS OR REMEDIES, WITH RESPECT TO (i) ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED DIRECTLY OR INDIRECTLY BY THE AIRCRAFT OR BY ANY INADEQUACY THEREOF OR DEFICIENCY OR DEFECT THEREIN OR BY ANY OTHER CIRCUMSTANCE IN CONNECTION THEREWITH, (ii) THE USE, OPERATION OR PERFORMANCE OF THE AIRCRAFT OR ANY RISKS RELATING THERETO, (iii) ANY INTERRUPTION OF SERVICE, LOSS OF BUSINESS OR ANTICIPATED PROFITS OR DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR (iv) THE DELIVERY, OPERATION, SERVICING, MAINTENANCE, REPAIR, IMPROVEMENT OR REPLACEMENT OF THE AIRCRAFT. THE WARRANTIES AND REPRESENTATIONS SET FORTH IN THIS SECTION 5(a) ARE EXCLUSIVE AND IN LIEU OF ALL OTHER REPRESENTATIONS OR WARRANTIES WHATSOEVER WITH RESPECT TO THE AIRCRAFT, EXPRESS OR IMPLIED, AND LESSOR SHALL NOT BE DEEMED TO HAVE MADE ANY OTHER IMPLIED WARRANTIES, OR GUARANTEES, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OF MERCHANTABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, OR ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR OR ANY USE, EXCEPT THAT: (A) Lessor represents and warrants that (x) on the Delivery Date Lessor had, and on the Restatement Date Lessor has, the right to lease the Aircraft hereunder and (y) on the Delivery Date the Aircraft was free of Head Lessor's Liens and on the Restatement Date the Aircraft is free of Lessor's Liens and Head Lessor's Liens and (B) Lessor covenants that it shall not create, incur, assume or suffer to exist any Lessor's Lien on the Aircraft. (b) Representations and Warranties of Lessor. Lessor hereby represents and warrants, as of the Restatement Date that its representations and warranties set forth in Section 9(b) of the Refunding Agreement were true when made and continue to be true and correct. (c) No Amendments to Financing Documents. Lessor covenants and agrees that Lessor will not, without the prior written consent of Lessee, amend, modify, supplement or waive any provision of any Financing Document in such a way as to materially increase Lessee's obligations hereunder or materially reduce Lessee's rights hereunder. The representations, warranties and covenants of Lessor under Sections 5(a) and 5(b) and this Section 5(c) shall survive the execution and delivery of this Lease and the delivery of the Aircraft and the Restatement Date. -27- 33 (d) Suppliers' Warranties. So long as a Default or an Event of Default has not occurred and is continuing and provided that the Aircraft continues to be maintained, modified and repaired as required hereunder, Lessor hereby assigns or, if by their terms not assignable, agrees otherwise to make available to Lessee the right to exercise in Lessee's name such rights as Lessor may have or may subsequently obtain (but without representation or warranty by or recourse to Lessor) with respect to any product warranty, service life policy, trademark, patent or copyright infringement indemnity, or airframe or propulsion system performance guaranty, of Airbus Industrie, the Manufacturer's Subsidiary, IAE or any subcontractor or vendor with respect thereto under the Purchase Agreement (except those which were given directly to Parent, the Original Head Lessee or any of their Affiliates and are not directly related to the operator's use of the Aircraft), to the extent that the same may be assigned or otherwise made available to Lessee, and Lessor agrees to exert its reasonable efforts, at Lessee's expense and upon its request, to enforce such rights as Lessor may have with respect thereto for the benefit of Lessee; provided, however, that upon and during the continuance of a Default or an Event of Default, such assignment or other rights which are otherwise made available to Lessee shall immediately and automatically without further action be deemed cancelled and, to the extent of any remaining interest held by Lessee, deemed reassigned to Lessor and all such rights shall revert to Lessor automatically including all claims thereunder whether or not perfected and all amounts payable shall be paid to and held by Lessor. In no event, however, shall Lessee have any right to amend, supplement or otherwise modify the Purchase Agreement (by change order or otherwise). In connection with the foregoing, Lessee agrees to be bound by and comply with all applicable terms, conditions and limitations of the provisions of the Purchase Agreement. Section 6. Possession and Use. (a) Possession. (i) Lease, Assignment and Transfer. LESSEE WILL NOT ASSIGN THIS LEASE OR ANY RIGHTS OR OBLIGATIONS HEREUNDER OR INTEREST HEREIN (EXCEPT AS PROVIDED IN SECTION 8(e) BELOW) OR SUBLEASE, WET LEASE OR OTHERWISE IN ANY MANNER TRANSFER, DELIVER OR RELINQUISH POSSESSION OR USE OF THE AIRCRAFT, AIRFRAME OR ANY ENGINE OR INSTALL ANY ENGINE OR PERMIT ANY ENGINE TO BE INSTALLED ON ANY AIRFRAME OTHER -28- 34 THAN THE AIRFRAME; provided, that, so long as no Event of Default or Default shall have occurred and be continuing or would result therefrom and so long as the action to be taken shall not adversely affect Lessor's title to or other interest in, or the Lien of the Indenture on, the Aircraft, the Airframe or either of the Engines or this Lease or the insurance required to be maintained hereunder and Lessee is otherwise in full compliance with Section 12, and so long as all necessary approvals of the FAA and any other Governmental Entity having jurisdiction have been obtained, then Lessee, without the prior written consent of Lessor, may, only to the extent provided below and subject to the limitations of Sections 6(a)(ii) and 6(a)(iii) below: (1) subject any Engine to a normal interchange, maintenance, servicing or pooling agreement or similar arrangement with a Permitted Sublessee, in each case customary in the airline industry of which Lessee is a part and entered into in the ordinary course of its business; provided that no transfer of the registration of any Engine shall be effected in connection therewith; and provided, further, that (A) no such agreement or arrangement contemplates, results in or requires the transfer of title to any Engine, and (B) if Lessor's or Foreign Lessor's (so long as the Foreign Lease Agreement is in effect) title to any Engine shall be divested under any such agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect to such Engine and not an Event of Default and Lessee shall comply with Section 11(b) hereof in respect thereof; (2) deliver possession of the Aircraft, the Airframe or any Engine to the manufacturer thereof, or in accordance with the Maintenance Program to an FAA certified repair station, for testing, service, storage, repair, maintenance, inspection or overhaul work on such Aircraft, Airframe or Engine or any part thereof or for alterations or modifications in or additions to such Aircraft, Airframe or Engine to the extent required or permitted by the terms of Section 9 hereof; (3) transfer possession of the Aircraft or the Airframe to the United States of America or any instrumentality or agency thereof pursuant to a sublease; -29- 35 (4) (i) subject the Airframe to the Civil Reserve Air Fleet Program and transfer possession of the Airframe or any Engine to the United States Government pursuant to the Civil Reserve Air Fleet Program, so long as Lessee shall promptly notify Lessor upon transferring possession of the Airframe or any Engine to the United States Government pursuant to the Civil Reserve Air Fleet Program 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; or (ii) subject the Airframe to (A) a service contract with the United States Government, a copy of which shall be provided to Lessor, providing for possession to be held by the United States Government for a period not extending beyond the end of the Term, or (B) a requisition for use by the United States Government not constituting an Event of Loss; (5) install an Engine on an airframe (other than the Airframe) owned by Lessee free and clear of all Liens except (A) Permitted Liens and Liens which apply only to engines (other than the Engines), appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment (other than Parts) installed on such airframe (but not to the airframe as an entirety) and (B) the rights of participants under normal interchange agreements which are customary in the airline industry and do not contemplate, permit, result in or require the transfer of title to the airframe or engines installed thereon; (6) install an Engine on an airframe leased to Lessee or owned by Lessee subject to a conditional sale or other security agreement; provided that: (A) such airframe is free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement covering such airframe and except Liens of the type permitted by clauses (A) and (B) of Section 6(a)(i)(5) and the Lien of any mortgage which provides that each Engine leased to Lessee hereby shall not become subject to the Lien thereof or to any rights of any party thereunder other than Lessee (with respect to Lessee's rights expressly granted hereunder), notwithstanding the installation of such Engine on any airframe subject to the Lien of such mortgage, unless and until Lessee shall become the -30- 36 owner of such Engine and Lessor shall have no further interest therein, all pursuant to the express terms of this Lease; and (B) there shall be in effect a written agreement of the lessor or secured party of such airframe (which may be contained in the lease or conditional sale or other security agreement covering such airframe) substantially similar in effect to the agreement of Lessor in Section 6(b) below whereby such lessor or secured party effectively and expressly agrees that neither it nor its successors or assigns will acquire or claim any right, title or interest in any Engine by reason of such Engine being installed on such airframe at any time while such Engine is subject to this Lease or is owned by Lessor, and a copy of such agreement shall be provided to Lessor upon written request; (7) install an Engine on an airframe owned by Lessee, leased to Lessee or purchased by Lessee subject to a conditional sale or other security agreement under circumstances where neither Section 6(a)(i)(5) or Section 6(a)(i)(6) is applicable; provided that such installation shall be deemed an Event of Loss with respect to such Engine and Lessee shall comply with Section 11(b) hereof in respect thereof, Lessor not intending hereby to waive any right or interest it may have to or in such Engine under applicable Law until compliance by Lessee with such Section 11(b); (8) enter into a Wet Lease for the Aircraft or the Airframe and engines installed thereon in the ordinary course of Lessee's business for a period not extending beyond the Term; provided that if Lessee shall enter into any Wet Lease for a period of more than six months (including renewal options) Lessee shall provide to Lessor written notice of such Wet Lease (such notice to be given at least ten (10) Business Days prior to entering into such Wet Lease); or (9) sublease the Aircraft or the Airframe to any Permitted Sublessee on the terms and conditions set forth in Section 6(a)(iii) below. (ii) Certain Limitations on Transfers. With respect to any transfer pursuant to Section 6(a)(i): (1) the rights of any transferee that receives possession by reason of a transfer permitted by Section -31- 37 6(a) hereof (other than the transfer of an Engine which is deemed to have been an Event of Loss) and any Wet Lease shall be expressly subject and subordinate to all the terms of this Lease and the Lien of the Indenture (if it has not been discharged); (2) Lessee's obligations hereunder and under the other Operative Documents shall continue in full force and effect and Lessee shall remain primarily liable hereunder for the performance of all of the terms of this Lease to the same extent as if such transfer had not occurred and no provision of this Lease shall be deemed a waiver of the Lessor's rights hereunder or under the other Operative Documents nor discharge or diminish any of Lessee's obligations hereunder or under the other Operative Documents; (3) During the Restricted Use Period, no Wet Lease, Permitted Sublease or other relinquishment of possession of the Aircraft, the Airframe or any Engine pursuant to the terms of this Section 6(a) shall be permitted if such Wet Lease, Permitted Sublease or other relinquishment of possession would cause the Aircraft, the Airframe or such Engine to be "tax-exempt use property" within the meaning of Section 168(h) of the Code or cease to be "Section 38 property" within the meaning of Section 48(a) of the Code (as determined after the application of Section 47(a)(7) of the Code); (4) The term of any transfer, Wet Lease, Permitted Sublease or other relinquishment of possession shall not extend beyond the Basic Term or the Renewal Term (if Lessee shall have exercised its option to renew this Lease in accordance with the terms hereof); (5) No transfer, Wet Lease, Permitted Sublease or other relinquishment of possession of the Aircraft, the Airframe or any Engine shall in any way discharge or diminish any of Lessee's obligations to Lessor or any other Person hereunder for which obligations Lessee shall remain primarily liable; (6) The sublessee under any Permitted Sublease, in its consent thereto, shall confirm that from and after the occurrence and continuance of an Event of Default and, unless an Event of Default specified in Section 17(e), (f) or (g) of this Lease has occurred and is continuing, this Lease being deemed or declared -32- 38 in default, Lessor (and, so long as the Lien of the Indenture shall not have been discharged, Indenture Trustee) shall be entitled to enforce directly and in its own name all representations, warranties, indemnities, covenants and agreements under the applicable Permitted Sublease; and (7) Each Permitted Sublease shall (A) provide that (I) the Aircraft or Airframe may not be operated or used other than as provided in this Lease and shall be maintained and operated as required hereunder, (II) Lessor may avoid or terminate such sublease following an Event of Default hereunder and (III) to the extent not accomplished by an assignment of the Permitted Sublease, upon the occurrence of an Event of Default hereunder, Lessee's rights under such Permitted Sublease shall automatically be deemed assigned to Lessor; and (B) be a "net lease" in accordance with industry practice and shall be comparable to, or more restrictive than, this Lease and under such Permitted Sublease (except a sublease to the United States Government or a Foreign Air Carrier after the Restricted Use Period), Lessee as lessor under such Permitted Sublease, must be entitled to the same benefits under 11 U.S.C. Section 1110 as Lessor is entitled hereunder and such Permitted Sublease shall contain provisions regarding such Section 1110 which are substantially the same as the related provisions of this Lease. In addition, from and after the occurrence and continuance of an Event of Default, all rent and other amounts payable by the Permitted Sublessee under such Permitted Sublease shall be paid directly to Indenture Trustee and, upon discharge of the Lien of the Indenture, to Lessor. (iii) Permitted Subleases. With respect to any sublease pursuant to Sections 6(a)(i)(3) or (4) (to the extent permitted by Law) or Section 6(a)(i)(9) above: (1) Lessee may sublease the Aircraft or the Airframe to a Permitted Sublessee (each of which shall constitute a "Permitted Sublease") if (A) in any such case, the Permitted Sublessee under such sublease is not subject to a proceeding or final order under applicable bankruptcy, insolvency or reorganization laws on the date such sublease is entered into, (B) in the event that the Permitted Sublessee under such sublease is a Foreign Air Carrier (other than a Foreign Air Carrier principally based in Taiwan), the United -33- 39 States maintains diplomatic relations with the country in which such proposed Permitted Sublessee is principally based at the time such sublease is entered into (or, in the case of a sublease to a proposed Permitted Sublessee principally based in Taiwan, maintains diplomatic relations at least as good as those in effect on the Restatement Date) and (C) in the event that the Permitted Sublessee under such sublease is a Foreign Air Carrier, Lessor and the Indenture Trustee shall have received an opinion of counsel to Lessee, in form and substance reasonably satisfactory to Owner Participant and the Indenture Trustee, to the effect that (I) the terms of the proposed sublease will be legal, valid, binding and (subject to customary exceptions in foreign opinions generally) enforceable against the proposed Permitted Sublessee in the country in which the Permitted Sublessee is principally based, (II) there exist no possessory rights in favor of the Permitted Sublessee under such sublease under the laws of such Permitted Sublessee's country of domicile that would, upon bankruptcy or insolvency of or other default by Lessee, prevent the return or repossession of the Aircraft in accordance with the terms of this Lease, (III) (unless Lessee shall have agreed or is required to provide insurance covering the risk of requisition of use of the Aircraft by the government of the country of such Permitted Sublessee's country of domicile) the laws of such Permitted Sublessee's country of domicile require fair compensation by the government of such jurisdiction payable in currency freely convertible into dollars for the loss of use of the Aircraft in the event of the requisition by such government of such use, (IV) the Permitted Sublessee is either not entitled to sovereign immunity, or has effectively waived such sovereign immunity, with respect to its rights and obligations under the proposed sublease; (V) the laws of such Permitted Sublessee's country of domicile would give recognition to Lessor's title to the Aircraft, to the registry of the Aircraft in the name of the Lessor (or Lessee, as "lessee", or the proposed Permitted Sublessee, as "sublessee", as appropriate) and to the Lien of the Indenture; (VI) it is not necessary under the laws of such Permitted Sublessee's country of domicile, solely as a consequence of such subleasing and without giving effect to any other activity of Owner Participant, Owner Trustee or Indenture Trustee or any Affiliate thereof, as the case may be, for the Owner Trustee, the Owner Participant or the Indenture Trustee to qualify -34- 40 to do business in such jurisdiction; and (VII) if the Owner Participant so requests, (x) under the laws of such Permitted Sublessee's country of domicile there is no tort liability of the owner of an aircraft not in possession thereof (it being agreed that in the event this opinion cannot be given in a form reasonably satisfactory to Owner Participant, such opinion shall be waived if insurance reasonably satisfactory to Owner Participant is provided to cover such risk), and (y) such other matters as the Owner Participant reasonably requests, provided, however, that no sublease shall extend beyond the expiration of the Basic Term or any Renewal Term then in effect. Any Permitted Sublease shall expressly provide that the rights of any Permitted Sublessee shall be expressly subject and subordinate to all the terms of this Lease and to the Lien of the Indenture (if it has not been discharged), including, without limitation, the covenants contained in Sections 6(c), 6(d) and 6(e) hereof and Lessor's rights to repossession pursuant to Section 18 hereof and to avoid or terminate such Permitted Sublease upon such repossession, and Lessee shall remain primarily liable hereunder for the performance of all of the terms of this Lease to the same extent as if such Permitted Sublease had not occurred. No Permitted Sublease shall in any way discharge or diminish any of Lessee's obligations to Lessor hereunder or under the other Operative Documents or constitute a waiver of Lessor's rights or remedies hereunder or under the other Operative Documents, and such rights shall continue as if such Permitted Sublease had not occurred. Any Permitted Sublease shall expressly prohibit any further sub-sublease or assignment or any other similar transfer of the Aircraft, Airframe or any Engine or rights thereto by the Permitted Sublessee. Lessee shall provide to the Owner Participant and the Indenture Trustee (i) written notice of any Permitted Sublease hereunder (such notice to be given not later than ten Business Days prior to entering into any Permitted Sublease with any proposed Permitted Sublessee), and (ii) a copy of each Permitted Sublease together with an assignment, as security for Lessee's obligations hereunder, of such Permitted Sublease, and if Lessor or the Indenture Trustee so requests, a consent thereto from such Permitted Sublessee, in form and substance reasonably satisfactory to Lessor and the Indenture Trustee, within ten (10) Business Days following the effective date of such Permitted Sublease. -35- 41 (b) Reciprocal Recognition of Rights. In the event the lessor or secured party of any airframe leased to Lessee (or a Permitted Sublessee) or owned by Lessee (or a Permitted Sublessee) is subject to a conditional sale or other security agreement in accordance with Section 6(a)(i)(6) hereof, and the lease or conditional sale or other security agreement covering such airframe also covers an engine or engines owned 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 hereby agrees for the benefit of such lessor or secured party that Lessor will not 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 by such lessor or subject to a security interest in favor of such secured party. Lessor also hereby agrees for the benefit of the mortgagee under any mortgage complying with Section 6(a)(i)(6) hereof, relating to installation of an Engine on an airframe leased to Lessee (or a Permitted Sublessee), that Lessor will not acquire or claim, as against such mortgagee, any right, title or interest in any engine subject to the lien of such mortgage as the result of such engine being installed on the Airframe at any time while such engine is subject to the lien of such mortgage. (c) Lawful Insured Operations. Lessee will not permit the Aircraft, the Airframe or any Engine to be serviced, repaired, maintained, used or operated in violation of any Law of any Governmental Entity having jurisdiction, or contrary to the Manufacturers' operating manuals or instructions, or in violation of any airworthiness certificate or limitation, license or registration issued by any such authority or any manufacturer's specifications, service bulletins or other requirements, including, without limitation, any manufacturer's requirements as may be applicable to keep in full force and effect each material warranty, product or performance guaranty, service life policy or the like, in each case, to the extent made mandatory for Part 121 operators similarly situated to Lessee or the Permitted Sublessee if the Aircraft is registered with the FAA, or the applicable laws of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 11 of the Refunding Agreement, unless the validity thereof is being contested in good faith and by appropriate proceedings, but only so long as such proceedings do not involve any danger of sale, -36- 42 forfeiture or loss of the Aircraft or impair the interest of Lessor therein or impair the validity or priority of the Lien of the Indenture or result in a risk of criminal liability of Lessor, Owner Participant or Indenture Trustee and are not inconsistent with any insurance required to be maintained by Lessee hereunder. In the event that such Law or other requirement requires alteration of the Aircraft during the Basic Term or the then-current Renewal Term, Lessee shall comply therewith at its sole expense and shall maintain the same in proper condition for operation under such Laws and other requirements. Lessee shall not operate in any manner or locate in any place the Aircraft, or suffer or permit the Aircraft to be operated by a Permitted Sublessee or otherwise in any manner or located by a Permitted Sublessee or otherwise in any place (i) unless the Aircraft is covered by insurance or United States Government indemnity as required by the provisions hereof or (ii) contrary to the terms of such insurance or United States Government indemnity or (iii) which prohibits the operation or location therein of Aircraft owned by a United States citizen. Lessee also agrees not to operate or locate the Aircraft or suffer or permit the Aircraft to be operated or located in any area excluded from coverage by any insurance policy issued pursuant to the requirements of this Lease or in any war zone unless insured or indemnified by the United States of America therefor, except in the case of operation pursuant to a sublease or contract with, or as a result of a requisition (not constituting an Event of Loss) by, the United States of America, and then only if Lessee has obtained insurance or an indemnity (in lieu of such insurance) from the United States of America covering such risks, in the amounts and otherwise as required by this Lease. Lessee shall in no event permit the Aircraft, the Airframe or any Engine to be used, located, operated or maintained in Hong Kong or the People's Republic of China. (d) Maintenance. Lessee, at its own cost and expense, shall: (i) perform or cause to be performed all service, repair, maintenance, overhaul, inspections, alterations, modifications, and testing (A) in accordance with good airline industry practice and in such manner to provide complete data and documentation necessary to substantiate certification, (B) as may be necessary and required under, and in compliance with, applicable Law, including, without limitation, FAA rules, regulations and other requirements, any other applicable rules, regulations and requirements by any other applicable Governmental Entity, the Maintenance Program, airworthiness directives having a compliance date during the Term, and the service -37- 43 bulletins and other requirements of any manufacturer, including, without limitation, such requirements as may be applicable to keep in full force and effect any and all material warranties, product and performance guaranties, service life policies, indemnities or the like, (C) except during any period that a Permitted Sublease is in effect, in the same manner and with the same care, including regard for the status and technical condition of the Aircraft, as shall be the case with respect to similar aircraft and engines owned by Lessee without discrimination and as if Lessee owned the Aircraft and was going to use the Aircraft in continued regular customer service after the expiration of the Term, and consistent with good industry practice, and during any period in which a Permitted Sublease is in effect, in the same manner and with the same care, including regard for the status and technical condition of the Aircraft, as shall be the case with respect to similar aircraft and engines owned by such Permitted Sublessee without discrimination and as if the Permitted Sublessee owned the Aircraft and was going to use the Aircraft in continued regular customer service after the expiration of the Permitted Sublease, and consistent with good industry practice, provided, however, that in all circumstances the Aircraft shall be maintained by Lessee (or any Permitted Sublessee) in accordance with maintenance standards required by, or substantially equivalent to those required by the central civil aviation authority of the country of registry, and, to the extent not inconsistent therewith, the FAA and (D) so as to keep the Aircraft in as good a condition as when delivered to Lessee, ordinary wear and tear excepted, and in good operating condition; (ii) keep the Aircraft or cause the Aircraft to be kept in such condition as is necessary to enable the airworthiness certification of such Aircraft to be maintained in good standing at all times under the Federal Aviation Act and any other applicable law, or the applicable laws of any other jurisdiction in which the Aircraft may be registered in accordance with Section 11 of the Refunding Agreement (provided that if any grounding is fleetwide in nature and so long as Lessee or a Permitted Sublessee is contesting in good faith such grounding, Lessee shall not be deemed in violation of this maintenance covenant); and (iii) maintain in English all records, logs and other materials required by, and in a manner acceptable to, the FAA or any other Governmental Entity having jurisdiction and as provided under the Maintenance Program and Lessee's recordkeeping policies. (e) Registration and Insignia. Lessee shall cause the Aircraft at all times, at its expense, to be duly -38- 44 registered during the Restricted Use Period and, subject to Section 11 of the Refunding Agreement, thereafter under the Federal Aviation Act in the name of Lessor or any successor or assignee, so long as (i) while the Aircraft is registered under the Federal Aviation Act, each of the Lessor or its successors or assigns is a "citizen of the United States" as defined in Section 40102(a)(15) of the Federal Aviation Act and (ii) the applicable parties to the Refunding Agreement cooperate with Lessee with respect thereto as reasonably requested by Lessee. Lessee shall not register the Aircraft or permit the Aircraft to be registered under any Laws other than the Federal Aviation Act at any time except as provided in Section 11 of the Refunding Agreement and shall cause the Indenture to be duly recorded and maintained of record as a duly perfected mortgage on the Aircraft and this Lease at all times. At any time after the Restricted Use Period, Lessor, upon compliance with all of the terms of Section 11 of the Refunding Agreement, shall, at the request and sole expense of Lessee, cooperate with Lessee to take all actions reasonably required to change the registration of the Aircraft to another country. Lessee agrees at its expense to place such appropriate insignia, plates and other identification ("Lease Identification") in the cockpit of the Aircraft and on each Engine showing title thereto and the Lien of the Indenture as designated by Lessor and as Lessor may from time to time reasonably request. Unless otherwise requested, upon delivery of the Aircraft, Lessee shall fasten or cause to be fastened in the cockpit of the Airframe in a location reasonably adjacent to and not less prominent than the airworthiness certificate for the Aircraft, and on each Engine (if not prohibited by applicable Law), a Lease Identification in the form set forth in Exhibit C hereto or with any other appropriate information in any other form subsequently designated by Lessor to Lessee. Except as provided herein, Lessee will not allow the name of any Person to be placed on the Aircraft or either Engine as a designation that would be reasonably interpreted as a claim of ownership or Lien; provided, however, that Lessee may cause the Airframe and Engines to have placed thereon the customary colors and insignia of Lessee or any Permitted Sublessee under a Permitted Sublease. Section 7. Inspection. During the Term of this Lease, Lessee shall furnish to Lessor, Owner Participant and Indenture Trustee -39- 45 such information concerning the location, condition, use and operation of the Aircraft as Lessor, Owner Participant or Indenture Trustee may reasonably request. Lessee shall permit, or cause any sublessee to permit, any person designated by Lessor, Owner Participant or Indenture Trustee on reasonable prior notice at reasonable times to visit, inspect and survey the Aircraft (including, without limitation, a visual "walk around" inspection which may include going on board the Aircraft, and inspecting the Aircraft during maintenance checks when panels and bays are open and subject to view), its condition, use, and operation, and the records maintained in connection therewith, and to visit and inspect the properties and to discuss the affairs, finances and accounts of Lessee with the principal officers of Lessee, provided, that so long as no Default or Event of Default has occurred hereunder inspections shall be endeavored to be performed during regularly scheduled maintenance checks of the Aircraft. Each such inspection or survey shall be conducted so as to not unreasonably interfere with the business of Lessee or the maintenance or operation of the Aircraft. Upon Lessor's, Owner Participant's or Indenture Trustee's request, Lessee will notify such Person of the next scheduled maintenance check for the Airframe or any Engine. Lessor, Owner Participant and Indenture Trustee shall have no duty to make any such inspection and shall not incur any liability or obligation by reason of not making any such inspection. Lessor's, Owner Participant's or Indenture Trustee's failure to object to any condition or procedure observed or observable in the course of an inspection hereunder shall not be deemed to waive or modify any of the terms of this Lease with respect to such condition or procedure. Section 8. Additional Covenants of Lessee. Lessee covenants and agrees that: (a) Financial Information. Lessee agrees to furnish Lessor, until the expiration or other termination of the Term of this Lease, the following: (i) within sixty (60) days following the end of each quarter of Lessee's fiscal year, except the last such quarter of such year, commencing after the Restatement Date, a copy of Lessee's Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission or, if Lessee no longer files such report, an unaudited consolidated balance sheet of Lessee and its consolidated -40- 46 subsidiaries prepared by it as of the close of the period ended, together with the related statements of income and cash flows for such period, and in each case certified by a Responsible Officer of Lessee as having been prepared in accordance with GAAP and as fairly presenting the financial condition and results of operations and changes in financial position for such period then ended in accordance with such principles and practices (subject to normal year-end audit adjustments); (ii) within one hundred five (105) days after the close of each fiscal year of Lessee, a copy of Lessee's Annual Report on Form 10-K as filed with the Securities and Exchange Commission or, if Lessee no longer files such reports, an audited consolidated balance sheet, income statement, and cash flow statement of Lessee and its consolidated subsidiaries, as of the close of such fiscal year, and in each case as certified by independent public accountants, including their certificate and accompanying comments, as having been prepared in accordance with GAAP and as fairly presenting the financial condition and results of operations and changes in financial position for such period then ended in accordance with such principles and practices, without qualification as to the scope of the audit or non-conformity with GAAP; (iii) promptly upon their becoming available, copies of all reports on Form 8-K filed by Lessee under the Securities Exchange Act of 1934, as amended, and each other statement, report or circular (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) generally distributed to creditors or shareholders; (iv) prior to the expiration date of each policy of insurance required to be maintained hereunder, a certificate signed by the Approved Broker of Lessee as to the due compliance with the insurance provisions of Section 12 hereof with respect to the Aircraft, together with certificates of insurance evidencing such insurance and the opinion provided for in Section 12(f); (v) together with each set of financial statements referred to in clauses (i) and (ii), a certificate signed by a Responsible Officer of Lessee, to the effect that such officer has reviewed the relevant terms of this Lease and has made, or caused to be made under his or her supervision, a review of the transactions and condition of Lessee during the accounting period covered by -41- 47 such financial statements, and that such review has not disclosed the existence during such accounting period, nor does such officer have any knowledge of the existence, as at the date of such certificate, of any condition or event which constitutes a Default or an Event of Default, or, if such condition or event which constitutes a Default or an Event of Default existed or exists, specifying the nature and period of existence thereof and what action Lessee has taken or is taking or proposes to take with respect thereto or any event classified as an accident by the National Transportation Safety Board, or if such event has occurred, information about such event; (vi) as soon as practicable after becoming aware thereof, notice of damage or destruction to the Aircraft, either Engine or any Part with a repair or replacement cost (including labor charges) in excess of $1,000,000; (vii) immediately after Lessee knows or should know of the occurrence thereof, notice of a Default; and (viii) from time to time such other information as Lessor may reasonably request. (b) Maintenance of Corporate Existence. Except as provided in Section 8(e) below, during the term of this Lease, Lessee will preserve and maintain its corporate existence and its rights, privileges, licenses and franchises material to Lessee's ability to perform its obligations hereunder in each applicable jurisdiction. (c) Maintenance of Status. Lessee is, and shall remain so long as it shall be the Lessee under this Lease, a "citizen of the United States" as defined in Section 40102(a)(15) of the Federal Aviation Act, and Lessee is and shall maintain its status at all times as a Certificated Air Carrier, including, without limitation, its status so as to fall within the purview of 11 U.S.C. Section 1110 or any analogous statute. (d) Payment of Taxes. Lessee will pay or cause to be paid all Taxes imposed upon it, or upon its income or profits, or upon any property belonging to it, on or prior to the due date thereof, including any extensions which have been duly obtained or granted; provided, however, that Lessee shall not be required to pay any such Taxes, the payment of which is being diligently contested in good faith and by appropriate proceedings with appropriate reserves so -42- 48 long as there is no material possibility that either failure to pay such Taxes or such contest may result in any loss, sale, confiscation, forfeiture or seizure of the Aircraft, the Airframe or either Engine or any criminal liability on the part of Lessor, Indenture Trustee or any Note Holder. (e) Consolidation, Merger, Etc. Lessee shall not liquidate or dissolve; and Lessee shall not consolidate with or merge into or with any other corporation or other Person, and Lessee shall not convey, transfer, lease or otherwise dispose of all or substantially all of its property and other assets (in one or a series of transactions) to any corporation or other Person, unless: (i) the Person formed by or surviving such consolidation or merger or the Person which acquires by conveyance, transfer, lease or other disposition all or substantially all of such property and other assets or stock (the "Successor Entity"): (A) shall be a corporation organized and existing under the Laws of the United States of America or any State thereof or the District of Columbia; (B) immediately after giving effect to such transaction, shall be Lessee or shall have acquired or succeeded to all or substantially all of such property and other assets (including, without limitation, all or substantially all of Lessee's property and other assets) as an entirety and, unless the Owner Participant otherwise agrees, shall have a Net Worth of not less than Lessee's Net Worth immediately prior to such transaction; (C) shall be a "citizen of the United States" of America as defined in Section 40102(a)(15) of the Federal Aviation Act and a Certificated Air Carrier; and (D) shall execute and deliver to Lessor and Indenture Trustee such recordations and filings with any Governmental Entity and such other documents as Lessor determines shall be reasonably necessary or advisable (including, without limitation, to preserve and protect the interests of the Lessor and the priority of the Lien of the Indenture (if it has not been discharged)) to evidence, or in connection with, such consolidation, merger, sale, lease, transfer or other disposition and an agreement, in form and substance reasonably satisfactory to Lessor, which is a legal, valid, binding and enforceable assumption by such Successor Entity of the due and punctual performance and observance of each covenant and condition of this Lease and the other Operative Documents to which Lessee is a party and agreement to be bound thereby, and an officer's certificate to such effect, and to the effect that the other requirements of this paragraph have been satisfied, and a legal opinion from -43- 49 counsel to such effect and otherwise in such form and substance reasonably satisfactory to Lessor; and (ii) prior to and immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing. No such permitted disposition to a Successor Entity shall relieve or release Lessee of or from any obligations hereunder or under the other Operative Documents. (f) Information. Within 60 days after the end of each calendar year and within 60 days of a request by Lessor or Owner Participant, or such shorter period as may be set forth in any written request by the Internal Revenue Service for information or documents, Lessee shall furnish in writing to Lessor or Owner Participant such information and documents (or copies thereof) regarding the Aircraft as may be reasonably requested by Lessor or Owner Participant or the Internal Revenue Service in order to permit Lessor to file its Federal and state income tax returns (or to permit the filing of the Federal and state income tax returns of any affiliated group of corporations filing a consolidated return of which Lessor is a member), or to maintain or defend any claims related thereto and promptly, after reasonable notice, furnish to Lessor or Owner Participant such information as may be reasonably requested by Lessor or Owner Participant or the applicable Governmental Entity as may be required to enable Lessor or Owner Participant to file any reports required to be filed by it with any Governmental Entity because of its ownership or other interest in the Aircraft, the Airframe or the Engines. (g) Place of Business. At all times while this Lease is in effect, Lessee will not, without thirty (30) days prior written notice to Lessor and Indenture Trustee (so long as the Lien of the Indenture shall not have been discharged), change its chief executive office (as such term is defined under Article 9 of the Uniform Commercial Code as adopted in Arizona) or location of its books and records, from 4000 East Sky Harbor Boulevard, Phoenix, Arizona 85034, -44- 50 or such subsequent location of which Lessee shall have so notified Lessor and, if applicable, Indenture Trustee. (h) Certain Limitations on Use. Lessee shall use the Aircraft, Airframe or Engines only in commercial passenger operations and related cargo operations. Unless Owner Participant otherwise agrees, during the Restricted Use Period, Lessee shall not use the Aircraft, Airframe or Engines or permit the Aircraft, Airframe or Engines to be used "predominantly outside the United States" within the meaning of Section 48(a)(2) of the Code. In addition, until the expiration of the Term or termination of the Foreign Lease Agreement, Lessee will not locate or use or permit the location or use of the Aircraft in, to or from Hong Kong or the People's Republic of China or in such manner that the percentage of the income, deduction or credit attributable to the Aircraft, Airframe or Engines for federal income tax purposes during any taxable year of the Lessor considered to be from foreign sources exceeds the Maximum Foreign Use Percentage. Unless the Owner Participant otherwise agrees, prior to permitting the Aircraft to be operated in any member state of the European Union or other European country, Lessee shall deliver to Lessor (i) a representation and warranty to the effect that Lessee (or any Permitted Sublessee) has no knowledge of any dispute with Eurocontrol or other relevant air traffic control authority over delinquent charges payable by it and (ii) a letter from Lessee (or any Permitted Sublessee) addressed to Eurocontrol or other relevant air traffic control authority pursuant to which Lessee (or such Permitted Sublessee) authorizes the addressee to issue to Lessor, upon Lessor's request from time to time, a statement of account of all sums due by Lessee (or such Permitted Sublessee) to the authority in respect of all aircraft (including, without limitation,the Aircraft) operated by Lessee (or such Permitted Sublessee). (i) Section 1110. Lessee acknowledges that Lessor would not have entered into this amended and restated Lease unless it had available to it the benefits of a lessor under Section 1110 of Title 11 of the United States Code. Lessee covenants and agrees with Lessor that to better ensure the availability of such benefits, Lessee shall support any motion, petition or application filed by Lessor with any bankruptcy court having jurisdiction over Lessee, whereby Lessor seeks recovery of possession of the Aircraft under said Section 1110 and shall not in any way oppose such action by Lessor unless Lessee shall have complied with the requirements of said Section 1110 to be fulfilled in order to entitle Lessee to continued use and possession of the -45- 51 Aircraft hereunder. The acknowledgement, covenant and agreement contained in this Section 8(i) shall continue in full force and effect and survive the expiration or other termination of this Lease and are expressly made for the benefit of and shall be enforceable by the Lessor, the Owner Participant and, if the Lien of the Indenture has not been discharged, the Indenture Trustee. (j) Permits and Licenses. Lessee shall make or obtain, and maintain in full force and effect, each and every consent, license, approval, notice, registration, filing or other action with any Governmental Entity (i) necessary or advisable in connection with the operation or use of the Aircraft, the Airframe, any Engine or Part or the execution, delivery or performance of this Lease or the enforcement thereof against Lessee or (ii) necessary in connection with the execution, delivery or performance of the Operative Documents (other than the Lease) to which Lessee is a party or the enforcement thereof against Lessee. (k) Security Opinion; Annual Certificate. (i) During such times that the Aircraft is registered under the Federal Aviation Act, Lessee shall furnish to Lessor and to Indenture Trustee: (1) (X) prior to the expiration of the time period covered by the opinion of counsel rendered on the Restatement Date, any opinion of counsel rendered pursuant to Section 11(C) of the Refunding Agreement, and any opinion of counsel rendered pursuant to this Section 8(k)(i) and (Y) upon any change in Law that would render the opinion of counsel rendered on the Restatement Date or such immediately preceding opinion of counsel inaccurate, an opinion of counsel with respect to Lessee and the FAA reasonably satisfactory to each addressee of such opinion (which counsel may be internal legal counsel of Lessee and FAA counsel) stating, in the opinion of such counsel, that such action has been taken with respect to the recording, filing, re- recording and refiling of (i) the appropriate Operative Documents and any supplements and amendments thereto and (ii) such other appropriate documents, as is necessary to maintain the perfection of Lessor's title to and/or interest in and Indenture Trustee's security interest in the Aircraft and the -46- 52 Operative Documents for such period of time as reflects the then-current applicable Law, reciting the details of such actions; or (2) at any time that an opinion is not required pursuant to Section 8(k)(i)(1), annually, a certificate reasonably satisfactory to each recipient thereof signed by a Responsible Officer of Lessee certifying that no such action is necessary to maintain the perfection of such title and/or interest and security interest. (ii) During such times that the Aircraft is registered under any Laws other than the Federal Aviation Act, Lessee shall furnish to Lessor and to Indenture Trustee annually (but in any case, (X) prior to the expiration of the time period covered by any opinion of counsel rendered pursuant to Section 11(C) of the Refunding Agreement and any opinion of counsel rendered pursuant to this Section 8(k)(ii) and (Y) promptly upon any change in Law that would render such immediately preceding opinion of counsel inaccurate), an opinion of counsel reasonably satisfactory to each addressee of such opinion stating, in the opinion of such counsel, that such action has been taken with respect to the recording, filing, re-recording and refiling of (i) the appropriate Operative Documents and any supplements and amendments thereto and (ii) such other appropriate documents, as is necessary to maintain the perfection of Lessor's title to and/or interest in and Indenture Trustee's security interest in the Aircraft and the Operative Documents for such period of time as reflects the then-current applicable Law, reciting the details of such actions. (l) Letter of Credit. As security for the obligations to Lessor, Lessee shall provide to Lessor, as named beneficiary thereof, one or more irrevocable standby letters of credit, in form and substance acceptable to Lessor in its sole and absolute discretion (the "Letter of Credit"), including, without limitation, as to renewal provisions, with a face amount available for drawdown at all times equal to the amount set forth on Exhibit C (the "Face Amount"), which Letter of Credit shall: (i) provide that the full amount thereof shall be available for drawdown thereunder and payable in New York, New York, on demand at any time, if a Default under Section 17(e), (f) or (g) or an Event of Default has -47- 53 occurred, which amount may be applied, retained or utilized as provided in the penultimate paragraph of this Section 8(l); (ii) be maintained in full force and effect at all times until ninety-one (91) days after the Expiration Date with a commercial bank acceptable to Lessor, in its sole and absolute discretion, having a long-term unsecured debt rating of "A" or better by Standard & Poor's Rating Group (if the issuing bank's credit rating is lower than such rating, Lessee shall replace such Letter of Credit issuer within five Business Days of any such reduction in rating with a commercial bank meeting such rating requirement), provided, that the Letter of Credit set forth in Exhibit D-2 issued by The Industrial Bank of Japan, Limited, will be acceptable to Lessor for so long as The Industrial Bank of Japan, Limited maintains a long term unsecured debt rating at least equal to its rating on the date hereof; (iii) be expressly designated as transferrable and assignable; and (iv) permit partial drawings. If the Letter of Credit is still in effect at the end of the Term, or the Lessor is holding proceeds of the Letter of Credit that were retained and not applied as provided herein, then Lessor shall return the Letter of Credit to Lessee or terminate it, and/or return any retained and unapplied proceeds, ninety-one (91) days following the date of such expiration or other termination of this Lease so long as no Default or Event of Default has occurred or is continuing hereunder or under any Other Lease, upon payment in full of all amounts then due and owing to Owner Trustee and Owner Participant under the Operative Documents. If an Event of Default has occurred or is continuing under this Lease or an Event of Default has occurred or is continuing under any Other Lease (as therein defined), in addition to any other rights and remedies Lessor may have hereunder, under any Other Lease, any sublease and any and all other remedies available at Law (including, without limitation, the Uniform Commercial Code as adopted in New York) or equity and upon exercising its rights under the Letter of Credit and any Other Letters of Credit, Lessor shall be entitled, in each case as it may elect in its sole and absolute discretion, to (i) hold any amounts drawn under the Letter of Credit or Other Letters of Credit as security for Lessee's obligations under this Lease -48- 54 or the Other Leases, (ii) retain any amounts drawn under the Letter of Credit or Other Letters of Credit for its own account and apply (including, without limitation, by way of set off against) such drawn amounts as it may elect (it being understood that amounts not so applied will be held as security for Lessee's obligations under this Lease and the Other Leases) to remedy any breach by Lessee of this Lease or any other Operative Documents or Other Leases or (iii) recompense Lessor, Owner Participant or any of their respective Affiliates for any loss, damage, cost or expense or other Claim due or owing hereunder or under the Other Leases; provided, however, that in the case of any drawing in respect of any claim for the payment of Rent, Lessee's right to apply the same to such claim shall be limited to amounts which would (absent such Event of Default) be distributable under the Indenture at the time such payment is made to Lessor, Owner Participant or any of their respective Affiliates (and shall not include any amounts distributable to Indenture Trustee in its individual capacity or to the Note Holders); provided further, however, that neither the amount so applied at any one time nor the aggregate amount so applied at different times shall reduce the amount of any installment or payment of Rent (whether upon the termination of the Lease or otherwise) payable by Lessee to an amount insufficient to pay in full the amounts required to be paid on account of the principal of and any interest on the Equipment Notes or otherwise owing to a Note Holder. Lessee shall not be entitled to any refund or credit with respect to any amounts so applied. Any amount retained shall be considered the property of Lessor and Lessor may commingle such amount with its general funds and Lessee, further, hereby absolutely and irrevocably disclaims, to the maximum extent permitted by applicable Law, any interest therein. Lessee shall not be entitled to any interest or other earnings on such retained amount and such amount shall not be refundable. On application of all or any portion of the amounts drawn under the Letter of Credit or any Other Letters of Credit in accordance with this Section 8(l) or the Other Leases, Lessee shall on demand reinstate the amount of the Letter of Credit or Other Letters of Credit, as the case may be, to its or their full Face Amount or provide to Lessor one or more additional Letters of Credit meeting the requirements of this Section 8(l), so that the Letter of Credit and each of the Other Letters of Credit at all times equals the original Face Amount provided for herein. During such times as Lessor shall elect to hold all or part of the proceeds of the Letter of Credit or Other Letters of Credit as security for Lessee's obligations to Lessor under the Lease and the Other Leases, Lessee shall not be obligated to reinstate the amount of the Letter of -49- 55 Credit or Letters of Credit, as the case may be, in respect of the proceeds so held. Section 9. Replacement of Parts; Alterations, Modifications and Additions. (a) Replacement of Parts. Lessee, at its own cost and expense, will promptly replace, or cause to be replaced, 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, in the ordinary course of maintenance, service, repair, overhaul or testing, Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) may at its own cost and expense remove any Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use, provided that Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) shall replace at its own cost and expense such Parts as promptly as possible. All replacement Parts shall be free and clear of all Liens (except for pooling arrangements to the extent permitted by paragraph (c) of this Section and Permitted Liens), be in at least the equivalent or better modification status and service bulletin accomplishment status, be fully interchangeable as to form, fit and function and shall be in as good operating condition as, and have a value, remaining useful life and utility at least equal to, the Parts replaced (assuming such replaced parts were in the condition and repair in which they were required to be maintained by the terms hereof). All Parts which are at any time removed from the Aircraft shall remain the property of Lessor (provided that, so long as the Foreign Lease Agreement is in effect, title to such Parts shall remain with the Foreign Lessor), subject to the Lien of the Indenture if it has not been discharged, and subject to this Lease no matter where located until such time as such Parts shall be replaced by parts which have been incorporated or installed in or attached to the Aircraft and which meet the requirements for replacement Parts specified above. Immediately upon any replacement Part becoming incorporated or installed in or attached to the Aircraft as above provided, or as provided in Section 9(c), without further act, (i) title to the removed Part shall thereupon vest in Lessee free and clear of all rights of Lessor, Indenture Trustee, Owner Participant and Note Holders and shall no longer be deemed a Part hereunder, (ii) title to such replacement Part shall thereupon vest in Lessor (or, so long as the Foreign Lease Agreement is in effect, Foreign Lessor) and become subject to the Lien of the Indenture if it has not been discharged, and (iii) such -50- 56 replacement Part shall become subject to the Lien of the Indenture (if it has not been discharged) and this Lease and be deemed a Part for all purposes hereof to the same extent as the Part which it has replaced. (b) Alterations, Modifications and Additions. Lessee, at its own cost and expense, shall make or cause to be made such alterations and modifications in and additions to the Airframe and each Engine to the extent made mandatory for Lessee (or a sublessee) in respect of the Aircraft, Engines or Parts from time to time to meet the applicable standards of the FAA or under any Law of any Governmental Entity having jurisdiction or issued by the manufacturer of the Airframe, Engines or Parts. In addition, so long as no Default or Event of Default has occurred and is continuing, Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee), at its own expense, may from time to time make such alterations and modifications in and additions to the Airframe and either Engine as Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) may deem desirable in the proper conduct of its business, provided, no such alteration, modification or addition diminishes the value, remaining useful life or utility, or impairs the condition or airworthiness, of the Airframe, either Engine or any Part below that immediately prior to such alteration, modification or addition assuming that the Airframe, Engines and Parts were then of the value, utility and remaining useful life and in the condition and airworthiness required by the terms of this Lease. Except as otherwise provided herein, title to all Parts incorporated or installed in or attached or added to the Aircraft as the result of such alteration, modification or addition, shall immediately vest in Lessor (or, so long as the Foreign Lease Agreement is in effect, Foreign Lessor) and become subject to the Lien of the Indenture (if it has not been discharged) and this Lease, without the necessity for any further act of transfer, document or notice. Notwithstanding the foregoing sentence of this Section 9(b), Lessor agrees that so long as no Default or Event of Default shall have occurred and be continuing Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) may, at such time during the Term for the Aircraft, remove any Part of such Aircraft, provided, that (i) such Part is in addition to, and not in replacement or substitution for, any Part originally incorporated or installed in or attached to, or delivered with, the Aircraft on the Delivery Date or any Part in replacement of, or substitution for, any such originally incorporated, installed, attached or delivered Part, (ii) such Part is not required to be incorporated or -51- 57 installed in or attached or added to the Aircraft pursuant to the terms of Section 6 or this Section 9 or to maintain the insurance required by Section 12 and (iii) such Part can be removed from the Aircraft without causing any material damage thereto and without diminishing or impairing the value, utility, remaining useful life, condition or airworthiness which the Aircraft would have had at such time had such alteration, modification or addition not occurred. Upon the removal by Lessee of any such Part as provided in the preceding sentence, title thereto shall, without further act, vest in Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) and such Part shall no longer be deemed part of the Aircraft (such a part is herein called a "Removable Part"). Any Part not removed by Lessee as above provided prior to the return of the Aircraft to Lessor hereunder, whether pursuant to Section 16, Section 18 or otherwise, shall remain the property of Lessor (provided that, so long as the Foreign Lease Agreement is in effect, title to such Parts shall remain with the Foreign Lessor). If any Removable Part is (i) owned by any third party and leased to Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee), (ii) sold to Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) subject to a conditional sale contract or other security interest or (iii) leased to Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) pursuant to a lease which is subject to a security interest in favor of any third party, then Lessor will not acquire or claim, as against such lessor, conditional vendor or secured party, any right, title or interest in any such Removable Part as the result of such Removable Part being installed on the Aircraft; provided, however, that (A) Lessor's inability to so acquire or claim is subject to the express condition that such lessor, conditional vendor, or secured party shall have agreed in writing (which agreement may be contained in the lease, conditional sale agreement or security agreement) not to acquire or claim, as against Lessor, any right, title or interest in the Aircraft, or any Part other than its interest in such Removable Part by reason of such Removable Part being installed thereon, and (B) any Removable Part not removed by Lessee upon the termination or expiration of this Lease, at such time, shall become the property of Lessor, or Foreign Lessor, as the case may be, and be subject to this Lease, and provided, further, that (1) if removal of any such Part shall affect the operation of the Aircraft in any way whatsoever, Lessee shall replace such Part with an owned Part of the same value, utility and remaining useful life and (2) Lessee shall repair any unsightly area of the -52- 58 Aircraft as a result of such removal and make all other repairs which are advisable and result from such removal. In the event Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) replaces a Part which is not required to be replaced under Section 9(a) or 9(b) hereof, Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) may remove the replacement Part so long as it reinstalls the original Part and such original Part is free and clear of all Liens, other than Permitted Liens, is in at least the same modification status and service bulletin accomplishment status, is fully interchangeable as to form, fit and function, has been overhauled, repaired and inspected by an agency acceptable to the FAA or other Governmental Entity having jurisdiction, and is in as good operating condition as, and has a utility, remaining useful life and a value at least equal to that of such Part when it was removed from the Aircraft. Notwithstanding any other provision hereof, and without limiting the foregoing, Lessee (or, if a Permitted Sublease is in effect, Permitted Sublessee) may install in the Aircraft audio visual, entertainment or telephonic equipment (including seats with such equipment installed therein) (any or all of which are hereafter referred to as "Excluded Property") in the ordinary course of business, and Lessor shall not claim or acquire title thereto and the rights of the owners thereof therein shall not constitute a default hereunder; provided that (i) any such Excluded Property shall be removed prior to the date of a Return Occasion without causing any damage to the Aircraft and without diminishing or impairing the value, utility, remaining useful life or condition which the Aircraft would have had at such time had such Excluded Property not been installed, (ii) any equipment or seats which such Excluded Property replaces shall be properly stored with the interests of Lessor and, if the Lien of the Indenture is in effect, the Indenture Trustee, duly noted thereon and acknowledged by any applicable bailee or warehouse, and properly reinstalled on the Aircraft prior to the date of a Return Occasion, and (iii) Lessee (or such Permitted Sublessee) shall make all repairs which are required as a result of such removal and/or reinstallation. In no event shall Lessor bear any liability or cost for any alteration, modification, or addition, or for any grounding or suspension of certification of the Aircraft, or for any loss of revenue arising therefrom. -53- 59 (c) Pooling. Any Part removed from the Airframe or either Engine as provided in Section 9(a) may so long as no Default or Event of Default shall have occurred and be continuing or would result therefrom be subjected by Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) to a normal pooling arrangement customary in the airline industry of which Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) is a part entered into in the ordinary course of Lessee's or such Permitted Sublessee's business, provided the Part replacing such removed Part shall be incorporated or installed in or attached to the Aircraft in accordance with Section 9(a) as promptly as possible, and in any event within sixty (60) days, 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 Section 9(a) may be owned by another Person subject to such a normal pooling agreement; provided, however, that Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee), at its own expense, as promptly thereafter as possible, and in any event within sixty (60) days, either (i) causes title to such replacement Part to vest with Lessor (or, so long as the Foreign Lease Agreement is in effect, Foreign Lessor) in accordance with Section 9(a) (and to be subjected to the Lien of the Indenture if it has not been discharged) by Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) acquiring title thereto for the benefit of and transferring title to Lessor (or, so long as the Foreign Lease Agreement is in effect, Foreign Lessor) free and clear of all Liens except Permitted Liens, whereupon such replacement Part shall become subject to this Lease and the Lien of the Indenture (if in effect) without the necessity for any further act, document or notice, or (ii) replaces such replacement Part by incorporating or installing in or attaching to the Aircraft a further replacement Part owned by Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) free and clear of all Liens other than Permitted Liens and by causing title to such further replacement Part to vest in Lessor (or, so long as the Foreign Lease Agreement is in effect, Foreign Lessor) as above provided and to be subjected to the Lien of the Indenture if it has not been discharged, whereupon such replacement Part shall become subject to this Lease and the Lien of the Indenture (if in effect) without the necessity for any further act, document or notice. -54- 60 Section 10. General Tax Indemnification. (a) Indemnity. Lessee agrees that each payment of Basic Rent hereunder shall be free and clear of, and without deduction for, any and all withholdings on account of Taxes of any nature whatsoever, whether or not an exclusion pursuant to Section 10(b) applies, except as required by law. If any such deduction or withholding of Taxes is required with respect to such payments of Basic Rent, Lessee shall pay an additional amount of Basic Rent such that the net amount actually received by Lessor, after such deduction or withholding, will be equal to all such amounts that would be received by Lessor if no such deduction or withholding had been required, but only to the extent necessary to ensure that the holders of the outstanding Equipment Notes receive such amount as may be required by the Indenture. If Lessee pays any amount to Lessor (or to any taxing authority for the account of Lessor) as a result of the application of the preceding sentence with respect to any withholding Tax which is an excluded tax in respect of Lessor pursuant to Section 10(b), then Lessor (or, in the case of Taxes imposed on the Owner Trustee, the Owner Participant to the extent such Tax would give rise to a Lessor's Lien for which the Owner Participant would be liable) shall reimburse Lessee for such withholding Tax within 30 days of written notice accompanied by evidence of payment for such withholding Taxes (exclusive of interest, penalties and additions to Tax) paid by Lessee provided that in any circumstance in which the Lessor is required to reimburse the Lessee for any such withholding Taxes and the Lessee has not received such reimbursement from Lessor or the Owner Participant, then to the extent of such shortfall and so long as no Lease Event of Default has occurred and is continuing, Lessee shall be entitled to obtain reimbursement from Lessor by reducing the succeeding payments of Rent payable to Lessor (other than any portion of Rent that may be required by the Indenture to be paid to the holders of any outstanding Equipment Notes issued thereunder) until the aggregate amount of reduction is equal to the sum of the amount of such shortfall and interest on that amount at the Interest Rate from the date reimbursement is required to be made until the date of such reduction in Rent. Except as provided in Section 10(b), and taking into account any payments received by Lessor pursuant to the second sentence of this Section 10(a), Lessee agrees to pay, and to indemnify and hold each Indemnitee harmless from, any and all taxes (including, without limitation, sales, personal property, transfer, fuel, leasing, use, registration, occupational, license, value added, excess -55- 61 profits, excise, gross receipts, franchise, stamp, income and minimum taxes), levies, withholdings, assessments or other taxes, duties or charges of any nature, together with any fines, penalties, charges or interest thereon (collectively, "Taxes"), howsoever levied or imposed, whether levied or imposed upon or with respect to or asserted against any Indemnitee, Lessee, the Aircraft, the Airframe, any Engine or any Part thereof or interest therein, or otherwise, with respect to any period beginning, or events or circumstances occurring, on or after the Restatement Date, by any Federal, state or local government or taxing authority in the United States of America or by any foreign government or any taxing authority or governmental subdivision of a foreign country or of a territory or possession of the United States (each such governmental subdivision or taxing authority referred to as a "Taxing Authority"): (i) upon or with respect to, based upon or measured by (A) the Aircraft, the Airframe, any Engine or any Part thereof, or interest therein, (B) the manufacture, purchase, ownership, delivery, leasing, acceptance, rejection, assigning, possession, use, operation, location, settlement of any insurance claim, sale, mortgaging, pledging, financing, subleasing, rental, retirement, abandonment, registration, preparation, installation, modification, repair, maintenance, replacement, transportation, storage, transfer of title, return or other disposition of the Aircraft, the Airframe, any Engine or any Part thereof or interest therein; (C) the rentals, receipts, income or earnings arising therefrom (including without limitation the Rent) or (D) interest, principal and other amounts paid or payable with respect to the Equipment Notes, or (ii) upon or with respect to the Operative Documents (including the Equipment Notes), any interest in any thereof, or any future amendment, supplement, waiver or consent thereto requested by Lessee with respect to any thereof, or the execution, delivery, or performance of any thereof, or the acquisition or subsequent transfer thereof or the issuance of the Equipment Notes or any other document executed and delivered in connection with the consummation or confirmation of the transactions contemplated by the Operative Documents or any Indemnitee's interest in any of the foregoing, or the execution, amendment, -56- 62 supplement, issuance, reissuance, refinancing or delivery of any of the foregoing, or (iii) the Trust Indenture Estate or the property, or the income or other proceeds received with respect to the property, held by the Indenture Trustee under the Indenture, or (iv) the payment of the principal of, or interest or premium on, or other amounts payable with respect to the Equipment Notes, whether as originally issued or pursuant to any refinancing, modification or reissuance or any other obligation evidencing any new loan, or (v) otherwise with respect to or in connection with the transactions contemplated by the Operative Documents. (b) Exclusions. The following Taxes shall not be subject to indemnification under subsection (a) of this Section 10: (i) In the case of any Indemnitee, any Taxes imposed on, based on, or measured by, the gross or net income, receipts, capital, or net worth, franchises, excess profits or conduct of business of such Indemnitee (including minimum taxes, withholding taxes and taxes on or measured by any item of tax preference) imposed by the Federal government of the United States of America (other than Taxes included in the calculation of an after-tax payment, Covered Income Taxes described in subsection (c) of this Section 10, or Taxes in the nature of sales or use Taxes, license Taxes or property Taxes), (ii) In the case of any Indemnitee, Taxes imposed on, based on, or measured by the income, receipts, capital, or net worth, franchises, excess profits or conduct of business of such Indemnitee (including minimum taxes, withholding taxes and taxes on or measured by any items of tax preference), imposed by any state, local or foreign government or taxing authority (other than Taxes included in the calculation of an after-tax payment, Taxes in the nature of sales Taxes, use Taxes, license Taxes or property Taxes, and Covered Income Taxes described in subsection (c) of this Section 10), -57- 63 (iii) In the case of any Indemnitee, Taxes which are the direct result of gross negligence or willful misconduct of such Indemnitee, (iv) In the case of any Indemnitee, any Taxes imposed as a result of a voluntary or involuntary bankruptcy of such Indemnitee (other than, in the case of Owner Trustee, as a result of the occurrence of an Event of Default) or any sale, transfer of title, transfer or other disposition by such Indemnitee or a related Indemnitee (for such purpose, Owner Trustee, Owner Participant and the general partners of Owner Participant are related Indemnitees with respect to each other) of the Aircraft, the Airframe, any Engine or any Part thereof or interest therein, or any interest in the Rent or part thereof or any interest in the Operative Documents or part thereof, unless such sale, transfer or disposition occurs in connection with (y) an Event of Default and the exercise by any Indemnitee of its remedies under the Lease or the Indenture, as the case may be, and (z) the substitution, pooling or interchange of the Aircraft, the Airframe, any Engine or any Part pursuant to the terms of the Lease; provided, however, that in all cases Owner Participant and Owner Trustee shall consider in good faith such request as Lessee shall make concerning the appropriate jurisdiction in which such sale, transfer or disposition shall be made, (v) In the case of any Indemnitee, Taxes imposed as a result of a transferee of such Indemnitee of any interest in the Aircraft, the Airframe, any Engine or any Part or any interest in the Operative Documents being a foreign entity or not having its principal office in the United States other than a disposition attributable to the exercise of default remedies under the Lease, or in the case of a default caused by the acts or omissions of Lessee, any sublessee, assignee, or successor of Lessee or person in possession of the Aircraft, default remedies under the Indenture, (vi) Any interest, penalties, fines and additions to tax imposed on an Indemnitee (other than Taxes that are due and payable with a return when properly filed) resulting from such Indemnitee's failure to file returns that are timely and proper, provided such failure was not attributable to such Indemnitee contesting any claim in accordance with this Section 10 or to a failure by Lessee to satisfy its obligations related to such return, -58- 64 (vii) In the case of an Indemnitee other than the Indenture Trustee or the Trust Indenture Estate, Taxes which arise out of or are caused by (i) any breach of an obligation required by the Operative Documents or material misrepresentation of such Indemnitee, or (ii) a failure by such Indemnitee to fulfill its contest obligations, provided such failure adversely affects such Indemnitee's ability to contest, and, in the case of the Indenture Trustee or the Trust Indenture Estate, Taxes imposed as a result of a breach of such Indemnitee's representations, warranties or covenants contained in Section 9(a), 12, or 16 of the Refunding Agreement in any material respect, or from a failure by such Indemnitee to fulfill its contest obligations, (viii) So long as no Event of Default shall have occurred and be continuing, Taxes attributable to the Aircraft related to acts or events occurring after the later of the termination of the Lease and the redelivery of the Aircraft, (ix) In the case of each Pass-Through Trust, each Pass-Through Trustee (in its individual capacity and as trustee under the Pass-Through Trusts), the Subordination Agent and each Liquidity Provider, United States withholding taxes imposed as a result of the place of organization or other status of a holder of an interest in a Pass-Through Trust, (x) In the case of the Indenture Trustee, each Pass-Through Trust, each Pass-Through Trustee (in its individual capacity), the Subordination Agent and each Liquidity Provider, Taxes imposed with respect to the Equipment Notes as a result of activities of such Indemnitee unrelated to the transactions contemplated by the Operative Documents, and (xi) In the case of a general partner of the Owner Participant, any Taxes to the extent such Taxes when added to the Taxes of the same type imposed on Owner Participant and all other general partners and which are subject to indemnification, exceed the Taxes that would have been imposed on Owner Participant alone had Owner Participant been a U.S. corporation (it being understood that in the case of multiple general partners, the Taxes subject to this exclusion shall be apportioned pro-rata in accordance with each general partner's interest in the partnership. -59- 65 For purposes of the exclusions provided in this Section (b), references to "such Indemnitee" shall mean, in the case of Owner Participant, Owner Participant or any partner of Owner Participant, and in the case of each general partner of Owner Participant, Owner Participant or any other partner or partners of Owner Participant. Notwithstanding anything to the contrary contained in this Section 10 (other than Section 10(b)(xi)), the provisions of this Section 10(b) shall not apply to, and Lessee shall hold each Indemnitee harmless against, and indemnify each Indemnitee on an after-tax basis (as provided under Section 10(e)) for, any Taxes imposed by any Taxing Authority, with respect to any period beginning, or events or circumstances occurring, on or after the Restatement Date in connection with or relating to the transactions undertaken pursuant to the Foreign Financing documents (and any other documents or agreements relating thereto unless such documents or agreements are or relate solely to Operative Documents other than the Foreign Financing Documents) including, without limitation, Taxes based on or measured by gross or net income or receipts, sales Taxes, value-added Taxes and any Taxes required to be withheld and paid over to the United States Federal government pursuant to Subtitle A of the 1986 Code or any successor provisions with respect to any amounts paid or deemed to be paid to the Foreign Lessor by any Indemnitee pursuant to the Foreign Financing documents, but excluding any net income taxes payable to the United States Federal government or any state or local Taxing Authority as a consequence of a determination that the Lease is not a true lease for Federal income tax purposes by reason of the terms and conditions of the Operative Documents or the exercise of any rights specifically granted thereunder. (c) Covered Income Tax. For purposes of subsection (b)(i) and (b)(ii) of this Section 10, a Covered Income Tax means (i) in the case of any Indemnitee other than the Indenture Trustee or the Trust Indenture Estate, any Tax based on or measured by gross or net income, receipts, capital or net worth, franchises, excess profits or conduct of business (other than taxes which are in the nature of sales or use taxes, license taxes or property taxes) imposed on an Indemnitee by any state or local Taxing Authority in whose jurisdiction such Indemnitee did not otherwise have sufficient business activities or business presence to be subject to tax solely as a result of (x) the operation of the Aircraft in such jurisdiction or (y) the transactions contemplated by the Operative Documents, to the extent such taxes are directly attributable to such operation of the Aircraft or to such transactions. For purposes of determining whether or not the Indemnitee engaged in business, maintained an office or other place of -60- 66 business or was otherwise located in the jurisdiction of a Taxing Authority, Indemnitee shall be defined as including all entities with which such Indemnitee is combined, integrated or consolidated in such Taxing Authority's jurisdiction; (ii) in the case of any Indemnitee other than the Indenture Trustee or the Trust Indenture Estate, any Tax based on or measured by gross or net income, receipts, capital or net worth, franchises, excess profits or conduct of business (other than taxes which are in the nature of sales or use taxes, license taxes, or property taxes) imposed on such Indemnitee by any foreign jurisdiction (i) which are imposed as a result of Lessee's or sublessee's activities in such foreign jurisdiction in connection with the transactions contemplated by the Operative Documents or (ii) which are withholding taxes on Basic Rent to the extent such withholding taxes would otherwise result in Basic Rent payments being insufficient to cover principal and interest payments on the Equipment Notes; (iii) in the case of the Indenture Trustee or the Trust Indenture Estate any Tax based on or measured by gross or net income, receipts, capital or net worth, franchises, excess profits or conduct of business (including minimum taxes, withholding taxes, and taxes on or measured by any item of tax preference) imposed on such Indemnitee by a Taxing Authority in or of any foreign jurisdiction or a territory or possession of the United States, other than any such Tax which would not have been imposed in the absence of such Indemnitee's (including for purposes of this definition, all entities with which such Indemnitee is combined, integrated, or consolidated in such Taxing Authority's jurisdiction) engaging in business, maintaining an office or other place of business or otherwise being located in such jurisdiction other than merely by reason of such Indemnitee's participation in the transactions contemplated by the Operative Documents; and (iv) in the case of the Indenture Trustee or the Trust Indenture Estate, a tax imposed by any Taxing Authority other than the Federal government of the United States of America based on, or measured by gross income or receipts (including minimum taxes, withholding taxes, and taxes on or measured by any item of tax preference), to the extent such Tax is -61- 67 attributable to the operation or registration of the Aircraft in such jurisdiction or to the transactions contemplated by the Operative Documents or is the result of the activities of Lessee, sublessee, or any Affiliate of either thereof in such jurisdiction, including residence. (d) Reports and Returns. In case any report or return is required to be made by Lessee with respect to any Taxes which are subject to indemnification by Lessee under this Section 10, Lessee will either make such report or return in such manner as will show the ownership of the Aircraft in Owner Trustee or the interest of Owner Participant or its permitted assigns and send a copy of such report or return to Owner Trustee and Owner Participant or will notify Owner Trustee or Owner Participant of such requirement and make such report or return in such manner as shall be reasonably satisfactory to Owner Participant or Owner Trustee. If actual notice is given by any taxing authority to an Indemnitee that a report or return is required to be filed with respect to any such Taxes, the Indemnitee shall promptly notify Lessee of such required report or return and Lessee shall either file such report or return in the manner prescribed in the preceding sentence, or shall use its best efforts to cause such report or return to be filed by the appropriate entity. Each Indemnitee agrees to respond to any reasonable request of Lessee for information not within Lessee's control and within the control of and reasonably available to such Indemnitee with respect to the filing of any such report or return, but Lessee agrees to pay any reasonable costs, fees, disbursements or other charges of independent counsel or independent accountants incurred in connection with such request. (e) After-Tax Basis. Lessee further agrees that, with respect to any payment or indemnity under this Section 10 and under Section 13 hereof, such payment or indemnity shall include the net amount necessary to hold the recipient of the payment or indemnity harmless on an after-tax basis from all Taxes required to be paid or credited by such recipient with respect to such payment or indemnity under the laws of any Taxing Authority (as determined, in the case of the Owner Participant, on a hypothetical basis based on the assumption that Owner Participant is subject to the highest federal corporate income tax rate applicable in the year of payment and the State Rate (as defined below). For this purpose, "State Rate" shall mean the actual state and local tax rate imposed upon the Owner Participant, taking -62- 68 into account all available allocations, apportionments, credits and deductions, such information to be provided by the certification of a Responsible Officer of Owner Participant (the "Certification"). At the request of the Lessee and at the Lessee's expense, the accuracy of such information shall be verified by the firm of certified public accountants regularly employed by the Owner Participant, or any other national firm of independent certified public accountants selected by Owner Participant and reasonably acceptable to Lessee. The Certification as verified as described in the preceding sentence (if requested by Lessee) shall be conclusive and binding on all parties. In no event shall Owner Participant be required to make available or disclose any tax returns or related information to any parties other than the certified public accountants verifying the Certification. (f) Tax Benefit. If, by reason of any payment made to or for the account of an Indemnitee by Lessee pursuant to this Section 10 or Section 13 hereof, such Indemnitee subsequently actually realizes a tax deduction or credit (including foreign tax credit and any reduction in Taxes) not previously taken into account in computing the amount of such payment, such Indemnitee shall promptly pay to Lessee, but only if there shall then be no Event of Default and if Lessee shall have made all payments then due and owing to such Indemnitee under the Operative Documents, an amount equal to the sum of (A) the actual reduction in Taxes, if any, realized by such Indemnitee which is attributable to such deduction or credit and (B) the reduction calculated on the same basis as the Gross-Up in Taxes realized by such Indemnitee as a result of any payment made by such Indemnitee pursuant to this sentence; provided, however, that such Indemnitee shall not be obligated to make any payment pursuant to this Section 10 or Section 13 hereof to the extent that the amount calculated pursuant to (A) above would exceed (x) the amount of all prior payments by Lessee to such Indemnitee, pursuant to this Section 10 or Section 13 hereof, net of any amount paid in respect of Taxes required to be paid by such Indemnitee in respect of the receipt or accrual of such amounts received by such Indemnitee from Lessee, less (y) the portion of all prior payments computed pursuant to (A) above by such Indemnitee to Lessee hereunder. (g) Payment. If a claim is made against any Indemnitee for any Taxes which may be subject to indemnification by Lessee hereunder and if such Indemnitee has notice thereof, such Indemnitee shall promptly notify -63- 69 Lessee; provided that the failure to provide such notice shall not release Lessee from any of its obligations hereunder except to the extent Lessee's right to contest such claim is precluded thereby. Any amount payable as an indemnity to any Indemnitee or any amount payable to Lessee pursuant to this Section 10 is to be paid to such party directly, in immediately available funds, within thirty (30) days after receipt of a written demand therefor from such Indemnitee or Lessee, as the case may be, except in the case of a payment to an Indemnitee to the extent that such Taxes are being contested in good faith pursuant to this Section 10, in which event the payment of such indemnity shall be made by the due date for the payment of any Taxes that are the subject of such contest taking into account all extensions of the due date that are available as a result of the contest. In the event an Indemnitee makes a tax payment with respect to any such Taxes (other than with funds advanced to such Indemnitee on an interest-free basis by Lessee pursuant to this Section 10), Lessee shall reimburse the amount of such payment and also shall pay to the Indemnitee interest on the amount of such payment by such Indemnitee at the Interest Rate from the date of any such payment by such Indemnitee to the date of such reimbursement by Lessee to the Indemnitee hereunder. In the event an amount is payable to Lessee under this Section 10 or Section 13, the Indemnitee owing such amount shall pay interest on such amount at the Interest Rate from the date of receipt by such Indemnitee of any amount giving rise to such obligation to pay Lessee until the date of payment to Lessee. (h) Contest. In the event that an Indemnitee receives a written notice of a claim which, if sustained, would require the payment of an indemnity by Lessee pursuant to this Section 10, such Indemnitee shall promptly notify Lessee of such claim and, if requested by Lessee, shall in good faith contest or shall permit Lessee, if desired by Lessee and, in the case of a contest involving Owner Participant, permitted by Owner Participant, and such contest may be conducted in whole or in part separately in the name of Lessee without involving Taxes of such Indemnitee not indemnified hereunder, to contest in the name of Lessee and/or the Indemnitee, the validity, applicability or amount of such Taxes by (x) resisting payment thereof if practicable, (y) not paying the same except under protest, if protest is necessary and proper, and (z) if payments be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings; provided, however, that the Indemnitee shall not be required -64- 70 to undertake or allow in its name or on its behalf any contest unless the following conditions are satisfied: (i) no Event of Default has occurred and is continuing, (ii) a threshold amount of $75,000 for any individual claim and $150,000 for recurring claims is at issue, (iii) Lessee shall have (a) furnished Indemnitee with a written opinion of tax counsel selected by Indemnitee and reasonably acceptable to Lessee to the effect that a reasonable basis (as defined in ABA Opinion 85-352) exists for the initial administrative or judicial contest and that the Indemnitee is more likely than not to prevail in any appeal of a trial court decision, and (b) agreed to pay Indemnitee for all reasonable costs and expenses which Indemnitee may incur in contesting such claim, (iv) there is no substantial risk of forfeiture of the Aircraft, (v) if such contest is to be initiated by the payment of, and the claiming of a refund for, such Taxes, Lessee shall advance or cause to be advanced to such Indemnitee (if such Indemnitee is the Indenture Trustee or the Trust Indenture Estate) sufficient funds (on an interest-free basis) to make such payments and shall have agreed to indemnify such Indemnitee against any adverse tax consequences of such advance, (vi) no claim shall be appealed to the U.S. Supreme Court, and (vii) Lessee shall have admitted its liability to indemnify Owner Participant should a proposed adjustment prove to be correct, provided that such admission may be conditioned on a binding judicial or administrative adjudication of Lessee's responsibility to indemnify Owner Participant, and provided further that in no event will such adjudication cause Lessee to delay in fulfilling its contest obligations. (i) Refund. If any Indemnitee shall obtain a refund of all or any part of any Taxes paid by Lessee or from an advance by Lessee, such Indemnitee shall pay Lessee the amount of such refund together with any interest paid -65- 71 thereon attributable to the Taxes paid or advanced by Lessee less the amount of any Taxes payable by such Indemnitee in respect of the receipt of such refund and interest after giving credit to Lessee for any savings by such Indemnitee in respect to any such Taxes by reason of deductions, credits, allocations or allowances in respect of the payment of any such Taxes; provided that such amount shall not be payable before such time as Lessee shall have made all payments or indemnities then due to the Lessor and the Indemnitee under the Lease and all other Operative Documents, and provided further that no amount shall be payable during any period in which an Event of Default under the Lease has occurred and is continuing unremedied unless this Lease has terminated and Lessee has paid all amounts due the Lessor thereunder. (j) Diligence. Lessee shall not be deemed to be in default under any of the above indemnification provisions of this Section 10 so long as Lessee or the Indemnitee shall diligently prosecute such contest in accordance with the provisions of this Section 10. Notwithstanding the foregoing, if a claim is made against any Indemnitee for any Taxes which, if successful, would result in the imposition of Taxes under circumstances which would require Lessee to indemnify such Indemnitee, the Indemnitee shall be released from its responsibility to contest such claim, or part thereof, if it agrees in writing not to seek indemnification from Lessee in respect of the claim, or such part thereof to be contested. In the event an Indemnitee fails to contest, or refuses to permit Lessee to contest, a claim or part thereof which the Indemnitee has the obligation to contest or to permit Lessee to contest under this Section 10, then Lessee shall not be obligated to indemnify the Indemnitee for such claim or such part thereof. (k) Affiliated Group. In the event that the Indemnitee is a member of an affiliated group (within the meaning of Section 1504(a) of the Code) which files a consolidated Federal income tax return, the term "Indemnitee" shall mean and include such affiliated group. (l) Survival. The provisions of this Section 10 shall survive the expiration or termination of any of the Operative Documents. Section 11. Loss, Damage and Requisition. (a) Event of Loss with Respect to the Airframe. Subject to the other provisions of this Section 11, upon an -66- 72 Event of Loss with respect to the Airframe or the Airframe and any Engines then installed thereon, Lessee shall forthwith (and, in any event, within five (5) Business Days after such occurrence) give Lessor written notice of such occurrence and within thirty (30) days after such occurrence give Lessor written notice of its election, subject to the terms hereof and of the Indenture, to perform one of the following two options (it being agreed that if Lessee shall not have given Lessor notice of such election within thirty (30) days after such occurrence, Lessee shall be deemed to have elected to perform the option set forth in the following clause (ii)), provided, that Lessee shall not have the right to select the option set forth in clause (i) if a Default or an Event of Default shall have occurred and be continuing at the time of such election or at the time of replacement or if the Foreign Lease Agreement does not permit such replacement or requires the payment of additional amounts thereunder (unless Lessee in its election pays such amounts due as a result thereof under the Foreign Lease Agreement): (i) Within one hundred twenty (120) days (the "Replacement Period") after the date of the Event of Loss (but in no event later than the last day of the Term) Lessee shall convey, or cause to be conveyed to Lessor as provided in Section 11(c) hereof, to be subjected to the Lien of the Indenture if it has not been discharged, and to be leased by Lessee hereunder in replacement of the Airframe and such Engines then installed thereon, title to (or, so long as the Foreign Lease Agreement is in effect, beneficial ownership of) a replacement Airframe (together with the same number of replacement Engines as the Engines), such replacement Airframe and Engines (A) to be free and clear of all Liens (it being understood that, upon such conveyance, such replacement Airframe and replacement Engines may be subject to Permitted Liens), (B) to have a value, utility and remaining useful life, determined in accordance with the Appraisal Procedure as provided in Section 11(c) hereof, at least equal to, and to be in at least as good operating condition as, the Airframe and the Engines, if any, so replaced (assuming the Airframe and the Engines were maintained in accordance with the requirements of this Agreement, whether or not they are in fact so maintained), and (C) to be a like Airbus A320-231 model aircraft with equivalent or better modification status delivered by the Manufacturer not earlier than June 30, 1988 and, in the case of Engines, in compliance with Section 11(b); provided that if Lessee shall not perform its obligation to effect such replacement under this clause by the end of the Replacement -67- 73 Period, Lessee shall then be deemed to have elected to comply, and shall comply, with the provisions of clause (ii) of this Section 11(a); provided, further, that the payment specified therein shall be deemed to have become due and payable on the Stipulated Loss Value Date occurring on or immediately preceding the last day of the Replacement Period. Upon compliance with the foregoing, Lessor will, subject to the rights of any insurers, transfer to Lessee, "AS IS, WHERE IS," without recourse, representation or warranty (except a warranty that such Airframe and Engines are free and clear of Lessor's Liens, Head Lessor's Liens and any Lien arising out of the Foreign Lease Agreement), all of Lessor's right, title and interest, if any, in and to the Airframe and the Engines suffering the Event of Loss as well as all of Lessor's right, title and interest in and to any Engine constituting part of the Aircraft and replaced as provided above but not installed thereon at the time of the Event of Loss. For all purposes hereof, a replacement Airframe shall be deemed part of the property leased hereunder and shall be deemed the "Airframe" as defined herein. No Event of Loss resulting in replacement of the Airframe or Engines under this Section 11(a)(i) shall result in any reduction of Rent. (ii) On a Stipulated Loss Value Date on or before one hundred twenty (120) days after the date of the Event of Loss (or, if earlier, with respect to insurance proceeds, on the date on which insurance proceeds with respect to the Event of Loss are received by the loss payee) Lessee shall pay to Lessor in immediately available funds the sum of (A) the Stipulated Loss Value of the Aircraft as shown on Exhibit A for such Stipulated Loss Value Date, plus all Basic Rent or Renewal Rent, as the case may be, payable on each Basic Rent Payment Date or Renewal Rent Payment Date, respectively, prior to the date of payment of such Stipulated Loss Value which has not been paid when due, [plus, if such Stipulated Loss Value Date is also a Basic Rent Payment Date or a Renewal Rent Payment Date, the amount of Basic Rent or Renewal Rent, as the case may be, payable by Lessee on such Stipulated Loss Value Date, or, if such Stipulated Loss Value Date occurs after the last day of the Term,] plus an amount equal to the average daily Basic Rent or Renewal Rent, as the case may be, in effect on the last day of the Term, for each day from and including the last day of the Term to and excluding such Stipulated Loss Value Date, and (B) all Supplemental Rent payable, whereupon (1) the obligation of Lessee to pay Basic Rent or Renewal Rent, as the case may be, hereunder with respect to the Aircraft for any period commencing after the date on which such -68- 74 Stipulated Loss Value is paid shall terminate; provided that Lessee shall remain liable for, and shall pay on or before the date the Stipulated Loss Value and Supplemental Rent are paid, all payments of Basic Rent or Renewal Rent, as the case may be, for the Aircraft due on or before the date of such payment of Stipulated Loss Value and Supplemental Rent, (2) the Term shall terminate with respect to such Aircraft, and (3) Lessor will, subject to the rights of any insurers, transfer to Lessee, "AS IS, WHERE IS," without recourse, representation or warranty (except a warranty that such Airframe and Engines are free and clear of Lessor's Liens and Liens arising out of the Foreign Lease Agreement), all of Lessor's right, title and interest, if any, in and to the Airframe and Engines suffering the Event of Loss, as well as all of Lessor's right, title and interest, if any, in and to any Engine constituting part of the Aircraft but not installed thereon at the time of the Event of Loss. (b) Event of Loss with Respect to an Engine. Upon an Event of Loss with respect to an Engine only, Lessee shall give Lessor prompt written notice thereof and shall, at its own cost and expense, within sixty (60) days after such occurrence pay all amounts due under the Foreign Lease Agreement as a result thereof and convey or cause to be conveyed to Lessor as replacement for the Engine suffering an Event of Loss, title to (or, so long as the Foreign Lease Agreement is in effect, beneficial ownership of) another IAE Model V2500 engine of like model and equivalent or better modification status or, at Lessee's option, an IAE engine of an improved model, in each such case which has a value, remaining useful life and utility determined in accordance with the Appraisal Procedure at least equal to such Engine and is suitable for installation and use on the Airframe without diminishing the value, remaining useful life or utility of such Airframe, free of all Liens (it being understood that, upon such conveyance, such replacement Engine may be subject to Permitted Liens) and being in as good operating condition as (including no greater number of cycles or hours than) the Engine being replaced assuming the Engine being replaced was serviceable and otherwise in the condition and repair required by the terms hereof immediately prior to the Event of Loss. Prior to or at the time of any such conveyance, Lessee, at its own cost and expense, will (i) furnish Lessor (or, so long as the Foreign Lease Agreement is in effect, Foreign Lessor) with a full warranty bill of sale, in form and substance reasonably satisfactory to Owner Participant and Indenture Trustee, as applicable, with respect to such replacement Engine; (ii) cause supplements, in form and substance reasonably satisfactory -69- 75 to Owner Participant and Indenture Trustee (if the Lien of the Indenture has not been discharged), subjecting such replacement Engine to this Lease, the Indenture (if then in effect), the Foreign Lease Agreement (if then in effect) and the Trust Agreement (if in effect), to be duly executed by Lessee, if applicable, and duly filed for recordation pursuant to the Federal Aviation Act; (iii) furnish Lessor and Indenture Trustee (if the Lien of the Indenture has not been discharged) with such evidence of title to such Replacement Engine and of compliance with the insurance provisions of Section 12 hereof with respect to such Replacement Engine as Owner Participant or Indenture Trustee (if the Lien of the Indenture has not been discharged) may reasonably request; (iv) furnish Owner Participant and Indenture Trustee (if the Lien of the Indenture has not been discharged) with an opinion of Lessee's counsel addressed to such parties and to Lessor to the effect that title to (or, so long as the Foreign Lease Agreement is in effect, beneficial ownership of) such Replacement Engine has been duly conveyed to Lessor free and clear of all Liens (except Permitted Liens), the replacement of the Engine suffering the Event of loss with the Replacement Engine is in accordance with the provisions of this Agreement and Foreign Lease Agreement (if then in effect), and the Replacement Engine is subject to the Lien of the Indenture (if it has not been discharged), the instruments subjecting such Replacement Engine to the Lien of the Indenture and the Lease, and subjecting to any relevant Assigned Sublease and Sublease Agreement, as the case may be, have been duly filed for recordation pursuant to the Federal Aviation 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 in order to establish and perfect, in the United States and, if the Aircraft is registered outside the United States, in the jurisdiction of registration, the legal title to such Replacement Engine and the Lien of the Indenture on such Replacement Engine; (v) furnish a certificate signed by a Responsible Officer of Lessee certifying that, upon consummation of such replacement, no Default or Event of Default will exist hereunder; (vi) furnish such documents and evidence with respect to Lessee, Owner Participant or Indenture Trustee (if the Lien of the Indenture has not been discharged), as such parties or their respective counsel may reasonably request in order to establish the consummation of the transactions contemplated by this Section 11(b), the taking of all corporate proceedings in connection therewith and compliance with the conditions set forth in this Section 11(b), in each case in form and substance satisfactory to such party; (vii) furnish such Uniform Commercial Code financing statements covering the Replacement Engine as may be requested by Lessor or Indenture Trustee (if the Lien of -70- 76 the Indentures has not been discharged); (viii) furnish Owner Participant with an opinion of tax counsel mutually satisfactory to Owner Participant and Lessee and which opinion is reasonably satisfactory to Owner Participant to the effect that such replacement will have no adverse tax consequences to Lessor and Owner Participant; (ix) furnish the appraisal referred to above; and (x) furnish Owner Trustee and Indenture Trustee with the opinion of counsel to Lessee specified in Section 5.06(a)(5)(i) of the Indenture. Upon full compliance by Lessee with the terms of this Section 11(b), Lessor will, subject to the rights of any insurers, transfer to Lessee, "AS IS, WHERE IS" without recourse, representation or warranty (except a warranty that such Engine is free and clear of Lessor's Liens, Head Lessor's Liens and any Lien arising out of the Foreign Lease Documents), all of Lessor's right, title and interest, if any, in the Engine which suffered the Event of Loss. For all purposes hereof, each such Replacement Engine shall be deemed an "Engine" as defined herein and shall be deemed part of the same Aircraft as was the Engine replaced thereof. No Event of Loss covered by this Section 11(b) shall result in any reduction in Rent. (c) Conveyance of Replacement Airframe. Prior to or at the time of any conveyance of a replacement Airframe pursuant to Section 11(a) above, Lessee, at its own cost and expense, will furnish Lessor with the following documents which shall have been duly authorized, executed and delivered by the respective parties thereto and shall be in full force and effect on said date: (i) a full warranty bill of sale, in form and substance satisfactory to Owner Participant and Indenture Trustee (if the Lien of the Indenture has not been discharged), and an AC Form 8050-2 Bill of Sale (or such other form of bill of sale as may be approved by the FAA on said date), executed by the owner thereof, in favor of Lessor or, so long as the Foreign Lease Agreement is in effect, the Foreign Lessor, and cause supplements, reasonably satisfactory to Owner Participant and Indenture Trustee (if the Lien of the Indenture has not been discharged), to this Lease, the Foreign Lease Agreement (if then in effect), the Indenture (if then in effect) and the Trust Agreement (if then in effect), with respect to such replacement Airframe and to be duly filed for recordation pursuant to the Federal Aviation Act or other applicable Governmental Entity; (ii) the certificate specified in Section 12(f) hereof demonstrating compliance with the insurance requirements of Section 12 with respect to the replacement Airframe and Engines; (iii) an opinion (addressed to Indenture Trustee, Lessor, and Owner -71- 77 Participant) of Lessee's counsel (and such other evidence of title as Owner Participant or Indenture Trustee (if the Lien of the Indenture has not been discharged) may reasonably request) to the effect that, upon such conveyance, Lessor will acquire good title to (or, so long as the Foreign Lease Agreement is in effect, beneficial ownership of) such replacement Airframe free and clear of all Liens (it being understood that, upon such conveyance, such replacement Airframe may be subject to Permitted Liens), that such replacement Airframe will be leased hereunder and under the Foreign Lease Agreement (if then in effect) to the same extent as the Airframe replaced thereby and will be subject to the Lien of the Indenture (if it has not been discharged), the instruments subjecting such Replacement Airframe and Replacement Engine to the Lien of the Indenture and the Lease, and subjecting to any relevant Assigned Sublease and Sublease Assignment, as the case may be, have been duly filed for recordation pursuant to the Federal Aviation 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 in order to establish and perfect, in the United States and, if the Aircraft is registered outside the United States, in the jurisdiction of registration, the legal title to such Replacement Airframe and Replacement Engine and the Lien of the Indenture on such Replacement Airframe and Replacement Engine, and that Lessor, and Indenture Trustee as assignee of Lessor, is entitled to the benefits of Section 1110 of Title 11 of the United States Code with respect to such replacement airframe and engines to the same extent as with respect to the Airframe and Engines then installed thereon prior to such replacement; (iv) a certificate signed by a Responsible Officer of Lessee certifying that, upon consummation of such replacement, no Default or Event of Default will exist hereunder; (v) such documents and evidence with respect to Lessee, Owner Participant or Indenture Trustee (if the Lien of the Indenture has not been discharged), as such parties or their respective counsel may reasonably request in order to establish the consummation of the transactions contemplated by this Section 11(c), the taking of all corporate proceedings in connection therewith and compliance with the conditions set forth in this Section 11(c), in each case in form and substance satisfactory to each such party, including evidence that the Aircraft of which the replacement Airframe is a part has been duly certificated by the FAA as to type and airworthiness in accordance with the terms of this Lease and application for registration of such replacement Airframe in the name of Lessor has been duly made with the FAA or other applicable -72- 78 Governmental Entity and Lessee has temporary or permanent authority to operate the replacement Airframe; (vi) furnish such Uniform Commercial Code financing statements covering the replacement Airframe as may be reasonably requested by Lessor or Indenture Trustee; (vii) furnish Owner Participant with an opinion of tax counsel mutually satisfactory to Owner Participant and Lessee and which opinion is reasonably satisfactory to Owner Participant to the effect that such replacement will have no adverse tax consequences to Lessor and Owner Participant; (viii) an appraisal prepared in accordance with the Appraisal Procedure which confirms that the replacement Airframe and any replacement Engine has a value, utility and remaining useful life at least equal to that of the Airframe and Engines which suffered the Event of Loss assuming that the same were maintained in accordance with the requirements of this Lease whether or not they are in fact so maintained; and (ix) furnish Owner Trustee and Indenture Trustee with the opinion of counsel to Lessee specified in Section 5.06(a)(5)(i) of the Indenture. Upon full compliance by Lessee with the terms of this Section 11(c), Lessor will, subject to the rights of any insurers, transfer to Lessee "AS IS, WHERE IS," without recourse, representation or warranty (except a warranty that such Airframe is free and clear of Lessor's Liens, Head Lessor's liens, and liens arising out of the Foreign Lease Documents), all of Lessor's right, title and interest in and to the Aircraft which suffered the Event of Loss. No Event of Loss with respect to the Aircraft under the circumstances contemplated by the terms of this Section 11(c) shall result in any reduction in Rent. For all purposes of this Lease, each such replacement Aircraft (together with any Engines constituting part of the Aircraft being replaced as to which an Event of Loss has not occurred) shall be deemed part of the property leased hereunder and shall be deemed the "Aircraft" as defined herein. (d) Application of Proceeds and Payments. Any payments received at any time by Lessor or by Lessee from any insurer (including a Governmental Entity providing an indemnity in lieu thereof) with respect to an Event of Loss shall be applied in the manner specified in Sections 12(c) and (e) hereof. Subject to Section 11(f) below, any payments (other than insurance or such indemnity proceeds) received at any time by Lessor or Lessee from any Governmental Entity or other Person with respect to an Event of Loss will be applied as follows (after reimbursement of Lessor, Indenture Trustee and Owner Participant for their reasonable out-of-pocket costs and expenses): -73- 79 (i) unless clause (ii) below is applicable, so much of such payments as shall not exceed the Stipulated Loss Value and other payments required to be paid by Lessee pursuant to Section 11(a)(ii) of this Lease shall be paid to Lessor in reduction of Lessee's obligation to pay such Stipulated Loss Value and other payments, if not already paid by Lessee, or, if already paid by Lessee, shall (unless a Default or an Event of Default shall have occurred and be continuing) be applied by Lessor to reimburse Lessee for its payment of such Stipulated Loss Value and other payments and the balance, if any, of such payment remaining thereafter shall be paid over to, or retained by, Lessor; or (ii) if such payments are received as a result of an Event of Loss with respect to the Airframe or an Engine which is being replaced pursuant to Section 11(a)(i) or Section 11(b) hereof, all such payments shall be paid over to, or retained by, Lessee if Lessee shall have fully performed or, concurrently therewith fully performs, the terms of Sections 11(a)(i) and (c) or Section 11(b) hereof, as the case may be, and of Section 15 hereof with respect to the Event of Loss for which such payments are made and if no Default or Event of Default shall have occurred and be continuing. (e) Requisition for Use by Government with Respect to the Aircraft. Subject to Section 11(f) below, in the event of the requisition for use by a Governmental Entity of the Aircraft, the Airframe or an Engine (other than a requisition constituting an Event of Loss), Lessee shall promptly notify Lessor and Indenture Trustee (if the Lien of the Indenture has not been discharged) thereof and all of Lessee's obligations under this Lease with respect to such Airframe or Engine shall continue to the same extent as if such requisition had not occurred. All payments received by Lessor or Lessee from the Governmental Entity for the use of such Airframe or Engine during the Term shall be paid over to, or retained by, Lessee if no Default or Event of Default shall have occurred and be continuing; and all other payments received by Lessor or Lessee from the Governmental Entity shall be paid over to, or retained by, Lessor. If the Airframe and such Engines or engines are not returned by the end of the Term, an Event of Loss shall be deemed to have occurred on the last day of the Term and, on the last day of the Term, Lessee shall either pay to Lessor the amount provided herein for an Event of Loss to the Airframe and such Engines or engines on such date or provide a replacement Aircraft and Engine on such date in the condition provided for in Section 16 and Exhibit E. In the -74- 80 event of the requisition for use by the Governmental Entity of any Engine without the requisition for use of the Airframe, Lessee will replace such Engine hereunder by complying with the terms of Section 11(b) to the same extent as if an Event of Loss had occurred with respect to such Engine, and thereafter any payments received by Lessor or Lessee from the Governmental Entity with respect to such requisition shall be paid over to, or retained by, Lessee. (f) Application in Default. Any amount referred to in clause (i) or (ii) of Section 11(d) or Section 11(e) which is otherwise payable to Lessee shall not be paid to Lessee, or, if it has been previously paid to or retained by Lessee, shall be paid by Lessee to Lessor, if at the time of such payment or retention a Default or an Event of Default shall have occurred and be continuing. In such case, all such amounts shall be paid to and held by Indenture Trustee so long as the Lien of the Indenture shall not have been discharged and thereafter by Lessor as security for the obligations of Lessee, or, at the option of Lessor or the Indenture Trustee, as the case may be, applied by Lessor or the Indenture Trustee, as the case may be, toward payment of any of Lessee's obligations at the time due hereunder, as Lessor or the Indenture Trustee, as the case may be, may elect, including, without limitation, by reason of this Lease being declared or deemed in default. At such time as there shall not be continuing any such Event of Default or Default, all such amounts at the time held by Lessor or Indenture Trustee in excess of the amount, if any, which Lessor or Indenture Trustee has elected for application as provided above, shall be paid to Lessee. Section 12. Insurance. (a) Public Liability and Property Damage Insurance. Lessee will carry and maintain in effect, or cause to be carried and maintained in effect, at its own cost and expense, with Approved Insurers, comprehensive aircraft and general public liability insurance (including, without limitation, contractual liability, liability war risk and passenger legal liability products, completed operation liability covering maintenance of aircraft, but excluding manufacturer's product liability insurance), and property damage insurance with respect to the Aircraft, in an amount not less than three hundred fifty million dollars ($350,000,000), combined single limit, per occurrence or such higher amount, and of such type and terms, as are customarily carried by prudent Certificated Air Carriers, similarly situated to Lessee, operating aircraft of similar -75- 81 size and engines and as hereinafter provided. Each and any policy of insurance carried in accordance with this Section 12(a), and each and any policy obtained in substitution or replacement for any of such policies, (i) shall designate Lessor (in both its individual and trustee capacity), Owner Participant, the general partners of Owner Participant, Indenture Trustee (in both its individual and trustee capacity), Foreign Lessor, Foreign Lessee, Foreign Lender and the other Indemnitees and their respective permitted assigns, as additional insureds as their interests may appear (but without imposing upon any such Person any obligation imposed upon the insured, including, without limitation, the liability to pay any premiums for any such policies), (ii) shall expressly provide that, in respect of the interests of Lessor, Owner Participant, the general partners of Owner Participant, Indenture Trustee, Foreign Lessor, Foreign Lessee, Foreign Lender and the other Indemnitees and their respective permitted assigns, in such policies, the insurance shall not be invalidated as to an insured or additional insured by any act or omission of Lessee or any other insured or additional insured and shall insure Lessor, Owner Participant, the general partners of Owner Participant, Indenture Trustee, Foreign Lessor, Foreign Lessee, Foreign Lender and the other Indemnitees and their respective permitted assigns, regardless as to any insured or additional insured of any breach or violation by Lessee or any other insured or additional insured of any warranty, declaration or condition contained in such policies, (iii) shall provide that if such insurance is cancelled for any reason whatsoever, or is changed in any adverse way with respect to the interests of Lessor, Owner Participant, the general partners of Owner Participant, Indenture Trustee, Foreign Lessor, Foreign Lessee, Foreign Lender and the other Indemnitees or if such insurance is allowed to lapse for non-payment of premium, such cancellation, change or lapse shall not be effective as to Lessor, Owner Participant, the general partners of Owner Participant, Indenture Trustee, Foreign Lessor, Foreign Lessee, Foreign Lender and the other Indemnitees, and their respective permitted assigns, until thirty (30) days, in each instance (seven (7) days or such lesser period of time as is the insurance industry standard for war/allied perils coverage), after notice to Lessor, Owner Participant, the general partners of Owner Participant, Foreign Lessor, Foreign Lessee, Foreign Lender and Indenture Trustee from such insurer or insurers, of such prospective cancellation, change or lapse, (iv) shall include coverage for any country in or over which the Aircraft is located or operated, and (v) shall provide that, as against Lessor, Owner -76- 82 Participant, the general partners of Owner Participant, Indenture Trustee, Foreign Lessor, Foreign Lessee, Foreign Lender and the other Indemnitees, and their respective permitted assigns, each insurer shall waive any rights of set-off, counterclaim or any other deduction, whether by attachment or otherwise, and waives any rights it may have to be subrogated to any right of any insured against Lessor, Owner Participant, the general partners of Owner Participant, Indenture Trustee, Foreign Lessor, Foreign Lessee, Foreign Lender or the other Indemnitees, or their respective permitted assigns, with respect to the Aircraft. Each liability policy shall be primary without right of contribution from any other insurance which may be carried by Lessor, Owner Participant, the general partners of Owner Participant, Indenture Trustee, Foreign Lessor, Foreign Lessee, Foreign Lender or the other Indemnitees, or their respective permitted assigns, and 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. Lessee shall cause its insurers to agree that the indemnity and hold harmless provisions of Section 13 are insured as a contractual assumption of liability by Lessee's insurers, subject to the terms, coverage, conditions, limitations and exclusions of the policy of insurance. Without limiting the foregoing, the type and amount of the insurance carried by Lessee hereunder shall be no less in amount and no less comprehensive or favorable to Lessor, Owner Participant, the general partners of Owner Participant, Indenture Trustee, Foreign Lessor, Foreign Lessee, Foreign Lender and the other Indemnitees than that carried by Lessee with respect to other A320-231 aircraft or similar-size aircraft owned or leased by Lessee. (b) Insurance Against Loss or Damage. Lessee, at its own expense, will maintain in effect, or cause to be carried and maintained in effect, with Approved Insurers "all-risk" ground and flight aircraft hull insurance (which shall include, but not be limited to, hijacking, a disappearance clause and coverage against strikes, riots, commotions or labor disturbances, air piracy, malicious acts or acts of sabotage and unlawful seizure or wrongful exercise of control of the Aircraft in flight by a person on board such Aircraft acting without the consent of Lessee) covering the Aircraft, and "all-risk" coverage including transit insurance with respect to Engines and Parts while not installed on such Aircraft or an aircraft, which in each case considering all policy terms, limitations and -77- 83 exclusions is of the type, terms and amount customarily maintained by prudent Certificated Air Carriers similarly situated to Lessee and operating similar size aircraft and engines and as hereinafter provided. Lessee shall also maintain, or cause to be maintained, war risk and allied perils hull insurance reasonably acceptable to Lessor with Approved Insurers. In addition, at least ten (10) Business Days (or, in the case of an emergency, at least two (2) Business Days) prior to permitting the Aircraft, Airframe or Engines to be operated or located outside of the United States of America, other than in Canada or Mexico, Lessee shall notify Lessor thereof. If Owner Participant or Indenture Trustee reasonably requests at any time and if such insurance is then customarily being obtained by or for Persons leasing or financing similarly-sized aircraft operating on similar routes to operators located in the jurisdiction of Lessee's or, if a Permitted Sublease is in effect, the Permitted Sublessee's jurisdiction of domicile, Lessee shall pay or reimburse Lessor for political risk, repossession, expropriation, confiscation and similar insurance as Lessor may arrange or cause to be arranged; provided that Indenture Trustee shall not be obligated to request such insurance and shall not be liable for any failure to request such insurance. Anything herein to the contrary notwithstanding, at all times while the Aircraft is subject to this Lease, the insurance required by this Section 12(b) shall be for an amount on an "agreed value" basis not less than the Stipulated Loss Value from time to time determined for the Aircraft. Without limiting the foregoing, the type and amount of insurance carried by Lessee hereunder shall be no less comprehensive or favorable to Lessor, Owner Participant, Indenture Trustee and the other Indemnitees than that carried by Lessee with respect to similar-size aircraft owned or leased by Lessee. Each and any policy of insurance obtained and maintained pursuant to this Section 12(b), and each and any policy obtained in substitution or replacement for any such policies, (i) shall designate Lessor as owner of the Aircraft, shall designate, so long as the Lien of the Indenture has not been discharged, Indenture Trustee and, thereafter, Lessor, as sole loss payee, as provided below and shall designate Lessor, Owner Participant, Indenture Trustee (in both its individual capacity and its trustee capacity) and the other Indemnitees and their respective permitted assigns as additional insureds, as their respective interests may appear (but without imposing upon Lessor, Owner Participant, Indenture Trustee and the other Indemnitees and their respective permitted assigns, any -78- 84 obligation imposed upon the insured, including, without limitation, the liability to pay any premiums for any such policies), (ii) shall expressly provide that, in respect of the interests of such an additional insured and its permitted assigns, in such policies, the insurance shall not be invalidated as to an insured by any act or omission of Lessee or any other additional insured, and shall insure each such additional insured and its permitted assigns, regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or another additional insured, (iii) shall provide that if such insurance is cancelled for any reason whatsoever, or is changed in any adverse way with respect to the interests of Lessor, Owner Participant, Indenture Trustee and to the other Indemnitees and their respective permitted assigns, or if such insurance is allowed to lapse, such cancellation, change or lapse shall not be effective as to Lessor, Owner Participant, Indenture Trustee, the other Indemnitees or their respective permitted assigns, until thirty (30) days (seven (7) days or such lesser period of time as is the insurance industry standard for war/allied perils coverage) after written notice to Lessor, Owner Participant and Indenture Trustee from such insurer or insurers, as the case may be, of such prospective cancellation, change or lapse, (iv) shall include coverage for any country in or over which the Aircraft may at any time be located or operated, (v) shall provide that, as against Lessor, Owner Participant, Indenture Trustee, Foreign Lessor, the other Indemnitees and their respective permitted assigns, each insurer shall waive any rights of set-off, counterclaim or any other deduction, whether by attachment or otherwise, and waives any rights it may have to be subrogated to any right of any insured against Lessor, Owner Participant, Indenture Trustee, Foreign Lessor, and the other Indemnitees and their respective permitted assigns, with respect to the Aircraft, (vi) shall provide that in the event of any damage or loss which is an Event of Loss hereunder and which results in a payment, such payment shall be payable directly to Indenture Trustee as sole loss payee, so long as the Lien of the Indenture shall not have been discharged and thereafter to Lessor, as sole loss payee, and (vii) shall provide that in the event of any damage or loss which is not an Event of Loss hereunder and which results in a payment, such payment shall be payable directly to Indenture Trustee, as sole loss payee for the account of all interests, so long as the Lien of the Indenture shall not have been discharged and thereafter to Lessor, as sole loss payee for the account of all interests. The insurance required under this Section 12(b) may -79- 85 incorporate deductible amounts which shall not exceed one million dollars ($1,000,000). Each of Lessor, Owner Participant, the general partners of Owner Participant and Foreign Lessor shall have the right to carry additional and separate excess or contingent insurance for its own benefit at its own expense, without, however, thereby limiting Lessee's obligations under this Section 12, and Lessee shall not carry any such insurance if it would conflict with or adversely affect other insurance carried by Lessor, Foreign Lessor, Owner Participant or the general partners of Owner Participant with respect to the Aircraft. Lessee shall have the right to carry insurance in excess of the amounts required hereunder and the proceeds of such excess insurance shall be payable to Lessee, provided, however, that such insurance does not conflict with or adversely affect the insurance required hereunder or any excess or contingent insurance carried by Lessor, Foreign Lessor, Owner Participant or the general partners of Owner Participant. Lessee shall give Lessor reasonable prior written notice of any insurance to be carried by Lessee in addition to that required to be carried by Lessee as provided herein. In the event that separate policies are maintained to cover "all-risk" ground and flight aircraft, hull and war risks and allied perils insurance, Lessee shall include a 50/50 provisional claims settlement clause as contained in the policies of insurance maintained by Lessee with respect to all other aircraft in Lessee's fleet, and a copy of the 50/50 provisional claims settlement clause in effect on the Restatement Date shall be attached to the insurance certificate issued on the Restatement Date. (c) Application of Insurance Proceeds for an Event of Loss. It is agreed that insurance payments which arise from insurance required to be carried by Lessee pursuant to this Section 12 and received as the result of the occurrence of an Event of Loss shall be applied as follows (after reimbursement of Lessor, Owner Participant, Indenture Trustee and Foreign Lessor for their reasonable out-of-pocket costs and expenses): (i) unless clause (ii) below is applicable, so much of such payments as shall not exceed the Stipulated Loss Value and other payments required to be paid by Lessee pursuant to Section 11(a)(ii) of this Lease shall be paid to Indenture Trustee so long as the Lien of the Indenture has not been discharged and thereafter to Lessor in reduction of -80- 86 Lessee's obligation to pay such Stipulated Loss Value and any other payments if not already paid by Lessee, or, if already paid by Lessee, shall (unless a Default or an Event of Default shall have occurred and be continuing) be applied by Indenture Trustee or Lessor, as the case may be, to reimburse Lessee for its payment of such Stipulated Loss Value and other payments and the balance, if any, of such payment remaining thereafter shall be paid over to, or retained by, Lessor; or (ii) if such payments are received as a result of an Event of Loss with respect to the Airframe or an Engine which is being replaced pursuant to Section 11(a)(i) or Section 11(b) hereof, all such payments shall be paid over by the Indenture Trustee or Lessor, as the case may be, to, or retained by, Lessee if Lessee shall have fully performed or, concurrently therewith fully performs, the terms of Section 11(a)(i) and (c) or Section 11(b) hereof, as the case may be, and of Section 15 hereof with respect to the Event of Loss for which such payments are made and if no Default or Event of Default shall have occurred and be continuing. (d) Application of Insurance Proceeds for Other than an Event of Loss. The insurance payments of any property damage loss to the Airframe or any Engine not constituting an Event of Loss with respect thereto will be applied in payment for the actual costs of repairs or for replacement property which Lessee has incurred in accordance with the terms of Section 9, 11 or 12(c) of this Lease against such documentation evidencing payment by Lessee as Lessor may reasonably request to reimburse Lessee for such repairs or replacements already paid for by Lessee, and any balance remaining after compliance with such Sections with respect to such loss shall be paid to Lessor. Lessee shall be entitled to receive from the insurer any insurance proceeds not in excess of five hundred thousand dollars ($500,000) as soon as such funds are paid and shall promptly receive such additional insurance proceeds from the loss payee upon invoices for repair work in progress, replacement parts which are ordered or for work completed as provided above in this Section 12(d). Any amount referred to in this Section 12(d) which is payable to Lessee shall not be paid to Lessee if at the time of such payment any Default or Event of Default shall have occurred and be continuing, but shall be held by Lessor as security for the obligations of Lessee under this Lease or applied as provided in Section 12(e). -81- 87 (e) Application in Default. Any amount referred to in clause (ii) of Section 12(c) or Section 12(d) which is otherwise payable to Lessee shall not be paid to Lessee, or if it has been previously paid to or retained by Lessee, shall be paid by Lessee to Indenture Trustee, so long as the Lien of the Indenture shall not have been discharged, and thereafter to Lessor, if at the time of such payment or retention a Default or an Event of Default shall have occurred and be continuing. In such case, all such amounts shall be paid to and held by Indenture Trustee, so long as the Lien of the Indenture shall not have been discharged, and thereafter held by Lessor as security for the obligations of Lessee, or, at the option of Indenture Trustee or Lessor, applied by Indenture Trustee or Lessor toward payment of any of Lessee's obligations at the time due hereunder, including, without limitation, by reason of this Lease being declared or deemed declared in default, as Indenture Trustee or Lessor may elect. At such time as there shall not be continuing any such Event of Default or Default, all such amounts at the time held by Indenture Trustee or Lessor in excess of the amount, if any, which Indenture Trustee or Lessor has elected for application as provided above, shall be paid to Lessee. (f) Certificates. On or before the Delivery Date, and thereafter on any renewal by the Lessee of the insurance required hereby (but in no event less than once in every twelve (12) month period), Lessee will furnish to Lessor and Indenture Trustee a certificate executed and delivered by an Approved Insurer or the Approved Broker, describing in reasonable detail, and in accordance with customary practice, insurance carried on the Aircraft and Lessee shall also furnish an opinion or report by the Approved Insurer or the Approved Broker certifying that the insurance then maintained on the Aircraft complies with the terms of this Lease. Lessee will cause the Approved Broker to agree to advise Lessor, Owner Participant and Indenture Trustee in writing at least thirty (30) days (seven (7) days or such lesser period of time as is the insurance industry standard for war/allied perils coverage) prior to the expiration, non-renewal, termination or cancellation for any reason (including, without limitation, failure to pay premium therefor) or material modification of any such insurance. In the event Lessee shall fail to maintain insurance as herein provided, Lessor, Owner Participant or Indenture Trustee at their respective options, may provide such insurance and, in such event, Lessee shall, upon -82- 88 demand, reimburse Lessor, as Supplemental Rent, or any other such other Person who may have provided such insurance, for the cost thereof. (g) Reinsurance. Lessee (or if a Permitted Sublease is in effect, the Permitted Sublessee) may carry primary insurance outside of the aviation insurance markets in New York, London or Paris if the relevant primary insurer shall have obtained reinsurance and such reinsurance (i) is on the same terms as the original insurance and includes the provisions required by this Agreement; (ii) provides in case of any bankruptcy, insolvency, liquidation, dissolution or similar proceedings of or affecting the original insurer that the reinsurers' liability will be to make such payment as would have fallen due under the relevant policy of reinsurance if the original insurer had (immediately before such bankruptcy, insolvency, liquidation, dissolution or similar proceedings) discharged its obligations in full under the original insurance policies in respect of which the then relevant policy of reinsurance has been effected; and (iii) contains a "cut-through" clause in the following form (or otherwise, satisfactory to Owner Participant): "The Reinsurers and the Reinsured hereby mutually agree that in the event of any claim arising under the reinsurances in respect of a total loss or other claim where as provided by the Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-8] dated as of June __, 1997 and made between Wilmington Trust Company, as Owner Trustee, and America West Airlines, Inc. such claim is to be paid to the person named as sole loss payee under the primary insurances, the Reinsurers will in lieu of payment to the original insured, its successors in interest and assigns pay to the person named as sole loss payee under the primary insurances effected by the original insured that portion of any loss due for which the Reinsurers would otherwise be liable to pay the original insurer (subject to proof of loss), it being understood and agreed that any such payment by the Reinsurers will (to the extent of such payment) fully discharge and release the Reinsurers from any and all further liability in connection therewith." (h) Storage. During any period that the Aircraft is in storage or otherwise grounded, Lessee may carry or cause to be carried, in lieu of the insurance required by Sections 12(a) and (b) above, insurance otherwise conforming with the provisions of said Sections 12(a) and (b) except that the scope of the risk and the type of insurance, and the amount of the insurance in the case of the insurance described in Section 12(a) above (but not the amount of -83- 89 insurance to be carried under Section 12(b) above), shall be the same as from time to time applicable to similar size passenger aircraft that comprise Lessee's fleet in similar storage or grounding, and in any event (including, without limitation, at any time when there shall be in existence a Permitted Sublease), the same as from time to time customarily carried by similarly-situated, prudent Certificated Air Carriers for passenger aircraft of similar size as the Aircraft in similar storage or grounding. (i) Amounts Held. So long as no Default or Event of Default has occurred and is continuing, any amount held by Lessor or Indenture Trustee, as the case may be, until application by Lessor or Indenture Trustee, as the case may be, pursuant to this Section 12 shall be invested as provided in Section 21(h) hereof. (j) After the Term. Lessee shall continue to maintain at its expense the insurance described in Section 12(a) for three years after the expiration or termination of the Basic Term or Renewal Term, if Lessee has elected to renew the Lease in accordance with Section 20, covering each Indemnitee as its interest may appear and specifically insuring the indemnity contained in Section 13 to the extent of the coverage of such policy. (k) Governmental Indemnity. In lieu of certain of the insurance described in Section 12 above, Lessee may provide a United States governmental indemnity, to the extent and subject to the terms and conditions specified in Section 6(c). Section 13. General Indemnity. Lessee hereby agrees to indemnify, reimburse, defend and hold harmless each Indemnitee on a net after-tax basis, as provided in Section 10(e), within fifteen (15) days after demand from and against any and all claims (whether or not based on strict liability), damages (whether direct, indirect, incidental, special or consequential), losses, charges, fees, liabilities, obligations, demands, suits, judgments, actions and other legal proceedings (whether civil or criminal), penalties, fines, other sanctions, and any reasonable costs and expenses in connection herewith, including, without limitation, costs and expenses set forth in Section 21(j) hereof and reasonable attorney's fees and expenses of whatever kind or nature (any and all of which are hereafter referred to as "Claims") imposed on, or asserted by or against, or suffered -84- 90 or incurred by, any Indemnitee, from (and including) the Restatement Date, including, without limitation, injury, death or property damage of passengers, shippers and others, environmental control, noise and pollution regulations, which in any way may result from, pertain to, or arise in any manner out of, or are in any manner related to (1) the Operative Documents, the Purchase Documents or the Financing Documents (exclusive of the Foreign Lease Documents except as expressly provided herein or as otherwise would be covered by the occurrences described in the following clause (2)(A)) or any of the transactions contemplated thereby; (2) the Aircraft, the Airframe, any Engine or any engine used in connection with the Airframe or any Part thereof, including, but not limited to, (A) the importation, exportation, condition, manufacture, design, purchase, ownership, registration, reregistration, deregistration (other than any deregistration caused by the failure of the registered owner of the Aircraft to be a "citizen of the United States" as defined under the Federal Aviation Act and the regulations thereunder or to file the documentation necessary to continue FAA registration of the Aircraft), delivery, nondelivery, assignment, leasing, subleasing, sub-subleasing, acceptance, rejection, possession, repossession, control, return, financing, Liens (excluding Lessor's Liens, Head Lessor's Liens and Lenders' Liens, but including the Lien of the Indenture), use, performance, modification, maintenance, overhaul, operation, pooling, interchange, repair, testing, sale, return or other disposition or application of the Aircraft, the Airframe, any Engine, any engine used in connection with the Airframe or any Part (including, but not limited to, latent and other defects whether or not discoverable by Lessee or Lessor, Claims related to any actual or alleged violation of Law, loss or damage to any property of passengers, shippers or otherwise or any Claim related to patent, copyright, trademark or other infringement) either in the air or on the ground, and including, without limitation, any interest therein of an Indemnitee or imposition of a Lien thereon (excluding Lessor's Liens, Head Lessor's Liens and Lenders' Liens but including the Lien of the Indenture), or the rentals, receipts or earnings therefrom (including, without limitation, the Rent and any other amounts paid or payable with respect thereto); or (B) any defect in the Aircraft, the Airframe, any Engine, any engine used in connection with the Airframe or any Part thereof arising from the material or any article used therein, whether from the design, testing or use thereof from any maintenance, service, repair, overhaul or testing of such Aircraft, Airframe, Engine, engine or Part, or otherwise regardless of when such -85- 91 defect shall be discovered, whether or not such Aircraft, Airframe, Engine, engine or Part is at the time in the possession of Lessee, and regardless of where such Aircraft, Airframe, Engine, engine or Part may then be located; or (3) the breach of any representation, warranty or covenant made by Lessee hereunder or under any of the other Operative Documents or any Default or Event of Default; provided, however, that the indemnity provided for in this Section 13 shall not apply to any portion of a Claim of an Indemnitee to the extent it results from: (i) the gross negligence or willful misconduct of such Indemnitee or any of its directors, officers, employees, servants or agents (except any such gross negligence or willful misconduct as may be attributed to an Indemnitee due to its interest in the Aircraft, the Airframe, an Engine, any Operative Document, any Purchase Document or any Financing Document), (ii) the material breach of any express representation, warranty or covenant made by such Indemnitee herein or in any other Operative Document, or the Financing Documents (not resulting from a breach by Lessee of any of its representations, warranties or covenants in the Operative Documents or in the Financing Documents), (iii) any Taxes, whether or not Lessee is required to indemnify such Taxes under Section 10 hereof or the Tax Indemnification Agreement (it being understood that Section 10 hereof and the Tax Indemnification Agreement exclusively provide for Lessee's liability with respect to Taxes), (iv) any Claim which relates solely to events which occurred prior to but excluding the Restatement Date (other than Claims related to the condition, manufacture or design of the Aircraft) and any Claim concerning payment for or the ownership of Buyer Furnished Equipment, (v) an underlying act which occurs after the Aircraft has been returned to Lessor in accordance with the terms hereof and the Term of this Lease has been terminated or has expired and the return is not related to an Event of Default, (vi) as to such Indemnitee, an underlying act which occurs after a disposition or other transfer (voluntary or involuntary) by such Indemnitee of all or any part of its interest in the Aircraft, the Airframe, any Engine, or any Part, or in the Financing Documents, the Purchase Documents or the Operative Documents, except as contemplated under or pursuant to the Operative Documents, the Financing Documents or the Purchase Documents and except as resulting from the exercise of its remedies during the period while an Event of Default has occurred and is continuing and prior to the time such Indemnitee has received payment of all amounts owing to it hereunder or thereunder and except any Claim which is alleged or does relate to the period prior to such -86- 92 disposition or (vii) the authorization or giving or withholding of any future amendments, supplements, waivers or consents with respect to any of the Financing Documents, the Purchase Documents or the Operative Documents, which amendments, supplements, waivers or consents were not requested by Lessee or are not required to give effect to the provisions of the Operative Documents, the Financing Documents or the Purchase Documents (provided, however, in no event will Lessee be liable for any Claims resulting from, pertaining to or arising from or related to Lessor's granting or creating a Lessor's Lien or the granting or creation of a Head Lessor's Lien). Upon full payment of the indemnities herein, Lessee shall be subrogated to all rights and remedies which such Indemnitee may have against any third party against whom such Indemnitee has the right to assert a Claim which arises under any action described in this Section 13 (except Claims under such Indemnitee's own insurance policies or under the indemnification provisions of any of the Financing Documents). Without limiting Lessee's liability under this Section 13, Lessee hereby waives and releases any Claim now or hereafter existing against any Indemnitee, on account of any Claims for or on account of or arising or in any way connected with injury to or death of personnel of Lessee or loss or damage to property of Lessee or the loss of use of any property which may result from or arise in any manner out of or in relation to the importation, exportation, ownership, purchase, registration, reregistration, deregistration (except as to Owner Participant or Lessor as and to the extent such Indemnitee is responsible under the Refunding Agreement for Claims related to such deregistration), delivery, non-delivery, assignment, leasing, subleasing, manufacture, acceptance, rejection, possession, return, financing, performance, modification, maintenance, condition, use, operation, pooling, interchange, repair, testing, sale, return or other disposition of the Aircraft, the Airframe, any Engine or any engine used in connection with the Airframe or any Part thereof, either in the air or on the ground, or which may be caused by any defect in such Aircraft, Airframe, Engine, engine or Part from the material or any article used therein or from the design or testing thereof, or use thereof or from any maintenance, service, repair, overhaul, or testing of such Aircraft, Airframe, Engine, engine or Part, claims for infringement, loss of or injury to any person, loss of or damage to any property or environmental damage, regardless of when such defect may be discovered, whether or not such Aircraft, Airframe, Engine, engine or Part is at the -87- 93 time in the possession of Lessee, and regardless of the location of such Aircraft at any such time except to the extent that such Claim results from (i) the gross negligence or willful misconduct of such Indemnitee (except any such gross negligence or willful misconduct as may be attributed to an Indemnitee due to its interest in the Aircraft, the Airframe, an Engine, any Operative Document, any Purchase Document or any Financing Document), (ii) the material breach of any of its express representations, warranties or covenants hereunder, under any other Operative Document or Financing Document (not resulting from a breach by Lessee of any of its representations, warranties or covenants in the Operative Documents or in the Financing Documents), (iii) any Taxes, whether or not Lessee is required to indemnify such Taxes under Section 10 hereof or the Tax Indemnification Agreement (it being understood that Section 10 hereof and the Tax Indemnification Agreement exclusively provide for Lessee's liability with respect to Taxes), (iv) any Claim which relates solely to events which occurred prior to but excluding the Restatement Date (other than Claims related to the condition, manufacture or design of the Aircraft) and any Claim concerning payment for or the ownership of Buyer Furnished Equipment, (v) an underlying act which occurs after the Aircraft has been returned to Lessor in accordance with the terms hereof and the Term of this Lease has been terminated or has expired and the return is not related to an Event of Default, (vi) an underlying act which occurs after a disposition or other transfer (voluntary or involuntary) by such Indemnitee of all or any part of its interest in the Aircraft, the Airframe, any Engine, or any Part, or in the Financing Documents, the Purchase Documents or the Operative Documents (except as contemplated under or pursuant to the Operative Documents, the Financing Documents or the Purchase Documents and except as resulting from the exercise of its remedies during the period while an Event of Default has occurred and is continuing and prior to the time such Indemnitee has received payment of all amounts owing to it hereunder and except any Claim which is alleged or does relate to the period prior to such disposition), (vii) the authorization or giving or withholding of any future amendments, supplements, waivers or consents with respect to any of the Financing Documents, the Purchase Documents or the Operative Documents, which amendments, supplements, waivers or consents were not requested by Lessee or are not required to give effect to the provisions of the Operative Documents, the Financing Documents or the Purchase Documents or (viii) a Lessor's Lien, a Head Lessor's Lien or a Lenders' Lien attributable to such Indemnitee. -88- 94 Each Indemnitee shall, at Lessee's sole cost and expense and with Lessee's cooperation, be entitled to conduct the defense of any Claim against it; provided, however, that Lessee shall, at the request of any Indemnitee and so long as no Event of Default has occurred and is continuing, assume and conduct promptly and diligently, at its sole cost and expense, the defense of such Indemnitee against any Claim of a third party with counsel reasonably acceptable to such Indemnitee; and provided, further, however, that Lessee shall have the right as well as the obligation to assume such defense to the extent required under the terms of the applicable insurance policies so long as no Default or Event of Default has occurred and is continuing. In the event Lessee shall so assume the defense of any Claim, such Indemnitee shall cooperate with Lessee in defending such Claim, but any expenses incurred by such Indemnitee in connection therewith shall either be paid by Lessee to such Indemnitee in advance, or reasonable security shall be provided by Lessee to such Indemnitee for such payments. Neither Lessee nor an Indemnitee shall enter into a settlement or other compromise with respect to any Claim which Lessee or such Indemnitee is defending hereunder in excess of $100,000 without the prior written consent of the other, which consent shall not be unreasonably withheld. Each Indemnitee agrees to give Lessee prompt notice of any Claims by a third party hereunder following such Indemnitee's actual knowledge of such Claims by third parties, but the failure of such Indemnitee to give the notice required by this Section 13 shall not constitute a release by Lessor or such Indemnitee of, or reduce, any of the obligations or liabilities of Lessee to such Indemnitee in respect of any such Claim or otherwise affect the obligations or liabilities of Lessee to any Indemnitee in respect of any such Claim, except to the extent that Lessee's ability to control the defense thereof where Lessee has the right to control the defense thereof is materially prejudiced as a result solely of such failure of such Indemnitee to give such notice. An Indemnitee or Lessee shall supply the other with such information requested by the other as is reasonably necessary or advisable for the other to control the defense of a Claim to the extent permitted by this Section. Nothing in this Section shall be construed as a guaranty by Lessee of payments due pursuant to any indebtedness incurred with respect to the purchase of the Aircraft or of the residual value of the Aircraft. -89- 95 Notwithstanding anything herein or in any other Operative Document to the contrary, with respect to any Claim for which any Indemnitee is entitled to indemnification under more than one provision of this Lease or any other Operative Document, such Indemnitee shall be entitled to recovery for such Claim only pursuant to one such provision as it may select in its sole discretion (and, for the avoidance of doubt, such Indemnitee shall not be entitled to any double recovery for the same Claim). The indemnities contained in this Section 13 shall continue in full force and effect notwithstanding the expiration or other termination of this Lease or any of the other Operative Documents and are expressly made for the benefit of and shall be enforceable by each Indemnitee. Section 14. Liens. Lessee shall not directly or indirectly create, incur, assume, or suffer to exist any Lien on or with respect to the Aircraft, the Airframe, any Engine or any Part thereof, title thereto, or any interest of Lessor therein or in this Lease, except (i) the respective rights of Lessor, Lessee, Owner Participant, Indenture Trustee, Foreign Lessor and any other Indemnitee as herein provided or provided under the other Operative Documents or the Financing Documents; (ii) Head Lessor's Liens, Lessor's Liens and Lenders' Liens and Liens arising out of the Foreign Lease Documents; (iii) Liens for Taxes either not yet due or being diligently contested in good faith by appropriate proceedings in accordance with Section 10 and so long as adequate reserves are maintained with respect to such Liens and only so long as neither such proceedings nor such Liens involve any material danger of the sale, forfeiture or loss of any of the Aircraft, the Airframe or any Engine or any Part, or any interest of Lessor, Foreign Lessor or Indenture Trustee therein or any risk of criminal liability of Lessor, Foreign Lessor or Indenture Trustee; (iv) inchoate materialmen's, mechanics', workmen's, repairmen's employees', or other like inchoate Liens arising in the ordinary course of business for sums not overdue by more than 45 days or being diligently contested in good faith and only so long as neither such proceedings nor any such Liens involve any material danger of the sale, forfeiture or loss of any of the Aircraft, the Airframe or any Engine or any Part, or any interest of Lessor, Foreign Lessor or Indenture Trustee therein; (v) the rights of other Persons to the extent expressly permitted by the provisions of Section 6(a), 9(c) or 19; (vi) Liens arising out of any -90- 96 judgment or award against Lessee (or any Permitted Sublessee) unless the judgment or award shall not, within thirty (30) days after the entry thereof, have been discharged, vacated, reversed, or execution thereof stayed pending appeal or shall not have been discharged, vacated or reversed within thirty (30) days after the expiration of such stay and only so long as such Liens shall not involve any material danger of the sale, forfeiture or loss of any of the Aircraft, the Airframe or any Engine or any Part, or any interest of Lessor, Foreign Lessor or Indenture Trustee therein and provided that the execution of such judgment or award or an attachment relating thereto shall not have occurred within such thirty (30) day period; and, (vii) any other Lien with respect to which Lessee (or a Permitted Sublessee) shall have provided a bond adequate in the reasonable opinion of Indenture Trustee (if the Lien of the Indenture has not been discharged) and Owner Participant. Lessee shall promptly, at its own expense, take or cause to be taken such action as may be necessary to duly discharge any Lien (except for the Liens referred to in clauses (i) through (vii) of this Section 14) directly or indirectly created, incurred, assumed, or suffered to exist by Lessee if the same shall arise at any time. Section 15. Protection of Title and Further Assurances. Forthwith upon the execution and delivery of this Lease, the Indenture, the Trust Agreement, Lease Supplement, Indenture Supplement and Trust Supplement, and any other supplement from time to time required by the terms hereof, Lessee will cause this Lease, the Indenture, the Trust Agreement, Lease Supplement, Indenture Supplement, Trust Supplement and such other supplements to be duly filed and recorded, and maintained of record, in accordance with the applicable laws of the government of registry of the Aircraft. If any filing or recording is reasonably necessary to protect the interests of Lessor, Foreign Lessor or Indenture Trustee, Lessee shall, at its own cost and expense (except it shall be at Lessor's expense if in connection with a change in ownership of the Aircraft or any other transfer or assignment by Lessor other than as contemplated hereunder or under the Financing Documents or in connection with an Event of Default) and upon request by Lessor, cause any financing statements and any and all additional instruments and other documents, so far as permitted by applicable Law, to be kept, filed, and recorded and to be re-executed, refiled and re-recorded at all times in the appropriate office pursuant or in relation to any -91- 97 applicable Laws of any Governmental Entity, to protect and preserve the rights and interests of Lessor, Foreign Lessor or Indenture Trustee hereunder, under the Indenture and in the Aircraft, and Lessee shall furnish to Lessor and Indenture Trustee, evidence, reasonably satisfactory to Lessor and Indenture Trustee, of each such filing or refiling and recordation and re-recordation. Without limiting the foregoing, Lessee shall do or cause to be done, at Lessee's cost and expense (except it shall be at Lessor's expense if in connection with a change in ownership of the Aircraft or any other transfer or assignment by Lessor other than as contemplated hereunder or under the Financing Documents or in connection with an Event of Default), any and all acts and things within its control which may be required under the terms of the Mortgage Convention to protect and preserve the title of Lessor or as applicable, Foreign Lessor, the Lien of the Indenture, this Lease, and the interests of Lessor, Foreign Lessor and Indenture Trustee within the jurisdiction of any signatory which has ratified the Mortgage Convention in such jurisdiction and in the territories thereof in which Lessee, any Permitted Sublessee or any wet lessee may operate the Aircraft, as Lessor may reasonably request. Lessee shall also do or cause to be done, at its own expense (except it shall be at Lessor's expense if in connection with a change in the ownership of the Aircraft or any other transfer or assignment by Lessor other than as contemplated hereunder or under the Financing Documents or in connection with an Event of Default), any and all acts and things which may be required under the terms of any other Law involving any jurisdiction in which Lessee, any Permitted Sublessee or any wet lessee may operate the Aircraft, which Lessor may reasonably request, to protect and preserve the title of the Lessor or as applicable, Foreign Lessor, this Lease, the Indenture and Lessor's, Foreign Lessor's and Indenture Trustee's interest in the Aircraft and under any of the Operative Documents or Financing Documents within any such jurisdiction. In addition, at Lessee's expense, Lessee will promptly and duly execute and deliver to Lessor or Indenture Trustee, as applicable, such further documents and assurances and take such further actions as Owner Participant or Indenture Trustee may from time to time reasonably request in order to more effectively carry out the intent and purpose of this Lease and the other Operative Documents and the Financing Documents and to protect the rights and remedies created or intended to be created in -92- 98 favor of Lessor, Foreign Lessor or Indenture Trustee hereunder and the other Operative Documents and the Financing Documents including, without limitation, if reasonably requested by Owner Participant or Indenture Trustee, at the expense of Lessee (except it shall be at Lessor's expense if in connection with a change in the ownership of the Aircraft or any other transfer or assignment by Lessor or Indenture Trustee other than as contemplated hereunder or under the Financing Documents or in connection with an Event of Default), the execution and delivery of supplements or amendments hereto in recordable form, subjecting to this Lease, the Indenture, the Foreign Lease Agreement and the other Financing Documents, any replacement Aircraft or Engine and the recording or filing of counterparts thereof in accordance with the laws of any appropriate jurisdiction. Section 16. Return of Aircraft and Records. (a) Return. On any Return Occasion, Lessee, at its own expense and risk, shall return the Aircraft to Lessor (or any Person designated by Lessor) in at least the condition specified in this Section and Exhibit E hereto at any Lessee system location in the continental United States selected by Lessor, or such other location as Lessor and Lessee may agree, fully equipped with all required Engines, or other engines owned by Lessee (which shall thereupon become Engines as hereinafter provided) meeting the conditions specified in this Section and Exhibit E, duly installed thereon by delivering the same to the Lessor at such location. Lessee shall comply with Section 11(b) and this Section 16 with respect to any engines installed on the Aircraft returned to Lessor hereunder and meeting the conditions described herein which were not originally installed on the Aircraft. (b) Status Upon Return. Upon any Return Occasion hereunder, the Aircraft shall be: (i) free and clear of all Liens, except for the Lien of the Indenture, Head Lessor's Liens, Lessor's Liens, Lenders' Liens and Liens arising out of the Foreign Lease Agreement, (ii) duly certified as an airworthy aircraft by the FAA under Part 121 of the regulations promulgated under the Federal Aviation Act and with a current and valid Airworthiness Certificate installed on the Aircraft, unless such certificate shall have been suspended or revoked as a result of the suspension or revocation of the registration of the Aircraft under the Federal Aviation Act due to the ineligibility of the Aircraft to be registered in the name of Lessor under the -93- 99 Federal Aviation Act (whether by means of a voting trust agreement or otherwise) in which case the Aircraft shall nevertheless meet all conditions for such certification and for the issuance of such certificate; (iii) in full airworthy condition for over water and EROPS operation according to the FAA standards required to allow the Aircraft to be operated under, and in full compliance with, such Airworthiness Certificate and Part 121 of the regulations promulgated under the Federal Aviation Act for such operation, such compliance to be by means of such mechanical repairs or modifications or such inspections as may be required thereby, but not by operational restrictions, by logbook entries or other method of acceptance of such restrictions; (iv) in full compliance with Lessee's Maintenance Program; (v) to the extent the owner of the Aircraft is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Federal Aviation Act and reasonably cooperative with Lessee at Lessee's expense with respect to effecting such registration, duly registered in the name of the Lessor or other then owner of the Aircraft under the Federal Aviation Act; (vi) in full compliance with the maintenance and operation provisions of this Lease and all FAA airworthiness directives, mandatory service bulletins and equivalent requirements which by their terms require compliance on or before the last day of the Term (without regard to any deferral, waiver, deviation or exemption granted by the FAA specifically to Lessee delaying such compliance); (vii) in good and airworthy operating condition, and in the same condition (including, without limitation, in a passenger configuration suitable for passenger revenue service) as when delivered to Lessee hereunder, ordinary wear and tear excepted, with no open or outstanding deferred maintenance items, scheduled or unscheduled, with all systems and components fully serviceable and operational and with no placards restricting operation or use, and (viii) with all remaining warranties, indemnities, policies and guarantees referred to in Section 5(d) made available to Lessor in a manner and by documents in form and substance reasonably satisfactory to Lessor. (c) Engines. In the event any engine not owned by Lessor shall be installed on the Aircraft on any Return Occasion, without limiting Lessee's obligations under the Tax Indemnification Agreement, such engine shall be of the same model and equivalent modification status as the Engines or, at Lessee's option, an IAE engine of an improved model suitable for installation and use on the Airframe without diminishing the value, remaining useful life or utility of -94- 100 such Airframe, in each such case having a value, remaining useful life and utility at least equal to (as determined in accordance with the Appraisal Procedure), and be in an operating condition as good as the Engines, assuming the Engines were in the condition and repair as required by the terms hereof immediately prior to such termination and shall conform to the return condition requirements set forth in this Section 16 and Exhibit E, and Lessee, at its own expense and concurrently with such delivery, shall cause such engine to become an Engine by complying with Section 11(b) hereof. Lessee's obligation to comply with the terms of this Section 16(c) shall be conditioned on Lessor's transferring to Lessee all of Lessor's right, title and interest in and to any Engine not installed on the Aircraft at the Return Occasion "AS IS, WHERE IS," without any representation, warranty or recourse of any kind whatsoever, express or implied, except a warranty that such Engine is free and clear of Lessor's Liens and Liens arising out of the Foreign Lease Agreement. (d) Records and Documents. Upon the return of the Aircraft, Lessee shall deliver to Lessor (i) all logs, manuals and data, and inspection, modification, overhaul and other records, related to the Aircraft, including, without limitation, those required to be maintained with respect thereto under applicable rules and regulations of the FAA, together with a detailed description of the Maintenance Program then applied to the Aircraft and shall provide Lessor and its designees access to the Maintenance Program which is sufficient for a Person to maintain the Aircraft under an FAA approved maintenance program after the Term or to transition maintenance to another program, including, without limitation, another registry, or, in the event an Event of Default shall have occurred, to continue to maintain the Aircraft under the Maintenance Program, in each case as Lessor may reasonably request, and all documentation with respect to the Aircraft set forth on Exhibit B or otherwise delivered to Lessee at delivery thereof, and (ii) all records necessary or required by the FAA to certify and place the Aircraft on an FAA or other country's, as the case may be, approved maintenance program. All of the foregoing shall, at Lessee's expense, be up-to-date and in the latest revision status as of the last day of the Term, including, without limitation, all software and other electronically-held materials which have been supplied by or on behalf of Manufacturer, Manufacturer's Subsidiary or Original Head Lessee, which must be updated to the latest revision status as of the last day of the Term within such software base and all data therein or pertaining thereto shall be deemed -95- 101 property of Lessor and shall be delivered to Lessor. If hard, i.e., non-computerized, copies of English language maintenance records are not available, then Lessee shall cause the appropriate action to be taken with the pertinent regulatory agencies to ensure that Lessor and the FAA are provided with all requested necessary and proper guarantees of methods of compliance, component overhaul and management, scheduling, quality control, serial number verification, etc. These records shall be all inclusive to the Aircraft, Airframe, Engines, components, rotables, and assemblies and, as a minimum, extend to include all activities associated with each of the last completed maintenance checks, repairs, scheduled inspections and functional tests, and overhauls performed under Lessee's Maintenance Program. All components and assemblies identified with safe life limits shall be identified with their service histories, accumulated cycles or flight hours as applicable and remaining service lives on a separate listing. All components and assemblies which are identified on the maintenance records by part numbers and serial numbers other than the manufacturer's shall be provided with interchange or cross reference listing necessary to establish complete traceability. All documentation, flight, and maintenance records as specified by United States Federal Aviation Regulations 91.173, 91.174, and each paragraph of regulation 121.380 which normally accompany the transfer of an aircraft which has been operating in regulated commercial air service, shall be delivered to Lessor with the Aircraft. Any documents or records required to be delivered hereunder shall be in English. (e) Condition of Aircraft. Upon any Return Occasion, Lessee shall return such Aircraft to Lessor in such condition that the Aircraft shall also comply with each and every condition and requirement set forth elsewhere in this Lease, including Exhibit E hereto. (f) Final Inspection. Upon any Return Occasion, Lessee shall make the Aircraft available to Lessor at the location where the "block 'C' Check" (or equivalent level designated check or checks) required hereunder to be performed immediately prior to redelivery is to be performed for detailed inspection of the documents referred to in paragraph (d) above and the Airframe, Engines and Parts structure and parts, at Lessee's expense (excluding compensation to representatives of Lessor), in order to verify that the condition of such Aircraft complies with the requirements set forth above (such inspection being hereinafter referred to as the "Final Inspection"). The -96- 102 Final Inspection shall be combined with such "block 'C' Check" (or equivalent level check or checks) and may include such other items as reasonably requested by Lessor. Lessee shall give Lessor not less than thirty (30) days prior written notice of the commencement date of such Final Inspection. The period allowed for the Final Inspection shall be the same period during which such "block 'C' Check" is being performed and shall have such duration as to permit the opening of any areas of the Aircraft which are necessary or advisable to satisfy Lessor as to compliance with the requirements of this Section 16 and Exhibit E. The Final Inspection shall commence on the date so noticed which shall be on or before the expiration of the Term with respect to the Aircraft and shall continue on consecutive days until all activity required above to be conducted has been concluded. To the extent that any portion of the Final Inspection extends beyond the expiration of the Term, unless Lessor has terminated the Lease pursuant to Section 18(g) hereof, the Term with respect to the Aircraft undergoing the Final Inspection shall be deemed to have been automatically extended, and all obligations hereunder continued, on a daily basis until the Final Inspection shall have been concluded and Lessee shall pay Rent during any such extension in an amount equal to the average daily Basic Rent or Renewal Rent, as the case may be, paid in respect of the last year of the Basic Term or Renewal Term, as the case may be (and Stipulated Loss Value during such extension shall equal the Stipulated Loss Value on the last day of the Basic Term or Renewal Term, as the case may be); provided, however, that Lessee shall not be required to pay Rent with respect to the Aircraft during the period of extension to the extent that Lessor is responsible for the delay in completion of the Final Inspection. All storage expenses attributable to any Term extension pursuant to the preceding sentence shall be payable by Lessee, except that Lessee shall not be liable for any storage expenses which are incurred after the sixtieth (60th) day after the Term to the extent that storage continues thereafter due to Lessor's delay in completion of the Final Inspection. (g) Aircraft Records and Documents. In order to enable Lessor to prepare for the Final Inspection of the Aircraft pursuant to Subsection 16(f) above, Lessee agrees to make available to Lessor at a maintenance base of Lessee with adequate facilities for short-term maintenance, where the Final Inspection is to occur, not later than ten (10) days prior to the commencement of such Final Inspection, the Aircraft Records and Documents listed in Exhibit B hereto, together with such other documentation (including, without -97- 103 limitation, original airworthiness directive compliance documents and other work documents) regarding the condition, use, maintenance, or operation as Lessor may reasonably request or require to substantiate the status of the Aircraft. (h) Corrections and Subsequent Corrections. To the extent that the Aircraft or any Engine fails upon a Return Occasion to conform to any requirement imposed by this Lease, Lessor may, at its option, (i) continue the Lease in effect in the manner provided for in Section 16(f) above with regard to automatic extension until such time as such Aircraft is brought up to the condition required by this Section 16, including Exhibit E, or (ii) accept the return of such Aircraft and thereafter have any such nonconformance corrected, at such time as Lessor may deem appropriate but not to commence later than ninety (90) days following the return of such Aircraft, at commercial rates then charged by the Person selected by Lessor to perform such correction. Lessee's obligations to pay such Supplemental Rent shall survive the Expiration Date or other termination of this Lease. Nothing set forth in this paragraph shall constitute a limitation on Lessor's or Owner Participant's ability to recover from Lessee any damages, expenses or losses pursuant to Sections 13 or 18 hereof suffered as a result of Lessee's failure to effect the return of the Aircraft at the time, in the place and in the condition as specified in this Section 16 and Exhibit E hereto. (i) Functional Flight Check. Immediately prior to the expiration of the Term, Lessor will be permitted to conduct a non-commercial functional flight check flight of no more than two (2) hours duration in accordance with the Manufacturer's functional flight check procedures at Lessee's expense to demonstrate the airworthiness of the Aircraft and proper functioning of all systems and components. A qualified pilot and up to five (5) other representatives selected by Lessor may take part in such flight to verify compliance of the Aircraft with the requirements of this Lease, provided, that Lessor shall be responsible for the charges of such qualified pilot and representatives. Lessee may combine the functional flight check provided in this Section 16(i) with the delivery flight specified in Section 16(a) and such functional flight check shall include the landing. Any discrepancy or malfunction detected during any functional flight check (including a functional flight check combined with a delivery flight) shall be corrected, at Lessee's expense, -98- 104 and prior to the expiration of the Term. To the extent that any actions to correct any such discrepancy or malfunction extend beyond the Term, the provisions of the first sentence of Section 16(h) shall apply. All storage expenses attributable to any Term extension pursuant to the preceding sentence shall be payable by Lessee. (j) Export Certificate of Airworthiness. Lessee shall, at Lessee's expense, take such action as Lessor may reasonably request to assist Lessor in obtaining any required documents in relation to the export of the Aircraft from the United States (including, without limitation, a valid and subsisting export certificate of airworthiness with respect to the Aircraft and export license) and in relation to the deregistration of the Aircraft. (k) Service Bulletin and Modification Kits. Lessee shall deliver to Lessor, at no cost to Lessor, all service bulletin kits furnished without charge by the manufacturer for installation on the Aircraft which have not been so installed together with appropriate instructions for installation. In the event such uninstalled kits were purchased or manufactured by Lessee, then Lessor shall be advised of such kits by Lessee and have a right of first refusal to purchase such kits at Lessee's cost for a period of ninety (90) days after return. (l) Storage Upon Return. Upon any Return Occasion, Lessee shall, at Lessor's request and at Lessee's risk and expense, in addition to other storage referred to above, arrange for the parking, storage and insurance of the Aircraft for a period not exceeding sixty (60) days at such reasonable location as Lessor requests where Lessee has or can arrange for storage. Lessee shall pay or cause to be paid all costs and expenses for such parking, storage and insurance. (m) Resale/Release Cooperation. During the last twelve (12) months of the Term, with reasonable notice and at reasonable times, Lessee will cooperate, and cause any Permitted Sublessee to cooperate, in all reasonable respects, with the efforts of Lessor to sell or lease the Aircraft after the end of the Term, by permitting prospective purchasers or lessees, except to the extent prohibited by applicable Law, to inspect the Aircraft and the records relating thereto to the extent it does not unreasonably interfere with the operation or maintenance of the Aircraft or the conduct of Lessee's business. -99- 105 Section 17. Events of Default. Any one or more of the following occurrences or 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 other Governmental Entity): (a) Lessee shall fail to make (i) any payment of Basic Rent, Renewal Rent or Stipulated Loss Value to Lessor within three (3) Business Days after the date on which such payment is due, or (ii) any other payment of Supplemental Rent due hereunder within ten Business Days after the date on which such payment is due and Lessee has received written demand therefor by the party entitled thereto; provided that any failure of Lessee to pay to Lessor or the Owner Participant when due any Excepted Payments (as defined in the Indenture) shall not constitute an Event of Default unless Lessor or Owner Participant delivers notice to Lessee; or (b) Lessee shall fail to obtain and maintain in full force and effect any insurance required under the provisions of Section 12 hereof or shall operate the Aircraft outside of the scope or in violation of the terms of the insurance or United States Government indemnity coverage required to be maintained with respect to such Aircraft; or (c) Any representation or warranty made by Lessee herein or in the Refunding Agreement or in any certificate furnished by Lessee in connection herewith or therewith is or was incorrect at the time made in any material respect and such incorrectness shall not have been cured within thirty (30) days after the receipt by Lessee of a written notice from Lessor or the Indenture Trustee advising Lessee of the existence of such incorrectness; or (d) Lessee shall fail to perform or observe any covenant, condition, or agreement to be performed or observed by it pursuant to this Lease or the Refunding Agreement, and such failure shall continue uncured for thirty (30) days after written notice thereof is given by Lessor or Indenture Trustee to Lessee; provided, however, that if Lessee shall have undertaken to cure any such failure which arises under the first or second sentence of Section 6(c) or Section 6(d), as such provisions of -100- 106 Section 6 relate to maintenance, service, repair or overhaul, or Section 9, and notwithstanding the diligence of Lessee in attempting to cure such failure, such failure is not cured within said thirty (30) day period but is curable with future due diligence, there shall exist no Event of Default under this Section 17 so long as Lessee is proceeding with due diligence to cure such failure and such failure is remedied not later than one hundred eighty (180) days after receipt by Lessee of such written notice; or (e) Lessee consents to the appointment of a custodian, receiver, trustee or liquidator of itself or all or any material part of Lessee's property or Lessee's consolidated property, or Lessee admits in writing its inability to, or is unable to, or does not, pay its debts generally as they come due, or makes a general assignment for the benefit of creditors, or Lessee files a voluntary petition in bankruptcy or a voluntary petition seeking reorganization in a proceeding under any bankruptcy or insolvency Laws (as now or hereafter in effect), or an answer admitting the material allegations of a petition filed against Lessee in any such proceeding, or Lessee by voluntary petition, answer or consent seeks relief under the provisions of any other bankruptcy, insolvency or other similar Law providing for the reorganization or winding-up of corporations, or provides for an agreement, composition, extension or adjustment with its creditors, or any corporate action (including, without limitation, any board of directors or shareholder action) is taken by Lessee in furtherance of any of the foregoing, whether or not the same is fully effected or accomplished; or (f) An order, judgment or decree is entered by any court appointing, without the consent of Lessee, a custodian, receiver, trustee or liquidator of Lessee, or of all or any material part of Lessee's property, or Lessee's consolidated property, or all or any material part of Lessee's property or Lessee's consolidated property is sequestered, and any such order, judgment or decree of appointment or sequestration remains in effect, undismissed, unstayed or unvacated for a period of ninety (90) days after the date of entry thereof or at any time an order for relief is granted; or (g) An involuntary petition against Lessee in a proceeding under the Federal bankruptcy laws or other insolvency Laws (as now or hereafter in effect) is filed and is not withdrawn or dismissed within ninety (90) days thereafter or at any time an order for relief is granted in -101- 107 such proceeding, 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 assumes jurisdiction over, or custody or control of, Lessee or of all or any material part of Lessee's property, or Lessee's consolidated property and such jurisdiction, custody or control remains in effect, unrelinquished, unstayed or unterminated for a period of ninety (90) days or at any time an order for relief is granted in such proceeding; or (h) Lessee's cessation of business as a commercial passenger Certificated Air Carrier or, except in either case in connection with a labor dispute, announcement thereof or Lessee's suspension of its business as a commercial passenger Certificated Air Carrier, or for any reason the preponderant business activity of Lessee shall cease to be that of a commercial passenger Certificated Air Carrier; or (i) Lessee's loss or suspension of its United States air carrier license or certificate under Part 121 of the Federal Aviation Regulations or certificate under Section 41102(a) of the Federal Aviation Act. Section 18. Remedies. Upon the occurrence of any Event of Default and at any time thereafter so long as the same shall be continuing, Lessor may, at its option, declare by written notice to Lessee this Lease to be in default, provided, however, that this Lease shall be deemed to be declared in default automatically without the necessity of such written declaration upon the occurrence of any Event of Default described in paragraph (e), (f) or (g) of Section 17 hereof; and at any time thereafter, so long as any outstanding Event of Default shall not have been remedied, Lessor may do one or more of the following with respect to all or any part of the Airframe and any or all of the Engines as Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with any mandatory requirements of, applicable Law then in effect: (a) Demand that Lessee, and Lessee shall upon the written demand of Lessor and at Lessee's cost and expense, immediately return, and the Lessee hereby agrees that it shall return promptly all or such part of, the Aircraft to Lessor in the manner specified in such notice, in which event such return shall not be delayed for the purposes of -102- 108 complying with the return conditions specified in Section 16 and Exhibit E hereof (none of which conditions shall be deemed to affect Lessor's possession of the Aircraft) or delayed for any other reason; provided, however, that Lessee shall remain and be liable to Lessor for amounts provided for herein or other damages resulting from the Aircraft or any Engine not being in the condition required by Section 16 and Exhibit E. Notwithstanding the foregoing, at Lessor's option, Lessee shall be required thereafter to take such actions as would be required by the provisions of this Lease if such Aircraft were being returned at the end of the Term hereof with respect to such Aircraft. In addition, Lessor or Lessor's agent, at its option and to the extent permitted by applicable Law, may but shall not be obligated to enter upon the premises where all or any part of the Aircraft, Airframe and/or Engines are located to take immediate possession of and, at Lessor's option, remove the same (and/or any engine which is not an Engine but which is installed on the Airframe, subject to the rights of the owner, lessor or secured party thereof) by summary proceedings or otherwise, all without liability accruing to Lessor or Lessor's agent for or by reason of such entry or taking of possession or removal whether for the restoration of damage to property, or otherwise, caused by such entry or taking, except direct damages to the extent caused by Lessor's gross negligence or willful misconduct. (b) With or without taking possession thereof, sell or cause to be sold, the Aircraft, Airframe or Engine or any part thereof, or Lessor's interest therein, at private or public sale, as Lessor in its sole discretion may determine, or otherwise dispose of, hold, use, operate, or lease to others, or keep idle the Aircraft, Airframe or Engine, as Lessor in its sole discretion may determine, all free and clear of any rights of Lessee or any Permitted Sublessee and except as hereinafter set forth in this Section 18. Lessor may be the purchaser at any such sale. (c) Whether or not Lessor shall have exercised, or shall thereafter at any time exercise, any of its rights under paragraph (a) or paragraph (b) above, Lessor, by written notice to Lessee specifying a payment date which shall be a Stipulated Loss Value Date, may demand that Lessee pay to Lessor, and Lessee shall pay to Lessor, on the Stipulated Loss Value Date specified in such notice, as liquidated damages for loss of bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent, as the case may be, due for the period commencing after the Stipulated Loss Value Date specified for payment in such notice), any unpaid -103- 109 Rent for the Aircraft to and including the Stipulated Loss Value Date specified in such notice, plus whichever of the following amounts as Lessor may specify, in its sole and absolute discretion, in such notice: (i) an amount equal to the excess, if any, of the sum of the Stipulated Loss Value for the Aircraft, Airframe or Engine computed as of the date specified in such notice plus, if such date is a Basic Rent Payment Date or a Renewal Rent Payment Date, an amount equal to the Basic Rent or Renewal Rent, as the case may be, due on such date, over the fair market sale value of the Aircraft, Airframe or Engine as of the date specified in such notice or (ii) an amount equal to the excess, if any, of the sum of the Stipulated Loss Value for the Aircraft, Airframe or Engine computed as of the date specified in such notice plus, if such date is a Basic Rent Payment Date or a Renewal Rent Payment Date, an amount equal to the Basic Rent or Renewal Rent, as the case may be, due on such date, over the fair market rental value of the Aircraft for the remainder of the Term as of the date specified in such notice. (d) In the event Lessor, pursuant to paragraph (b) above, shall have sold the Aircraft, Airframe or Engine or its interest therein, Lessor, in lieu of exercising its rights under paragraph (c) above, may, if it shall so elect, demand that Lessee pay Lessor, and Lessee shall pay to Lessor on such demand, as liquidated damages for loss of bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent, as the case may be, due for the period commencing after the Stipulated Loss Value Date immediately prior to the date such sale occurs), any unpaid Rent due to and including the date of sale, plus the amount by which the Stipulated Loss Value of such Aircraft, Airframe or Engine, computed as of such Stipulated Loss Value Date, exceeds the net proceeds of such sale (after deducting all costs of such sale). (e) In lieu of exercising its rights under paragraph (b), (c) or (d) above, by notice to Lessee, Lessor may require Lessee to pay, on the next Stipulated Loss Value Date, to Lessor, and Lessee hereby agrees that it will so pay to Lessor, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent, as the case may be, payable in advance for the period on and after the Stipulated Loss Value Date), any unpaid Basic Rent or Renewal Rent, as the case may be, for such Aircraft due and unpaid for any period prior to and including, and any Basic Rent or Renewal Rent payable on, the Stipulated Loss Value Date, plus, an amount equal to the -104- 110 Stipulated Loss Value for the Aircraft computed as of such Stipulated Loss Value Date; and upon such payment of liquidated damages and the payment of all other Rent then due hereunder and the discharge of the Lien of the Indenture pursuant to Section 10.01 thereof, Lessor shall, at Lessee's expense, transfer, without recourse or warranty (except as to the absence of Lessor's Liens and the Lien of the Indenture), all right, title and interest of Lessor in and to the Aircraft to Lessee or as it may direct and Lessor shall, at Lessee's expense, execute and deliver such documents evidencing such transfer and take such further action as Lessee shall reasonably request. (f) In the event that Lessor, pursuant to paragraph (b) above, shall have relet the Aircraft, Airframe or Engine under a long term lease, Lessor, in lieu of exercising its rights under paragraph (c) above with respect to such Aircraft, Airframe or Engine, may, if it shall so elect, demand that Lessee pay Lessor, and Lessee shall pay Lessor on such demand, as liquidated damages for loss of bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent, as the case may be, for such Aircraft due after the time of reletting) any unpaid Rent for such Aircraft due up to the date of reletting, plus the amount, if any, by which the aggregate Basic Rent or Renewal Rent, as the case may be, for such Aircraft which would otherwise have become due over the Basic Term or Renewal Term, as the case may be, discounted periodically (equal to installment frequency) to present worth as of the date of reletting at the rate of 8.50% per annum, exceeds the aggregate basic rental payments to become due under the reletting from the date of such reletting to the date upon which the Term for such Aircraft, Airframe or Engine would have expired but for Lessee's default, discounted periodically (equal to installment frequency) to present worth as of the date of the reletting at the rate of 8.50% per annum. (g) Cancel, rescind and/or terminate this Lease by written notice to Lessee which cancellation, rescission and/or termination shall be effective upon dispatch, whereupon Lessee's right to possess and use the Aircraft, Airframe or Engine shall immediately cease, however, Lessee shall be and remain liable for damages and losses suffered by Lessor and all other amounts payable by Lessee hereunder. (h) Lessor may exercise any other right or remedy which may be available to it under applicable laws, or may proceed by appropriate court action or actions, either at law or in equity, to enforce any other remedy or right -105- 111 Lessor may have hereunder, under the other Operative Documents, at law or in equity, including, without limitation, proceed by court order to enforce performance by Lessee of the applicable covenants of this Lease or to recover damages for the breach thereof. In addition to the foregoing, Lessee shall be liable (without duplication of the remedies above and of Lessee's obligations under Section 10 and Section 13 hereof and subject to the exclusions set forth therein) for any and all unpaid Rent before, during or after the exercise of any of the above mentioned remedies (including without limitation interest on unpaid amounts with respect to all amounts not paid when due, including, without limitation, any amounts payable pursuant to the foregoing provisions of this Section 18), and, except as specified above, until satisfaction of all of Lessee's obligations to Lessor hereunder and for all legal fees and other costs and expenses incurred by any Indemnitee by reason of the occurrence of any Event of Default or the exercise of an Indemnitee's remedies with respect thereto, including all costs and expenses incurred in connection with the return of the Aircraft in accordance with the terms of Section 16 and Exhibit E hereof or in placing the Aircraft, Airframe or Engine in the condition and with airworthiness certification as required by such Section and such Exhibit and costs and expenses related to the Lease, the Refunding Agreement, the Indenture, the Pass Through Trust Agreements, the Intercreditor Agreement or each Liquidity Facility. All liquidated damages payable pursuant to the foregoing shall bear interest, which shall be payable on the date the payment of such liquidated damages is due at a rate equal to the Interest Rate from and including the date due to and excluding the date actually paid. In effecting any repossession, Lessor, its representatives and agents, to the extent permitted by applicable Law, (i) shall have the right to enter upon any premises where it reasonably believes the Aircraft, the Airframe, an Engine or Part to be located, (ii) shall not be liable, in conversion or otherwise, for the taking of any personal property of Lessee which is in or attached to the Aircraft, the Airframe, an Engine or Part which is repossessed, (iii) shall not be liable or responsible, in any manner, for any damage or injury to any of Lessee's property in repossessing and holding the Aircraft, the Airframe, an Engine or Part except for direct damages caused by Lessor's gross negligence or willful misconduct and (iv) shall have the right to maintain possession of and dispose -106- 112 of the Aircraft, the Airframe, an Engine or Part on any premises owned by Lessee or under Lessee's control. If requested by Lessor, Lessee shall, at its sole expense, assemble and make the Aircraft, the Airframe, an Engine or Part available at a place designated by Lessor in accordance with Section 16 and Exhibit E hereof. Lessee hereby agrees that, in the event of the return to or repossession by Lessor of the Aircraft, the Airframe, an Engine or Part, or otherwise upon the occurrence of an Event of Default, any rights in any warranty (express or implied), service life policy, infringement indemnity, performance guaranty or the like heretofore made available to Lessee or otherwise held by Lessee shall without further act, notice or writing be deemed automatically cancelled and shall be enforceable solely by and for the benefit of, and assigned to, Lessor. Lessee shall be liable to Lessor (without duplication) for all expenses, disbursements, costs and fees incurred in (i) repossessing, storing, preserving, shipping, maintaining, repairing and refurbishing the Aircraft, the Airframe, an Engine or Part to the condition required by Section 16 and Exhibit E hereof and (ii) preparing the Aircraft, the Airframe, an Engine or Part for sale or lease, advertising the sale or lease of the Aircraft, the Airframe, an Engine or Part and selling or releasing the Aircraft, the Airframe, an Engine or Part. Lessor is hereby authorized and instructed, at its option, to make expenditures which Lessor considers advisable to repair and restore the Aircraft, the Airframe, an Engine or Part to the condition required by Section 16 and Exhibit E hereof, all at Lessee's sole expense. For the purpose of this Section 18, the "fair market rental value" or the "fair market sales value" of the Aircraft, Airframe, an Engine or Part shall be determined pursuant to the Appraisal Procedure. At any sale of the Aircraft, the Airframe, an Engine or Part pursuant to this Section, Owner Participant may bid for and purchase such property and Lessee agrees that the amounts paid therefor shall be used in the computations contemplated herein and Lessee shall remain liable for any deficiency. No remedy referred to in this Section is intended to be exclusive, but, to the extent permitted by Law, each shall be cumulative and in addition to any other remedy referred to above or otherwise available to Lessor at law or in equity; and, to the extent permitted by Law, the exercise -107- 113 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 or all of such other remedies. No waiver by Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of the same Event of Default in the future or any other prior or future Event of Default. To the extent permitted by Law, Lessee hereby waives any right it may have to require Lessor to mitigate damages in connection with the remedies described in Sections 18(c), (d), (e) or (f) above. Lessee hereby irrevocably appoints Lessor as Lessee's attorney-in-fact (which appointment is coupled with an interest) to execute all documents deemed necessary to release, terminate and void Lessee's interest in the Aircraft leased hereunder or otherwise to more effectively carry out Lessor's rights and remedies and to file said documents for recordation with the FAA, under the Uniform Commercial Code, and with any other appropriate Governmental Entity, and otherwise act in Lessee's name and place with respect to the Aircraft, provided that an Event of Default has occurred and is continuing and this Lease has been declared or deemed to be in default. The provisions of this Section 18 shall continue in full force and effect and survive the expiration or other termination of this Lease and are expressly made for the benefit of and shall be enforceable by Lessor, Owner Participant and, if the Lien of the Indenture has not been discharged, Indenture Trustee. Section 19. Security for Obligations. In order to secure the Equipment Notes, Lessor has created, by the Indenture, a security interest in the Trust Indenture Estate, including, without limitation, this Lease and all Rent and other sums payable hereunder, except as provided in the Indenture and subject in each case to Liens permitted hereunder. The Indenture provides, among other things for the assignment by Lessor to Indenture Trustee of its right, title and interest in, to and under this Lease, to the extent set forth in the Indenture, for the creation of a first-mortgage lien on and perfected security interest in all of Lessor's right, title and interest in and to the Aircraft in favor of Indenture Trustee. Lessee hereby consents to such assignment and to the creation of such mortgage and security interest and acknowledges receipt of copies of the Trust Agreement and the Indenture, it being understood that such consent shall not affect any -108- 114 requirement or the absence of any requirement for any consent under any other circumstances. Until the Lien of the Indenture has been discharged, Lessee will furnish to Indenture Trustee counterparts of all notices and other writings of any kind required to be delivered hereunder by Lessee to Lessor. Until the Lien of the Indenture has been discharged, (a) Lessee shall make all payments of Rent, Stipulated Loss Value and all other amounts payable hereunder (other than Excepted Payments) to or as directed by Indenture Trustee as provided in Sections 4(c) and 4(d), and (b) Indenture Trustee shall be entitled to exercise the rights of Lessor (but not Owner Participant) (other than Expected Rights) herein as and to the extent provided herein or in the Indenture and any express reference to Indenture Trustee in any Section of this Lease shall not give rise to any implication that Indenture Trustee may not exercise the rights of Lessor in any other Section of this Lease as and to the extent provided in the Indenture. The provisions of this Lease and the Refunding Agreement which require or permit action by, the payment of monies to, the consent or approval of, the furnishing of any instrument or information to, or the performance of any other obligation to, Indenture Trustee, shall not be effective, and the Sections hereof containing such provisions shall be read as though there were no such requirements or provisions and all moneys otherwise payable to Indenture Trustee hereunder shall be paid to Lessor, after Lessee shall have received from Indenture Trustee notice of discharge of the Lien of the Indenture. Any payment or performance by Lessee to or as directed by Indenture Trustee shall constitute payment or performance of such obligation to Lessor by Lessee under this Lease. Any payment or performance of an obligation of Lessee under this Lease by a Permitted Sublessee shall constitute payment or performance of such obligation by Lessee. Section 20. Renewal Option. Lessee may renew this Lease as provided in the following clause (i) and subject to the following clause (ii): (i) Exercise of Renewal Option. Provided that this Lease has not been previously terminated and that no Default or Event of Default shall have occurred and be continuing at the time of the giving of -109- 115 irrevocable notice hereinafter referred to in this clause (i) or at the time of the commencement of the Renewal Term, Lessee, at its option, may renew this Lease for one Renewal Term consisting of a period equal to five years. The right to renew this Lease for such Renewal Term pursuant to this clause (i) shall be exercised upon irrevocable notice from Lessee received by Lessor of Lessee's election to so renew this Lease not less than twelve (12) months and not more than twenty-four (24) months prior to the last day of the Basic Term. The Renewal Rent for the Renewal Term shall be the "fair market rental value" of the Aircraft for such Renewal Term (the "renewal fair market rental value") as determined in accordance with the Appraisal Procedure. For purposes of this paragraph (i), the Appraisal Procedure shall be initiated by Lessee no earlier than nine (9) months prior to the end of the Basic Term. If Lessee shall fail to exercise its option to extend the term of this Lease for the Renewal Term in accordance with the provisions of this paragraph, all of Lessee's rights to extend the Term for such Renewal Term shall expire. Lessee shall pay all reasonable costs and expenses, including, without limitation, reasonable legal fees and expenses, incurred by Lessor, Owner Participant and the Indenture Trustee in connection with the exercise of such option. (ii) Provisions Applicable During Renewal Term. All provisions of this Lease, including, without limitation, as to Rent and Stipulated Loss Value (which shall be, with appropriate adjustments, in no event less than the greater of 120% of the "fair market sales value" of the Aircraft as of the first day of the Renewal Term as determined pursuant to the Appraisal Procedure or the amount set forth on Exhibit A as of the end of the Basic Term), shall remain in effect and be applicable during such Renewal Term, except that Lessee shall pay to the Lessor, semi-annually in arrears as Renewal Rent on each Renewal Rent Payment Date, the amount for such Renewal Term as determined in accordance with clause (i) of this Section 20. Section 21. Miscellaneous. (a) Severability, Amendment, and Construction. 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 unenforceability without invalidating the -110- 116 remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by Law, each of Lessor and 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 expressed to be a supplement or amendment to, or waiver or termination of this Lease signed by an officer of the party against which the enforcement of the change, waiver, discharge, or termination is sought. This Lease shall constitute an agreement of lease, and nothing herein shall be construed as conveying to Lessee any right, title, or interest in the Aircraft or any Engine or Part except as a lessee only. Without limiting the foregoing, the parties hereto agree to treat this Agreement as a lease for United States federal income tax purposes and Lessee will not file a tax return which is inconsistent with the foregoing and nothing contained herein shall be construed as an election by Lessor to treat Lessee as having acquired the Aircraft for the purpose of the investment credit allowed by Section 38 of the 1954 Code or any similar or successor statute. The headings in this Lease are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. (b) GOVERNING LAW. THIS LEASE HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY, AND PERFORMANCE WITHOUT REGARD TO PROVISIONS GOVERNING CONFLICTS OF LAW WHICH MIGHT LEAD TO THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION. (c) Notices. All notices and instructions between Lessor and Lessee required or permitted under the terms and provisions hereof shall be in writing and shall be sent to Lessor or Lessee at their respective addresses set forth in Exhibit C hereto (or such other addresses as the parties may designate from time to time in writing). All notices, reports or other documents provided to Lessor or Lessee shall be provided concurrently to Indenture Trustee (until such time as the Lien of the Indenture is discharged) and to Owner Participant, at such address as Owner Participant and Indenture Trustee, respectively, may designate from time to time. All notices and instructions hereunder shall become effective when received. -111- 117 (d) Lessor's Right to Perform for Lessee. If Lessee fails to make any payment of Rent required to be made by it hereunder or fails to perform or comply with any covenant, agreement, or obligation contained herein, Lessor shall have the right but not the obligation to make such payment or conform or comply with such agreement, covenant, or obligation, and the amount of such payment and the amount of the reasonable expenses of Lessor incurred in connection with such payment or the performance thereof or compliance therewith, together with interest thereon at the Interest Rate, shall be payable by Lessee to Lessor (as Supplemental Rent) upon demand. The taking of any such action by Lessor pursuant to this Section 21(d) shall not constitute a waiver or release of any obligation of Lessee under this Lease, nor a waiver of any Event of Default which may arise out of Lessee's nonperformance of such obligation, nor an election or waiver by Lessor or any remedy or right available to Lessor under or in relation to this Lease. (e) Counterparts. To the extent, if any, 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 created through the transfer or possession of any counterpart other than the original counterpart, which shall be identified as the counterpart containing the receipt therefor executed by or on behalf of Indenture Trustee on the signature page thereof. Subject to the preceding sentence, this Lease may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (f) Quiet Enjoyment. Lessor covenants that, so long as no Event of Default shall have occurred and be continuing and this Lease has not been declared or deemed to be in default, Lessor shall not take or cause to be taken any action to interfere with the right of Lessee to the possession, use, operation and quiet enjoyment of and other rights with respect to the Aircraft hereunder, and all rents, revenues, profits and income therefrom, in accordance with the terms of this Lease without interference from Lessor or any Person lawfully claiming by or through it, provided that Lessor and Owner Participant shall not be liable for any such interference by Indenture Trustee, Pass Through Trustee, Note Holder or any other Person lawfully claiming by or through them, and provided further, that the foregoing shall not be deemed to have modified the -112- 118 obligations of Lessee pursuant to Section 4(d) hereof, which obligations remain absolute and unconditional. (g) Brokers. Lessee and Lessor agree that, except as provided in the Refunding Agreement, there has been no third party as agent involved in this Lease and each indemnifies the other from liability for fees, commissions, or other claims made upon the other due to any such claim. (h) Investment of Funds. Any monies which are held by Lessor or Indenture Trustee and are payable to Lessee shall, unless a Default or an Event of Default shall have occurred and be continuing, be invested as provided below until paid to Lessee or applied by Lessor or Indenture Trustee to the extent provided herein. Until paid to Lessee or applied as provided herein or in the Indenture such monies shall be invested by Lessor or Indenture Trustee from time to time at the expense of Lessee in Specified Investments, as directed by Lessee in accordance with the provisions of Section 3.07 of the Indenture if the Lien of the Indenture shall not have been discharged and thereafter as provided below. There shall be promptly (but not more frequently than monthly) remitted to Lessee any gain (including interest received) realized as the result of any such investment (net of any fees, commissions and other reasonable expenses, if any, incurred in connection with such investment) unless a Default or an Event of Default shall have occurred and be continuing. Lessee will promptly pay to Lessor or Indenture Trustee, as the case may be, and hold Lessor or Indenture Trustee harmless from, on demand, the amount of any loss realized as the result of any such investment (together with any Taxes, fees, commission and other reasonable expenses, if any, incurred in connection with such investment). (i) Entire Agreement; Amendment. This Lease (including the Exhibits hereto), any related letter agreements and the other Operative Documents, the Financing Documents and the Purchase Documents (including the Exhibits thereto) and all closing documents delivered in connection with any of the foregoing embody the entire agreement and understanding among the parties hereto with respect to the subject matter hereof. This Lease may be changed, waived, discharged, amended, revised or terminated only by an instrument in writing signed by the party against which enforcement is sought. (j) Expenses. Without limiting Section 13 or 18, Lessee agrees within fifteen (15) days after demand to pay -113- 119 or reimburse Lessor for all reasonable out-of-pocket costs and expenses (including, without limitation, legal and other professional fees and expenses) incurred or payable by Lessor in connection with or related to (i) the fees and expenses of Owner Trustee and Indenture Trustee, (ii) to the extent requested by or relating to acts or omissions of Lessee or as otherwise provided herein or to give effect to the provisions hereof, or the other Operative Documents, the Financing Documents or the Purchase Documents, any future amendments, supplements or other modifications hereof or thereof, or waivers or consents hereunder or thereunder, and (iii) any Default or Event of Default or the enforcement of any of Lessor's rights, remedies or privileges hereunder or at law or in equity, but not Lessor's legal fees and expenses in connection with the negotiation and execution of this Lease or the Financing Documents. (k) Federal Bankruptcy Code. In the event Section 1110 of Title 11 of the United States Code is amended, or if it is repealed and another statute is enacted in lieu thereof, Lessor and Lessee agree to amend this Lease and take such other action not inconsistent with this Lease as Lessor reasonably deems necessary so as to afford to Lessor the rights and benefits as such amended or substituted statute confers upon owners and lessors of aircraft similarly situated to Lessor. (l) U.S. Registration Number. At Lessee's request, Lessor shall use its best efforts to have the Aircraft registered under the United States Registration Number designated by Lessee. (m) Submission to Jurisdiction; Service of Process; Waiver of Forum Non Conveniens; Waiver of Jury Trial. Each of Lessee and Lessor hereby irrevocably agrees that any suit, action or proceeding related to this Lease or any of the other Operative Documents to which it is a party or the subject matter hereof or thereof or any of the transactions contemplated hereby and thereby may be instituted in, and submits for itself and its property to the non-exclusive jurisdiction of, (i) the courts of the State of New York in New York County and (ii) the United States District Court for the Southern District of New York. Each of Lessee and Lessor represents and warrants that it is not currently entitled to, and agrees that to the extent that Lessee or Lessor hereinafter may acquire, any immunity (including, without limitation, sovereign immunity) from jurisdiction of any court or from any legal process, it hereby, to the extent permitted by Law, waives such -114- 120 immunity, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of the above-named courts that it is immune from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper, or that this Lease or any of the other Operative Documents or the subject matter hereof or thereof or any of the transactions contemplated hereby and thereby may not be enforced in or by such courts. Each of Lessee and Lessor hereby generally consents to service of process by registered mail, return receipt requested, addressed to it at its address set forth in Exhibit C, or at such other office of Lessee or Lessor as from time to time may be designated by Lessee or Lessor (as applicable) in writing to Lessee or Lessor (as applicable), Owner Participant and Indenture Trustee. Each of Lessee and Lessor hereby agrees that its submission to jurisdiction and its designation of service of process by mail set forth above is made for the express benefit of Lessor, Lessee, Owner Participant, Indenture Trustee, each Note Holder and their successors and assigns (as applicable). Final (after all appeals) judgment (the enforcement of which has not been stayed) against either Lessee or Lessor obtained in any suit originally brought in the court of the State of New York in New York County or in the United States District of New York shall be conclusive, and, to the extent permitted by applicable Law, may be enforced in other jurisdictions by suit on the judgment, a certified or true copy of which shall be conclusive evidence of the fact and of the amount of any indebtedness or liability of Lessee therein described; provided that the plaintiff at its option may bring suit, or institute other judicial proceedings, against Lessee or Lessor, as the case may be, or any of their assets in the courts of any country or place where such Person or such assets may be found. EACH OF LESSEE AND LESSOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE OPERATIVE DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED THEREBY OR THE LESSOR/LESSEE RELATIONSHIP BEING ESTABLISHED, including, without limitation, contract claims, tort claims, breach of duty claims and other common law and statutory claims. Lessor and Lessee represent and warrant that each has reviewed this waiver with its legal counsel, and that each knowingly and -115- 121 voluntarily waives its jury trial rights following consultation with such legal counsel. THIS WAIVER IS IRREVOCABLE, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE OPERATIVE DOCUMENTS. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. (n) Limitation on Recourse. The parties hereto agree that all statements, representations, covenants and agreements made by Lessor (when made in its capacity as such and not in its individual capacity) contained in this Agreement, unless expressly otherwise stated, are made and intended only for the purpose of binding the Trust Estate and establishing the existence of rights and remedies that can be exercised and enforced against the Trust Estate. Therefore, no recourse shall be had with respect to anything contained in this Agreement (except for any express provisions that Lessor is responsible for in its individual capacity), against Lessor in its individual capacity or against any institution or person that becomes a successor trustee or co-trustee or any officer, director, trustee, servant or direct or indirect parent or controlling Person or Persons of any of them; provided that (i) this Section 21(n) shall not be construed to prohibit any action or proceeding against any party hereto for its own willful misconduct or grossly negligent conduct for which it would otherwise be liable and (ii) nothing contained in this Section 21(n) shall be construed to limit the exercise and enforcement in accordance with the terms of this Agreement or such other agreements of rights and remedies against the Trust Estate. The foregoing provisions of this Section 21(n) shall survive the termination of this Agreement and the other Operative Documents. (o) Successor Trustee. Lessee agrees that in the case of the appointment of any successor Owner Trustee pursuant to the terms of the Trust Agreement, such successor Owner Trustee shall, upon written notice by such successor Owner Trustee, succeed to all the rights, powers and title of Lessor hereunder and shall be deemed to be Lessor and the owner of the Aircraft for all purposes hereof without the necessity of any consent or approval by Lessee (subject to Section 14(d) of the Refunding Agreement) and without in any way altering the terms of this Lease or Lessee's obligations hereunder. One such appointment and designation of a successor Owner Trustee shall not exhaust the right to appoint and designate further successor Owner Trustees pursuant to the Trust Agreement, but such right may be -116- 122 exercised repeatedly as long as this Lease shall be in effect. (p) Article 2-A of the UCC. The parties hereto agree that the Original Head Lease, as amended and restated by this Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-8] (and as otherwise extended, amended, modified, renewed or supplemented), shall be governed by Article 2-A of the Uniform Commercial Code of New York. -117- 123 IN WITNESS WHEREOF, Lessor and Lessee, each pursuant to due authority, have each caused this Lease to be executed by its duly authorized officer as of the day and year first above written. Lessor: WILMINGTON TRUST COMPANY, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By: ------------------------------------- Title: Lessee: AMERICA WEST AIRLINES, INC. By: ------------------------------------- Title: -118- 124 ANNEX I to Amended and Restated Aircraft Lease Agreement DESCRIPTION OF ORIGINAL HEAD LEASE 125 EXHIBIT A to Amended and Restated Aircraft Lease Agreement STIPULATED LOSS VALUES The "Stipulated Loss Value" of the Aircraft leased hereunder during the Term shall be determined as of the date provided in the Lease and shall be an amount equal to the amount shown below as of the applicable "Stipulated Loss Value Date" set forth below. STIPULATED LOSS VALUES S/N 66 Stipulated Loss Value Date (1) (2) ____________________ (1) Thereafter, during any (i) Renewal Term or (ii) extension or deemed extension of the Term of the Lease due to the occurrence of an event described in clause (iii) to the definition of "Supplemental Rent" in the Lease, "Stipulated Loss Value Date" shall mean the ___ day of each calendar month. (2) Thereafter, such amount as determined in accordance with Section 20(ii) of the Lease. A-1 126 EXHIBIT B to Amended and Restated Aircraft Lease Agreement AIRCRAFT RECORDS AND DOCUMENTS One original (or, if greater, the number delivered to Lessee) of each of the following: A. CERTIFICATES 1. Certificate of Airworthiness (FAA) 2. Lessee to supply Radio License 2a. Certificate of Sanitary Construction B. AIRCRAFT STATUS RECORDS 3. Log Book (currently on Aircraft) 4. Airframe Maintenance Status (with time-to-go or time since last) 5. Airworthiness Directive Compliance Report 6. Modification Status report 7. Weighing Report (most recent) 8. Accident and incident report 9. List of Life Limited Components (with time-to-go) C. AIRCRAFT MAINTENANCE RECORDS (last heavy maintenance visits) 10. Test Flight Reports 11. Job Cards and Work Accomplishment Documents (copies) 12. X-ray pictures (most recent) B-1 127 D. AIRCRAFT HISTORY RECORDS 13. Log Books 14. Aircraft Maintenance History Cards 15. Mechanical Interruption Summary E. ENGINE RECORDS (for each engine) 16. Last overhaul and repair documents 17. Airworthiness Directive Compliance Report 18. List of Life Limited Components 19. Modification Status Report F. APU RECORDS 20. Last Overhaul and Repair Documents 21. Airworthiness Directive Compliance Report 22. List of Life Limited Components 23. Modification Status Report G. COMPONENT RECORDS 24. Component records maintained in accordance with a record keeping policy approved by and acceptable to the FAA to certify the status and maintenance histories of the components H. MANUALS 25. Approved Flight Manual 26. Flight Crew Operating Manual 27. Weight and Balance Manual 28. Wiring Diagram Manual 29. Illustrated Parts Catalog I. MISCELLANEOUS TECHNICAL DOCUMENTS 30. Operations Specification 31. Passenger Cabin Configuration Drawings B-2 128 J. Any other documents, manuals, reports or related information delivered with or related to the Aircraft, updated as may be required to reflect the current aircraft status. B-3 129 EXHIBIT C to Amended and Restated Aircraft Lease Agreement DEFINITIONS AND VALUES Basic Rent: During the Basic Term of the Lease, Basic Rent shall be payable in semi-annual installments, each of which shall be in an amount equal to the amount [and in ________], as set forth in Schedule I hereto. Basic Rent Payment Date: Each such date set forth as such on Schedule I hereto. Letter of Credit Face Amount: The amount set forth as such on Schedule I hereto Manufacturer: Airbus Industrie Maximum Foreign Use Percentage: The Permitted Percentages as defined in the Tax Indemnification Agreement. Payment Location: So long as the Lien of the Indenture shall remain in effect, Fleet National Bank, Account No. ____ and thereafter (and at all times with respect to Excepted Payments) to _____, for the account of ________ Account No. ____. Renewal Rent: During the Renewal Term of the Lease Renewal Rent shall be payable in installments, semi-annually in arrears. Renewal Rent Payment Date: The same day and month during each year of the Renewal Term on which Basic Rent was due during the Basic Term (the Basic Rent Payment Dates). If a Renewal Rent Payment Date shall fall on a day which is not a Business Day, any payment due on such Renewal Rent Payment Date shall be made on the next succeeding Business Day.
C-1 130 Restricted Use Period: On and after the Delivery Date until and including the last day of the Owner Participant's seventh full fiscal year after the Delivery Date. Lease Identification: A fireproof metal plate bearing the following legend: "Title to this Aircraft is held by Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee, as Lessor, which is the registered owner thereof on the U.S. FAA Aircraft Registry, and which has leased this Aircraft to America West Airlines, Inc., as Lessee" and, for so long as the Lien of the Indenture shall not have been discharged, bearing the following additional legend: "Mortgaged to The Chase Manhattan Bank as Indenture Trustee." Lessee's Address: America West Airlines, Inc. 4000 East Sky Harbor Boulevard Phoenix, Arizona 85034 Telex: 755089 (Answerback: AMERWEST) Telecopier: (602) 693-5990 Attention: Senior Vice President - Legal Affairs Lessor's Address: Wilmington Trust Company Rodney Square North Wilmington, DE 19890 Telecopier: (302) 651-8882 Attention: Corporate Trust Administration
C-2 131 EXHIBIT D-1 to Amended and Restated Aircraft Lease Agreement LEASE SUPPLEMENT NO. 3 LEASE SUPPLEMENT [GPA 1989 BN-8] NO. 3, dated June ___, 1997, between WILMINGTON TRUST COMPANY, a Delaware corporation (not in its individual capacity but solely as Owner Trustee under a Trust Agreement [GPA 1989 BN-8] dated December 19, 1989, as amended, supplemented, or otherwise modified from time to time) (together with its successors and assigns, "Lessor"), and AMERICA WEST AIRLINES, INC., a Delaware corporation (together with its successors, "Lessee"). Lessor and Lessee have heretofore entered into that certain Aircraft Lease Agreement [GPA 1989 BN-8] dated as of December 19, 1989, as Amended and Restated as of June __, 1997 (as further amended, supplemented or otherwise modified from time to time, herein called the "Lease Agreement", and the defined terms therein being hereinafter used with the same meaning) and that certain Lease Supplement [GPA 1989 BN-8] No. 1 dated December 29, 1989 ("Lease Supplement No. 1") and that certain Lease Supplement [GPA 1989 BN-8] No. 2 dated December 29, 1994 ("Lease Supplement No. 2"). The Lease Agreement provides for the execution and delivery from time to time of a Lease Supplement substantially in the form hereof for the purpose of leasing the aircraft described below (or confirming the leasing of the aircraft described below) under the Lease Agreement as and when delivered by Lessor to Lessee in accordance with the terms thereof. The Lease Agreement relates to the aircraft, parts and engines described below, and a counterpart of the Lease Agreement is attached hereto and made a part hereof, and this Lease Supplement, together with such attachment, is being filed for recordation on the date hereof with the FAA as one document. NOW, THEREFORE, in consideration of the premises and other good and sufficient consideration, Lessor and Lessee hereby agree as follows: 1. Lessor hereby confirms that it has leased to Lessee and Lessee hereby confirms that it has leased from Lessor that certain Airbus Model A320-231 commercial jet D-1 132 aircraft airframe and two IAE V2500 engines (each of which Engines has 750 or more rated takeoff horsepower or the equivalent of such horsepower) described in Schedule 1 hereto (the "Delivered Aircraft"). 2. The Delivery Date of the Delivered Aircraft is December 29, 1989. 3. The Basic Term for the Delivered Aircraft shall commence on the Delivery Date and shall end on the Expiration Date, which shall be July 5, 2013 unless the Lease Agreement is extended or deemed extended or terminated prior thereto in accordance with the terms thereof. 4. Lessee hereby agrees to and confirms its obligation to pay Rent (as defined in the Lease Agreement) in the amounts and at the times provided in the Lease Agreement. 5. Lessee hereby confirms to Lessor that (i) the Delivered Aircraft and each Engine installed thereon or belonging thereto have been duly marked in accordance with the terms of Section 6(e) of the Lease Agreement, and (ii) Lessee has accepted the Delivered Aircraft for all purposes of Lease Supplement No. 1, as further supplemented by Lease Supplement No. 2, hereof and of the Lease Agreement, and the Delivered Aircraft is (A) as far as Lessee reasonably ascertained from the acceptance procedures provided for in the Purchase Agreement, airworthy, in accordance with specifications, and in good working order and repair, it being understood that Lessee by this confirmation is not giving any warranty of any kind with respect to the Aircraft, and (B) free and clear of all Liens except Permitted Liens. 6. All of the terms and provisions of the Lease Agreement, including, without limitation, as to governing Law, are hereby incorporated by reference in this Lease Supplement No. 3 to the same extent as if fully set forth herein. 7. This Lease Supplement No. 3 may be executed in any number of counterparts; each of such counterparts, except as provided in Section 21(e) of the Lease Agreement, shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same Lease Supplement. To the extent, if any, that this Lease Supplement constitutes chattel paper (as such term is D-2 133 defined in the Uniform Commercial Code as in effect in any applicable jurisdiction), no security interest in this Lease Supplement may be created except by the transfer or possession of the counterpart containing the printed receipt therefor executed by Indenture Trustee on the signature page hereof. D-3 134 IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease Supplement No. 3 to be duly executed by its duly authorized officer on the day and year first above written. Lessor: WILMINGTON TRUST COMPANY, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By:_________________________ Title: Lessee: AMERICA WEST AIRLINES, INC. By:__________________________ Title: D-4 135 The undersigned acknowledges receipt of this original counterpart of the foregoing Lease Supplement on this _______ day of June, 1997 and consents to the terms hereof. The Chase Manhattan Bank, not in its individual capacity, but solely as Indenture Trustee By:___________________________ Title: D-5 136 SCHEDULE 1 to LEASE SUPPLEMENT NO. 3 Airbus Model A320-231 Airframe U.S. Registration No. Manufacturers Serial No. N627AW 66 Installed IAE Engines Model No. Serial No. V2500 V0033 V2500 V0041 D-6 137 EXHIBIT D-2 to Amended and Restated Aircraft Lease Agreement LETTER OF CREDIT D-7 138 EXHIBIT E to Amended and Restated Aircraft Lease Agreement RETURN CONDITION REQUIREMENTS In addition to the requirements set forth in Section 16 of the Lease, on any Return Occasion with respect to the Aircraft, Lessee, at its own cost and expense, shall return the Aircraft in compliance with the following: (1) The Aircraft shall have at all times theretofore been maintained and modified in accordance with Sections 6(d) and 9 hereof with the same care, maintenance status and consideration for the technical condition of the Aircraft as if such Aircraft were owned and were to have been kept in continued regular service by Lessee, without discrimination as to any other similar aircraft owned or leased by Lessee. (2) The Aircraft shall be clean by good commercial airline standards as on the Delivery Date with only such modifications to the Aircraft as are permitted under this Lease. (3) The Aircraft shall have installed the full complement of Engines (as used herein the term "Engines" includes engines for which title will be transferred to Lessor pursuant to Section 16(c)) and other equipment, parts, components, accessories, and loose equipment subleased hereunder or substituted therefor, each such item functioning in accordance with its intended use. (4) Lessee, at Lessor's request, shall activate any systems installed on the Aircraft previously deactivated by Lessee and shall assure each such system is properly functioning for its intended use. (5) Each Engine shall have just completed a hot and cold section baroscope and/or radiographic isotope inspection by Lessor (at Lessee's cost and expense) of the low and high pressure compressors and turbine area, and shall have just completed engine condition runs, and any discrepancies detected shall be corrected at Lessee's cost and expense in accordance with the Manufacturer's maintenance policies and procedures. (6) Lessee's name, logo, and all other exterior markings shall have been removed in a good and workmanlike manner from the Aircraft and the Aircraft shall have been E-1 139 repainted in a good and workmanlike manner in the livery specified by Lessor. (7) The Aircraft shall have simultaneously with such return completed a "block 'C' Check" or the equivalent level designated check or checks (inclusive of all phases of a "block 'C' Check" or equivalent level designated check if the Maintenance Program is a "phase" program), in accordance with Lessee's Maintenance Program such that all inspections and airworthiness directives having terminating actions due within the next "block 'C' Check" or equivalent level designated check(s), and all other actions as per the Manufacturer's minimum recommendations in its then current maintenance planning document for such check or checks, shall have been accomplished immediately prior to redelivery. (8) Neither the Aircraft nor any Engine shall have any scheduled or unscheduled open or deferred maintenance items or placards. (9) No Engine shall be on "Watch" and each Engine shall comply with Lessee's Maintenance Program without waiver, deviations or exceptions. (10) Each landing gear assembly shall have no less than 50% of allowable hours or cycles, whichever is the more limiting factor, under Lessee's Maintenance Program, remaining until the next scheduled overhaul or replacement. (11) Each Engine shall have not less than 5,000 hours or 5,000 cycles, whichever is the more limiting factor, remaining on any hour or cyclic limited part, and each Engine shall have not more than 5,000 hours or 5,000 cycles, whichever is the more limiting factor, since the last engine compressor refurbishment, and each Engine shall have not more than 2,500 hours or 2,500 cycles, whichever is the more limiting factor, since its last turbine restoration, based on Lessee's historical experience of engine on-wing service life or based on Lessee's hard time engine overhaul limit if in effect. The Engine hour and cycle limits described herein shall be in accordance with Lessee's Maintenance Program and the manufacturer's mandatory hour and cyclic life limits and presumes an hour-to-cycle ratio of two (2.0) hours to one (1) cycle. If the actual hour-to-cycle ratio is less than 2.0:1, then the cyclic limit amounts described herein shall be increased proportionately. E-2 140 (12) Each cycle, time or calendar controlled component in accordance with Lessee's Maintenance Program or the Manufacturer's mandatory life limits shall have no less than twelve months or 5,000 hours or 5,000 cycles, whichever is the more limiting factor, remaining until the next scheduled overhaul or replacement or 100% of the allowable time if less than twelve months. (13) The Airframe shall be returned to Lessor with not less than fifty percent (50%) of the total scheduled period between scheduled Major Structural Inspections of the most comprehensive type (currently referred to as an "eight year" heavy structural inspection" or "8C" inspection under the Manufacturer's maintenance planning document in effect on the Delivery Date) with respect to allowable hours, cycles or calendar months, whichever is the more limiting factor, remaining until the next scheduled Major Structural Inspection of the most comprehensive type, including, without limitation, the replacement of any safe-life limited parts, required in accordance with the Lessee's then current Maintenance Program or the Manufacturer's mandatory life limits and, therefore, at a minimum, having just completed a "four-year heavy structural inspection" or "4C" inspection as referred to in the Manufacturer's maintenance planning document in effect on the Delivery Date. (14) All software associated with or relating to any on-board avionic equipment must be delivered to Lessor and be in a condition complying with the Manufacturer's then recommended standards. (15) Each oil tank on the Aircraft shall be full and the fuel tanks shall contain as much fuel as such tanks contained at the time the Aircraft was accepted by Lessee, or, in the case of insufficient quantities, an appropriate payment will be made by Lessee at the then current market price of oil or fuel, as the case may be. E-3 141 EXHIBIT F-1 to Amended and Restated Aircraft Lease Agreement FOREIGN AIR CARRIERS Aer Lingus Air Canada Air France (Compagnie Nationale Air France) Air New Zealand, Ltd. All Nippon Airways Alitalia - Italy's World Airlines Ansett Airlines of Australia Australian Airlines Austrian Airlines (Oesterreichische Luftverkehrs AG) British Airways Canadian Airlines International Ltd. Deutsche Lufthansa Aktiengesellschaft (Lufthansa German Airlines) Finnair Oy Iberia Japan Air Lines, Co., Ltd (JAL) KLM - Royal Dutch Airlines (Koninklijke Luchtvaart Maatschappij) Korean Air Malaysian Airlines QANTAS Sabena Belgian World Airlines (Societe Anonyme Belge D'Exploitation De La Navigation Aerienne) Scandinavian Airlines Systems (SAS) Singapore Airlines Swissair (Swiss Air Transport Company Ltd.) TAP Air Portugal (Transportes Aeros Portugeses) Thai Airways International Ltd. Varig S.A. (Viacao Aerea Rio Grandense S.A.) (a) Lessor may at any time, by written notice to Lessee, propose the deletion of particular airlines from the above list of Foreign Air Carriers (as the same may be amended pursuant to this provision) based upon Lessor's reasonable judgment. Lessee may at any time, by written notice to Lessor, propose the addition of particular airlines to such list of Foreign Air Carriers based upon Lessee's reasonable judgment and which are comparable to the above airlines. (b) If Lessee has not objected in writing to the deletion of a particular airline proposed by Lessor as provided in paragraph (a) of this Exhibit, or if Lessor has not objected in writing to the addition of a particular F-1 142 airline proposed by Lessee as provided in paragraph (a), in each case within 30 days after receipt of notice of such proposal, the list of Foreign Air Carriers shall be deemed amended without further act to delete or add such airline. If Lessee or Lessor delivers a timely objection in writing to a proposal made by the other pursuant to paragraph (a), each party agrees to consult promptly at the request of the other in a good-faith effort to resolve the disagreement through negotiation; provided, however, that an airline which Lessor has proposed to delete shall be deleted from such list if there will be at least twenty (20) (or such lesser number as Lessor and Lessee shall reasonably determine, if the number of airlines of a type similar to the airlines listed above which may be included within the definition of Foreign Air Carriers is substantially reduced as a result of consolidation in the airline industry) other airlines remaining on such list after giving effect to such deletion and any other deletions then proposed by Lessor. (c) Notwithstanding any other provision hereof, no addition shall be made, and an airline shall be deleted from such list if, such airline would not be permitted to be a lessee under the provisions of the Lease, and no deletion of an airline from the list of Foreign Air Carriers pursuant to this Exhibit shall affect any existing sublease or other agreement providing for transfer of possession of the Aircraft, the Airframe or any Engine or Part which was permitted under the Lease at the time entered into, or preclude any subsequent renewal or extension of such sublease or other agreement. F-1 143 EXHIBIT F-2 to Amended and Restated Aircraft Lease Agreement PERMITTED FOREIGN SUBLESSEE DOMICILES Argentina Malta Australia Mexico Austria Morocco Bahamas Netherlands Belgium New Zealand Brazil Norway Canada Paraguay Chile Philippines Denmark Portugal Egypt Republic of China (Taiwan)* Finland Singapore France South Africa Germany South Korea Greece Spain Hungary Sweden Iceland Switzerland India Thailand Indonesia Tobago Ireland Trinidad Italy United Kingdom Japan Uruguay Luxembourg Venezuela Malaysia - ------------------------ * So long as on the date of entering into the proposed sublease such country and the United States of America have diplomatic relations at least as good as those in effect on the Restatement Date. (a) Lessor may at any time, by written notice to Lessee, propose the deletion of a particular country from the above list of Permitted Foreign Sublessee Domiciles (as the same may be amended pursuant to this provision) based upon Lessor's reasonable judgment. Lessee may at any time, by written notice to Lessor, propose the addition of particular countries which are comparable to the above countries to such list of Permitted Foreign Sublessee Domiciles based upon Lessee's reasonable judgment. F-2 144 (b) If Lessee has not objected in writing to the deletion of a particular country proposed by Lessor as provided in paragraph (a) of this Exhibit, or if Lessor has not objected in writing to the addition of a particular country proposed by Lessee as provided in paragraph (a), in each case within 30 days after receipt of notice of such proposal, the list of Permitted Foreign Sublessee Domiciles shall be deemed amended without further act to delete or add such country. If Lessee or Lessor delivers a timely objection in writing to a proposal made by the other pursuant to paragraph (a), each party agrees to consult promptly at the request of the other in a good-faith effort to resolve the disagreement through negotiation. (c) Notwithstanding any other provision hereof, no deletion of a country from the list of Permitted Foreign Sublessee Domiciles pursuant to this Exhibit shall affect any existing sublease or other agreement providing for transfer of possession of the Aircraft, the Airframe or any Engine or Part which was permitted under the Lease at the time entered into, or preclude any subsequent renewal or extension of such sublease or other agreement. F-2 EX-4.17 15 AMENDED & RESTATED AIRCRAFT LEASE 1 EXHIBIT 4.17 THE RIGHTS OF LESSOR UNDER THIS AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT [GPA 1989 BN-11] AND IN THE AIRCRAFT COVERED HEREBY WILL BE OR HAVE BEEN ASSIGNED TO, AND ARE OR WILL BE SUBJECT TO A SECURITY INTEREST IN FAVOR OF, THE CHASE MANHATTAN BANK, FORMERLY KNOWN AS CHEMICAL BANK, SUCCESSOR BY MERGER TO MANUFACTURERS HANOVER TRUST COMPANY, AS INDENTURE TRUSTEE UNDER AN AMENDED AND RESTATED TRUST INDENTURE AND SECURITY AGREEMENT [GPA 1989 BN-11] DATED AS OF JUNE __, 1997. AS PROVIDED IN SECTION 21(e) HEREOF, TO THE EXTENT, IF ANY, THAT THIS AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT 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 AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT MAY BE CREATED THROUGH THE TRANSFER OF POSSESSION OF ANY COUNTERPART OTHER THAN THE ORIGINAL COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE CHASE MANHATTAN BANK, AS INDENTURE TRUSTEE, ON THE SIGNATURE PAGE THEREOF. - -------------------------------------------------------------------------------- AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT [GPA 1989 BN-11] Dated as of December 19, 1989 Amended and Restated as of June __, 1997 between WILMINGTON TRUST COMPANY, not in its individual capacity except as otherwise expressly provided herein, but solely as Owner Trustee under a Trust Agreement [GPA 1989 BN-11] dated as of December 19, 1989, as amended Lessor and AMERICA WEST AIRLINES, INC. Lessee One Airbus A320-231 Aircraft Manufacturer's Serial No. 81 U.S. Registration No. N632AW - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ---- Section 1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 2. Agreement to Lease . . . . . . . . . . . . . . . . . . . . . . 21 Section 3. Delivery and Acceptance; Term . . . . . . . . . . . . . . . . 21 (a) Time of Delivery . . . . . . . . . . . . . . . . . . . . 21 (b) [Intentionally Left Blank] . . . . . . . . . . . . . . . 21 (c) Acceptance of Aircraft . . . . . . . . . . . . . . . . . 22 (d) Term of Lease . . . . . . . . . . . . . . . . . . . . . 22 Section 4. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 (a) Rent . . . . . . . . . . . . . . . . . . . . . . . . . . 22 (b) Minimum Payments . . . . . . . . . . . . . . . . . . . . 22 (c) Date, Place and Method of Payment . . . . . . . . . . . . 23 (d) Prohibition Against Setoff, Counterclaim, Etc. . . . . . 24 Section 5. Representations, Warranties and Covenants . . . . . . . . . . . 25 (a) Warranties and Disclaimer of Warranties . . . . . . . . . 25 (b) Representations and Warranties of Lessor . . . . . . . . 27 (c) No Amendments to Financing Documents . . . . . . . . . . 27 (d) Suppliers' Warranties . . . . . . . . . . . . . . . . . . 27 Section 6. Possession and Use . . . . . . . . . . . . . . . . . . . . . . 28 (a) Possession . . . . . . . . . . . . . . . . . . . . . . . 28 (b) Reciprocal Recognition of Rights . . . . . . . . . . . . 35 (c) Lawful Insured Operations . . . . . . . . . . . . . . . . 35 (d) Maintenance . . . . . . . . . . . . . . . . . . . . . . . 37 (e) Registration and Insignia . . . . . . . . . . . . . . . . 38 Section 7. Inspection. . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 8. Additional Covenants of Lessee . . . . . . . . . . . . . . . . 40 (a) Financial Information . . . . . . . . . . . . . . . . . . 40 (b) Maintenance of Corporate Existence . . . . . . . . . . . 41 (c) Maintenance of Status . . . . . . . . . . . . . . . . . . 42 (d) Payment of Taxes . . . . . . . . . . . . . . . . . . . . 42 (e) Consolidation, Merger, Etc. . . . . . . . . . . . . . . . 42 (f) Information . . . . . . . . . . . . . . . . . . . . . . . 43 (g) Place of Business . . . . . . . . . . . . . . . . . . . . 44 (h) Certain Limitations on Use . . . . . . . . . . . . . . . 44 (i) Section 1110 . . . . . . . . . . . . . . . . . . . . . . 45 (j) Permits and Licenses . . . . . . . . . . . . . . . . . . 45 (k) Security Opinion; Annual Certificate . . . . . . . . . . 45 (l) Letter of Credit . . . . . . . . . . . . . . . . . . . . 47 Section 9. Replacement of Parts; Alterations, Modifications and Additions 49 (a) Replacement of Parts . . . . . . . . . . . . . . . . . . 49 (b) Alterations, Modifications and Additions . . . . . . . . 50 (c) Pooling . . . . . . . . . . . . . . . . . . . . . . . . . 52
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Page Section 10. General Tax Indemnification . . . . . . . . . . . . . . . 53 (a) Indemnity . . . . . . . . . . . . . . . . . . . . . . . . 53 (b) Exclusions . . . . . . . . . . . . . . . . . . . . . . . 56 (c) Covered Income Tax . . . . . . . . . . . . . . . . . . . 59 (d) Reports and Returns . . . . . . . . . . . . . . . . . . . 60 (e) After-Tax Basis . . . . . . . . . . . . . . . . . . . . . 61 (f) Tax Benefit . . . . . . . . . . . . . . . . . . . . . . . 61 (g) Payment . . . . . . . . . . . . . . . . . . . . . . . . . 62 (h) Contest . . . . . . . . . . . . . . . . . . . . . . . . . 62 (i) Refund . . . . . . . . . . . . . . . . . . . . . . . . . 64 (j) Diligence . . . . . . . . . . . . . . . . . . . . . . . . 64 (k) Affiliated Group . . . . . . . . . . . . . . . . . . . . 64 (l) Survival . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 11. Loss, Damage and Requisition . . . . . . . . . . . . . . 64 (a) Event of Loss with Respect to the Airframe . . . . . . . 65 (b) Event of Loss with Respect to an Engine . . . . . . . . . 67 (c) Conveyance of Replacement Airframe . . . . . . . . . . . 68 (d) Application of Proceeds and Payments . . . . . . . . . . 71 (e) Requisition for Use by Government with Respect to the Aircraft . . . . . . . . . . . . . . . . . . . . . . 71 (f) Application in Default . . . . . . . . . . . . . . . . . 72 Section 12. Insurance . . . . . . . . . . . . . . . . . . . . . . . . 72 (a) Public Liability and Property Damage Insurance. . . . . 72 (b) Insurance Against Loss or Damage . . . . . . . . . . . . 74 (c) Application of Insurance Proceeds for an Event of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . 77 (d) Application of Insurance Proceeds for Other than an Event of Loss . . . . . . . . . . . . . . . . . . . . 78 (e) Application in Default . . . . . . . . . . . . . . . . . 78 (f) Certificates . . . . . . . . . . . . . . . . . . . . . . 79 (g) Reinsurance . . . . . . . . . . . . . . . . . . . . . . . 79 (h) Storage . . . . . . . . . . . . . . . . . . . . . . . . . 80 (i) Amounts Held . . . . . . . . . . . . . . . . . . . . . . 80 (j) After the Term . . . . . . . . . . . . . . . . . . . . . 80 (k) Governmental Indemnity . . . . . . . . . . . . . . . . . 81 Section 13. General Indemnity . . . . . . . . . . . . . . . . . . . . 81 Section 14. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Section 15. Protection of Title and Further Assurances . . . . . . . 87 Section 16. Return of Aircraft and Records . . . . . . . . . . . . . 89 (a) Return . . . . . . . . . . . . . . . . . . . . . . . . . 89 (b) Status Upon Return . . . . . . . . . . . . . . . . . . . 89 (c) Engines . . . . . . . . . . . . . . . . . . . . . . . . . 90 (d) Records and Documents . . . . . . . . . . . . . . . . . . 91 (e) Condition of Aircraft . . . . . . . . . . . . . . . . . . 92 (f) Final Inspection . . . . . . . . . . . . . . . . . . . . 92 (g) Aircraft Records and Documents . . . . . . . . . . . . . 93 (h) Corrections and Subsequent Corrections . . . . . . . . . 93
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Page (i) Functional Flight Check . . . . . . . . . . . . . . . . . 94 (j) Export Certificate of Airworthiness . . . . . . . . . . . 94 (k) Service Bulletin and Modification Kits . . . . . . . . . 94 (l) Storage Upon Return . . . . . . . . . . . . . . . . . . . 95 (m) Resale/Release Cooperation . . . . . . . . . . . . . . . 95 Section 17. Events of Default . . . . . . . . . . . . . . . . . . . . 95 Section 18. Remedies . . . . . . . . . . . . . . . . . . . . . . . . 97 Section 19. Security for Obligations . . . . . . . . . . . . . . . . 103 Section 20. Renewal Option . . . . . . . . . . . . . . . . . . . . . 104 Section 21. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 105 (a) Severability, Amendment, and Construction . . . . . . . . 105 (b) GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . 106 (c) Notices . . . . . . . . . . . . . . . . . . . . . . . . . 106 (d) Lessor's Right to Perform for Lessee . . . . . . . . . . 106 (e) Counterparts . . . . . . . . . . . . . . . . . . . . . . 107 (f) Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . 107 (g) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 107 (h) Investment of Funds . . . . . . . . . . . . . . . . . . . 107 (i) Entire Agreement; Amendment . . . . . . . . . . . . . . . 108 (j) Expenses . . . . . . . . . . . . . . . . . . . . . . . . 108 (k) Federal Bankruptcy Code . . . . . . . . . . . . . . . . . 108 (l) U.S. Registration Number . . . . . . . . . . . . . . . . 109 (m) Submission to Jurisdiction; Service of Process; Waiver of Forum Non Conveniens; Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . . . 109 (n) Limitation on Recourse . . . . . . . . . . . . . . . . . 110 (o) Successor Trustee. . . . . . . . . . . . . . . . . . . . 111 (p) Article 2-A of the UCC. . . . . . . . . . . . . . . . . . 111
-iii- 5 ANNEXES Annex I - Description of Original Head Lease EXHIBITS Exhibit A - Stipulated Loss Values Exhibit B - Aircraft Records and Documents Exhibit C - Definitions and Values Exhibit D-1 - Lease Supplement No. 3 Exhibit D-2 - Letter of Credit Exhibit E - Return Condition Requirements Exhibit F-1 - Foreign Air Carriers Exhibit F-2 - Permitted Foreign Sublessee Domiciles -iv- 6 AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT THIS AMENDED AND RESTATED AIRCRAFT LEASE AGREEMENT dated as of December 19, 1989 and amended and restated as of June ___, 1997 is entered into between WILMINGTON TRUST COMPANY, not in its individual capacity except as otherwise expressly provided herein, but solely as Owner Trustee under a Trust Agreement [GPA 1989 BN-11] dated as of December 19, 1989, as amended, and with its principal place of business at Rodney Square North, Wilmington, Delaware 19890 (together with its successors and permitted assigns, "Lessor"), and AMERICA WEST AIRLINES, INC., a Delaware corporation, with its chief executive office at 4000 East Sky Harbor Boulevard, Phoenix, Arizona 85034 (together with its successors and permitted assigns, "Lessee"). W I T N E S S E T H: WHEREAS, Lessor and Lessee desire to amend and, solely for the convenience of the parties, restate in its entirety the Original Head Lease (as hereinafter defined) as of the Restatement Date (as hereinafter defined) as hereinafter set forth; NOW, THEREFORE, in consideration of the mutual promises herein contained, Lessor and Lessee agree as follows: Section 1. Definitions. The following terms shall have the following respective meanings for all purposes of this Lease (including the Recitals) and shall be equally applicable to both the singular and the plural forms of the terms defined herein: As used herein, the terms "Assigned Sublease", "Equipment Notes", "Excepted Payments", "Indenture Supplement", "Note Holder", "Pass Through Trust", "Pass Through Trust Agreement", "Pass Through Trustee", "Past Due Rate", "Principal Amount", "Refinancing Transaction", "Refunding Agreement", "Restatement Date", "Sublease Assignment", "Trust Company" and "Trust Indenture Estate" shall have the meanings specified in the Indenture; the terms "Intercreditor Agreement", "Liquidity Facility", "Liquidity Provider" and "Subordination Agent" shall have the meanings specified in the Intercreditor Agreement (as defined in the Pass Through Trust Agreement); and the terms "OP Guarantee", "Lease Amendment No. 1" and "SLV Letter Agreement" shall have the meanings specified in the Refunding Agreement. 7 "Affiliate" shall mean, with respect to any specified Person, any other Person which, directly or indirectly, owns or controls, is controlled by or is under common control with such specified Person. Control will be deemed to exist based on (i) ownership of 25% or more of the voting securities of a Person or (ii) the power to direct or elect or cause the direction or election of the management and policies of a Person whether by contract or otherwise. "Airbus Industrie" shall mean Airbus Industrie G.I.E., a groupement d'interet economique formed under the laws of the French Republic, and its successors and assigns. "Aircraft" shall mean the Airframe leased hereunder and described in Lease Supplement No. 1 (or any airframe from time to time substituted for such Airframe pursuant to Section 11(a)(i) hereof) together with the (i) two IAE Model V2500 Engines described in Lease Supplement No. 1 (or any Engine substituted therefor hereunder) with respect to such Airframe, whether or not any such initial or substituted Engines may from time to time no longer be installed on the Airframe or may be installed on any other airframe, (ii) Parts or components thereof, (iii) spare parts or ancillary equipment or devices furnished therewith under this Lease (including any separate equipment described on one or more Lease Supplements hereto), (iv) the Aircraft Records and Documents and all other logs, manuals and records with respect to such Aircraft, and (v) all substitutions, replacements and renewals of any and all thereof. "Aircraft Records and Documents" shall mean the items identified in Exhibit B hereto, all of which shall be maintained in the English language. "Airframe" shall mean (a) the Airbus Industrie model A320-231 aircraft (except Engines or engines from time to time installed thereon) described in Lease Supplement No. 1 and leased by Lessor to Lessee hereunder, and any such model aircraft (except Engines or engines from time to time installed thereon) which may from time to time be substituted for such aircraft (except Engines or engines from time to time installed thereon) pursuant to Section 11(a)(i); and (b) any and all Parts so long as the same shall be incorporated or installed on or attached to the Airframe, or so long as title thereto shall remain vested in Lessor in accordance with the terms of Section 9 hereof after removal from the Airframe; provided, however, that at such time as an aircraft (except Engines or engines from time to time -2- 8 installed thereon) shall be deemed part of the property leased hereunder in substitution for the Airframe pursuant to the applicable provisions hereof and the replacement Airframe shall have been subjected to the Lien of the Indenture (if the Lien of the Indenture has not been discharged), the replaced Airframe shall cease to be the Airframe hereunder. "Appraisal Procedure" shall mean the following procedure for determining the "fair market sales value" or "fair market rental value" of the Aircraft, Airframe, an Engine or a Part. Except as provided in Section 18, "fair market sales value" or "fair market rental value" shall mean the value that would be obtained in an arm's-length transaction between an informed and willing seller or lessor, as the case may be, and an informed and willing buyer or lessee, as the case may be, both under no compulsion to sell and purchase or to lease (and other than a lessee in possession or a used equipment scrap dealer), as the case may be, as such value is determined by an appraisal which assumes: (i) that such Aircraft, such Airframe, such Engine or such Part is unencumbered by this Lease (or any sublease) or any of the other Operative Documents or any of the Financing Documents and the terms thereof; (ii) that such Aircraft, Airframe, Engine or Part has been maintained in all respects in accordance with the terms of this Lease (whether or not in fact in such condition), (iii) that such Aircraft, Airframe, Engine or Part meets the return conditions specified in Section 16 and Exhibit E (whether or not in fact meeting such conditions) and (iv) that Lessee has removed the Removable Parts entitled to be removed under Section 9(b) (it being agreed that no such removal is permitted in connection with an appraisal pursuant to Section 18) and replaced any part which was removed from the Aircraft as a result of such Removable Part being installed; provided, however, that costs of removal from the location of current use and costs of sale shall not be a consideration in determining such value except in connection with any determination of "fair market sales value" or "fair market rental value" pursuant to Section 18; and provided, further, that any determination of "fair market sales value" or "fair market rental value" pursuant to Section 18 shall be on an "as is, where is" basis in its actual condition and location subject to this Lease and any sublease and any and all Liens thereon (other than a Lessor's Lien or Lenders' Lien). Lessor and Lessee shall, except for any appraisal pursuant to Section 18 in which case only Lessor shall select such appraiser (which appraiser does not have to be acceptable to Lessee), select an independent -3- 9 nationally-recognized aircraft appraiser, mutually acceptable to each of them, who shall make the determination as to the "fair market sales value" or "fair market rental value" of such Aircraft, Airframe, Engine or Part for which such appraisal is to be conducted. If Lessor and Lessee fail to agree upon a mutually acceptable appraiser within ten (10) days, then each of Lessor and Lessee shall select an appraiser and such determination shall be made by such appraisers (if either party shall fail to appoint an appraiser within ten (10) days after notice from the other party of the selection of its appraiser, then the appraisal made by the other party's appraiser shall be determinative). If the two appraisers chosen pursuant to the preceding sentence fail to agree upon a determination of the "fair market sales value" or "fair market rental value" of such Aircraft, Airframe, Engine or Part within twenty (20) days after their appointment, then such appraisers shall mutually choose a third appraiser within ten (10) days thereafter, provided that if such appraisers fail to mutually choose a third appraiser within said 10-day period, such appointment shall be made by the American Arbitration Association (or any successor) in New York, New York, and the three appraisers so chosen shall each make such determination. The appraisal determined by each of the three appraisers chosen pursuant to the preceding sentence shall be averaged and the appraisal furthest from the average of the three appraisals shall be disregarded. The appraisal determined by each of the two remaining appraisers shall be averaged and such average shall be the appraised "fair market sales value" or "fair market rental value" of such Aircraft, Airframe, Engine or Part. Lessee shall bear all the fees and expenses of the Appraisal Procedure. "Approved Broker" shall mean any reputable insurance broker of recognized responsibility and standing experienced in aircraft insurance. "Approved Insurers" shall mean any reputable and creditworthy insurance company of recognized responsibility and standing experienced in aircraft insurance. "Basic Rent" for the Aircraft shall mean the Basic Rent specified in Exhibit C and payable throughout the Basic Term for the Aircraft pursuant to Section 4(a)(i). "Basic Rent Payment Date" shall mean each day determined in accordance with Exhibit C upon which a payment of Basic Rent becomes payable. If a Basic Rent Payment Date shall fall on a day which is not a Business Day, any payment -4- 10 due on such Basic Rent Payment Date shall be made on the next succeeding Business Day. "Basic Term" shall mean the period specified in Lease Supplement No. 3. "Business Day" shall mean any day other than a Saturday, Sunday or other day on which banking institutions in New York, New York or Hartford, Connecticut are authorized or required by Law to be closed. "Buyer Furnished Equipment" shall mean the equipment which was to be furnished by Braniff, Inc. or, if applicable, Original Head Lessee and installed on the Aircraft pursuant to Clause 18 of the Purchase Agreement, and any similar equipment furnished to Lessee. "Certificated Air Carrier" shall mean any corporation (except the United States Government) domiciled in the United States of America and holding a Certificate of Convenience and Necessity issued under Section 41102(a) of the Federal Aviation Act by the Department of Transportation or any predecessor or successor agency thereto, or, in the event such Certificates shall no longer be issued, any corporation (except the United States Government) domiciled in the United States of America and legally engaged in the business of transporting for hire passengers or cargo by air predominantly to, from or between points within the United States of America, and, in either event, operating commercial jet aircraft, which also is a citizen of the United States (as defined in Section 40102 of the Federal Aviation Act) holding an air carrier operating certificate issued by the Secretary of Transportation pursuant to chapter 447 of the Federal Aviation Act for aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of cargo so as to fall within the purview of 11 U.S.C. Section 1110 or any analogous statute. "Civil Reserve Air Fleet Program" shall mean the Civil Reserve Air Fleet Program administered by the United States Government and authorized under 10 U.S.C. Section 9511, et seq., as amended, or any substantially similar or substitute program of the United States Government. "Claims" shall have the meaning specified in Section 13. -5- 11 "Code" shall mean the Internal Revenue Code of 1986, as amended and the rules and regulations promulgated thereunder. "Commonly Controlled Person" shall mean an entity, whether or not incorporated, which is under common control with Lessee within the meaning of Section 414(b) or (c) of the Code. "Consent and Guaranty" shall mean the Amended and Restated Consent and Guaranty of Airbus Industrie, dated as of May 1, 1985, as amended and restated as of December 30, 1988, in the form attached to the Purchase Agreement. "Default" shall mean an event or condition which would constitute an Event of Default with the lapse of time or the giving of notice or both. "Delivery Date" shall mean December 29, 1989, being the date the Aircraft was delivered to and accepted by the Original Head Lessee as Lessee hereunder for all purposes of this Lease. "$" and "dollars" shall mean the lawful currency of the United States of America. "Engine" shall mean (i) each of the two IAE Model V2500 engines listed by manufacturer's serial number in Lease Supplement No. 1 and initially installed on the Airframe covered by such Lease Supplement, whether or not from time to time thereafter no longer installed on the Airframe or installed on any other aircraft or airframe, and (ii) any replacement engine which may from time to time be substituted, pursuant to Section 6(a), 11(a), 11(b) or 16(c), for any Engine leased hereunder; together in each case with any and all Parts incorporated or installed in or attached thereto or any and all Parts removed therefrom so long as title thereto after removal from such Engine shall remain vested in Lessor in accordance with the terms of Section 9 hereof. Except as otherwise set forth herein, at such time as a replacement engine shall be so substituted and leased hereunder and the replacement engine shall have been subjected to the Lien of the Indenture (if the Lien of the Indenture has not been discharged), such replaced Engine shall cease to be an Engine hereunder. The term "Engines" means, as of any date of determination, both Engines then leased hereunder. -6- 12 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, as from time to time in effect. "Event of Default" shall have the meaning specified in any one or more clauses in Section 17. "Event of Loss" shall mean any of the following events with respect to the Aircraft, Airframe or either Engine: (a) loss of such property or the use thereof due to theft or disappearance for a period in excess of sixty (60) consecutive days, but in no event later than the last day of the Term; (b) destruction or damage of such property that renders repair uneconomic or such property permanently unfit for normal use by Lessee (or, if a Permitted Sublease is in effect, the Permitted Sublessee) for any reason whatsoever; (c) any loss or disappearance of or damage to or destruction of such property which results in an insurance settlement with respect to such property on the basis of an actual or a constructive total loss; (d) the condemnation, confiscation, appropriation, seizure or requisition of title to any such property by any Governmental Entity which results in the loss of title by Lessor for ten (10) days or more but excluding requisition for use or hire which does not involve requisition of title; (e) the condemnation, confiscation, appropriation, seizure or requisition of the use of any such property by any Governmental Entity (other than a requisition for use by the federal government of the United States or any instrumentality or agency thereof bearing the full faith and credit of the United States of America), which in any such case shall have resulted in the loss of possession thereof by Lessee for a period in excess of the earlier of ninety (90) consecutive days or the last day of the Term (or for such shorter period ending on the date which is the next Business Day after the date of receipt of an insurance settlement with respect to such property on the basis of a total loss); (f) the requisition for use of such property by the federal government of the United States or any agency or instrumentality thereof bearing the full faith and credit of the United States of America, which purports to or does continue beyond the Term; (g) as a result of any law, rule, regulation, order or other action by the FAA, the Department of Transportation or any other Governmental Entity having jurisdiction, the use of such Aircraft, Airframe or Engine in the normal course of Lessee's (or, if a Permitted Sublease is in effect, the Permitted Sublessee's) business of air transportation of passengers shall have been prohibited for a period of six (6) consecutive months, unless Lessee (or the Permitted Sublessee), -7- 13 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 such normal use of such item of equipment by Lessee (or the Permitted Sublessee), or, in any event, if such normal use shall have been so prohibited by any such Governmental Entity for a period of twelve (12) consecutive months or is continuing on the last day of the Term; or (h) as otherwise provided herein. 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 which is a part of such Aircraft. An Event of Loss with respect to an Engine shall not, absent an Event of Loss with respect to the Airframe, be deemed an Event of Loss with respect to the Airframe. "Excluded Property" shall have the meaning set forth in Section 9(b) hereto. "Expiration Date" shall mean the date specified in Lease Supplement No. 3, on which date the Basic Term of this Lease shall expire. "FAA" shall mean the Federal Aviation Administration of the United States Department of Transportation or any successor agency. "FAA Bills of Sale" shall mean, collectively, (i) the Bill of Sale for the Aircraft on AC Form 8050-2, dated the Delivery Date, from Manufacturer's Subsidiary to the Original Head Lessee, and (ii) the Bill of Sale for the Aircraft on AC Form 8050-2, dated the Delivery Date, from the Original Head Lessee to Lessor. "Federal Aviation Act" shall mean the sections of Title 49 of the United States Code relating to aviation, as amended and in effect from time to time, or any similar legislation of the United States of America enacted in substitution or replacement thereof. "Financials" shall mean Lessee's most recent fiscal year-end audited consolidated balance sheet and statements of income and cash flow for the period then ending, copies of which for the fiscal year ended December 31, 1996, have been provided to Lessor prior to the date hereof. "Financing Documents" shall mean the Lease Agreement, each Lease Supplement, the Lease Amendment No. 1, the Trust Agreement, each Trust Supplement, the Indenture, -8- 14 each Indenture Supplement, the Refunding Agreement, the Equipment Notes issued under the Indenture, the Intercreditor Agreement, each Liquidity Facility, each Pass Through Trust Agreement and each supplement thereto and any certificate delivered or entered into in accordance with the foregoing, as amended, supplemented or otherwise modified. "Foreign Air Carrier" shall mean any air carrier listed in Exhibit F-1, as amended, supplemented or otherwise modified from time to time, whose principal place of business and legal domicile at the time of entering into the applicable sublease is located in a country listed on Exhibit F-2, as amended, supplemented or otherwise modified from time to time, and not prohibited by the terms of the insurance then in effect, with which the United States has diplomatic or, such as in the case of Taiwan, similar relations, in each case which is obligated under the applicable sublease to perform all maintenance required by applicable foreign governmental standards made mandatory to the Aircraft by such jurisdiction and, to the extent not inconsistent therewith, all FAA-airworthiness directives and other requirements made mandatory to the Aircraft by the FAA. "GAAP" shall mean United States generally accepted accounting principles and practices consistently applied as in effect from time to time, which shall include the official interpretations thereof by the Financial Accounting Standards Board. All accounting terms not otherwise defined herein shall have the meanings assigned to such terms in accordance with GAAP. "Governmental Entity" shall mean and include (i) any national government, political subdivision thereof, or local jurisdiction therein; (ii) any board, commission, department, division, organ, instrumentality, court, or agency of any thereof, however constituted; and (iii) any association, organization, or institution of which any entity described in (i) or (ii) above is a member or to whose jurisdiction any such entity is subject or in whose activities any such entity is a participant but only to the extent that any entity described in clause (i), (ii) or (iii) has jurisdiction over Lessor, Lessee, Indenture Trustee, Note Holders, any sublessee, the Aircraft or its operations. "Head Lessor's Lien" shall mean a "Lessor's Lien" under and as defined in the Original Head Lease. -9- 15 "IAE" shall mean IAE International Aero Engines AG, a company organized and existing under the laws of Switzerland. "Indemnitee" shall mean Lessor (in its individual capacity and as trustee under the Trust Agreement), the Trust Estate, Owner Participant, the general partners (and not the limited partners, if any) of Owner Participant, the Trust Indenture Estate, Indenture Trustee (in its individual capacity and as trustee under the Indenture), each Pass Through Trust, each Pass Through Trustee (in its individual capacity and as trustee under the Pass Through Trusts), the Subordination Agent and each Liquidity Provider, and their respective successors and permitted assigns, and any combination thereof and their respective officers, directors, agents, servants, employees, subsidiaries, Affiliates and shareholders. "Indenture" shall mean the First Amended and Restated Trust Indenture and Security Agreement [GPA 1989 BN-11] dated as of June ___, 1997, as the same may be further amended, supplemented or modified from time to time, between Indenture Trustee and Lessor. The term "Indenture" shall also include the Indenture Supplements entered into pursuant to the terms of the Indenture. "Indenture Trustee" shall mean the bank or trust company serving as Indenture Trustee under the Indenture, and its successors and assigns. "Interest Rate" shall mean (i) with respect to the portion of any payment of Rent that may be required by the Indenture to be paid to the holders of any outstanding Equipment Notes issued thereunder, a per annum rate of interest equal to the Past Due Rate applicable thereto under and as defined in the Indenture computed on the basis of a 360-day year and twelve 30-day months and (ii) with respect to any other amount, a per annum rate of interest equal to the sum of the rate of interest publicly announced by Citibank, N.A., at its principal office in New York City, as its prime or similar base rate from time to time in effect from the date the amount becomes due to the date it is paid in full, plus 2%, computed on the basis of a year of 365 or 366 days, as the case may be, and actual number of days elapsed. "Law" shall mean and include (i) any statute, rule, decree, constitution, regulation, order, judgment or other directive of any Governmental Entity; (ii) any treaty, -10- 16 pact, compact or other agreement to which any Governmental Entity is a signatory or party; (iii) any judicial or administrative interpretations of the application of any Law described in (i) or (ii) above; and (iv) except where expressly excluded herein, any amendment or revision of any Law described in (i), (ii), or (iii) above. "Lease Agreement," "this Lease Agreement," "this Lease," "this Agreement," "herein," "hereunder," "hereby," "hereof" or other like words shall mean this Lease as originally executed and as amended, supplemented or otherwise modified from time to time, including, without limitation, by one or more Lease Supplements, as a whole and not to any particular Section or other subdivision, and any reference to a "Section" or an "Exhibit" shall refer to a Section or an Exhibit of this Lease, as so amended, supplemented or modified, unless expressly provided to the contrary. "Lease Identification" shall have the meaning set forth in Section 6(e) hereto. "Lease Supplement" shall mean Lease Supplement No. 1, Lease Supplement No. 2 and Lease Supplement No. 3 and each subsequent Lease Supplement entered into hereunder. "Lease Supplement No. 1" shall mean Lease Supplement [GPA 1989 BN-11] No. 1 dated the Delivery Date between Lessor and Original Head Lessee, as Lessee. "Lease Supplement No. 2" shall mean Lease Supplement [GPA 1989 BN-11] No. 2 dated January 5, 1995, between Lessor and Original Head Lessee, as Lessee. "Lease Supplement No. 3" shall mean Lease Supplement [GPA 1989 BN-11] No. 3, substantially in the form of Exhibit D-1 hereto, entered into between Lessor and Lessee on the Restatement Date for the purpose of confirming the leasing of the Aircraft hereunder. "Lenders' Lien" shall mean any Lien or disposition of title attributable to Indenture Trustee in its individual capacity (and not as Indenture Trustee) on or in respect of (as the case may be) the Aircraft or any other portion of the Trust Estate or the Trust Indenture Estate arising as a result of (i) Claims against Indenture Trustee in its individual capacity (and not as Indenture Trustee) not related to its interest in the Aircraft or the administration of the Trust Estate or the Trust Indenture -11- 17 Estate pursuant to the Indenture, whether under Section 9-207(2)(e) of the Uniform Commercial Code or otherwise, (ii) acts or omissions of Indenture Trustee in its individual capacity (and not as Indenture Trustee) not contemplated hereunder or under the other Operative Documents, or acts or omissions of Indenture Trustee in its individual capacity (and not as Indenture Trustee) which are in violation of any of the Operative Documents, or (iii) Taxes imposed on or Claims against Indenture Trustee in its individual capacity (and not as Indenture Trustee) which are excluded from indemnification by Lessee, or (iv) Claims against Indenture Trustee in its individual capacity (and not as Indenture Trustee) arising out of the voluntary or involuntary transfer by Indenture Trustee in its individual capacity (and not as Indenture Trustee) of all or any portion of its interest in the Aircraft, the Airframe, any Engine, the Trust Estate, the Trust Indenture Estate or the Operative Documents (except a Claim resulting from the exercise of remedies under and in accordance with the Indenture or for a transfer provided for in the Operative Documents). "Lessee" shall have the meaning set forth in the Recitals hereto. "Lessor" shall have the meaning set forth in the Recitals hereto. "Lessor's Lien" shall mean any Lien or disposition of title affecting the Aircraft, the Airframe, any Engine or any Part arising as a result of (i) any claim against Lessor, Owner Participant, any partner of the Owner Participant, Trust Company or any of their Affiliates not related to the transactions contemplated by this Lease or the other Operative Documents, the Financing Documents or the Purchase Documents; (ii) any affirmative act of Lessor, Owner Participant, any partner of the Owner Participant, Trust Company or any of their Affiliates not expressly contemplated by this Lease or the other Operative Documents, the Financing Documents or the Purchase Documents or not permitted without consent (which consent has not been granted) by any party hereto or thereto or that is in violation of any term of this Lease or the other Operative Documents, the Financing Documents or the Purchase Documents; (iii) Taxes imposed against the Trust Estate, Trust Company, Lessor, Owner Participant, any partner of the Owner Participant or any of their Affiliates or the consolidated group of taxpayers of which any of them is a member which are not to be indemnified against by Lessee under the Operative Documents, the Purchase Documents -12- 18 or the Financing Documents or by Original Head Lessee under the Original Head Lease Tax Indemnification Agreement; (iv) claims against the Trust Estate, Trust Company, Owner Participant, any partner of the Owner Participant or Lessor or any of their Affiliates arising out of the transfer of all or any part of their respective interest in the Aircraft, the Airframe, either Engine, the Trust Estate, the Operative Documents or the Financing Documents other than any transfers or dispositions pursuant to Sections 2, 6, 9, 11, 16, 18, 19 or 20 (except Liens resulting from a transfer not permitted by such Section) of this Lease or pursuant to Section 10 of the Refunding Agreement; provided, however, that there shall be excluded from this definition and Lessor shall not be required to remove any Lien which would otherwise constitute a Lessor's Lien, if it is being diligently contested in good faith so long as neither such proceedings nor Lien involves a material danger of the sale, forfeiture or loss of the Aircraft or adversely affects Lessee's rights under Section 21(f); and provided, further, that Lessor's Liens shall not include the Lien of the Indenture or Lenders' Liens. "Lien" shall mean any mortgage, chattel mortgage, pledge, lien, charge, encumbrance, lease, exercise of rights, security interest, lease in the nature of a security interest, statutory right in rem, or claim of any kind, including any thereof arising under any conditional sale agreement, equipment trust agreement or title retention agreement. "Lien of the Indenture" shall mean the Lien created by the Indenture on the Trust Indenture Estate. "Maintenance Program" shall mean (i) the America West Maintenance Program approved by the FAA for America West Airbus model A320-231 aircraft in effect on the date hereof or as modified with the approval of the FAA without affecting, or any other FAA approved maintenance program which does not affect, the return condition standards set forth in Section 16 and Exhibit E or (ii) if the Aircraft is subject to a Permitted Sublease to a Foreign Air Carrier, any other maintenance program for the Aircraft which is approved by the aviation authority of the country of registry and complies with the requirements applicable to maintenance of the Aircraft contained in the definition of Foreign Air Carrier. The Maintenance Program shall encompass scheduled maintenance, condition monitored maintenance, and on-condition maintenance of the Airframe, Engines, and components of the Aircraft, including, but not -13- 19 limited to, servicing, testing, preventive maintenance, repairs, structural inspections, structure life improvements, system checks, overhauls, approved modifications, service bulletins, engineering orders, airworthiness directives, and corrosion control inspections and treatments. All modifications and supplements to the Maintenance Program shall be provided to Lessor upon its reasonable request and Lessor shall be given reasonable access to the Maintenance Program upon its request. "Manufacturer" shall mean, collectively, Manufacturer's Subsidiary, IAE, Airbus Industrie or, as the case may be, any one or more thereof as may be applicable in any given circumstance, together in each case with any subcontractor or supplier thereof. "Manufacturer's Subsidiary" shall mean AVSA, S.A.R.L., a French societe a responsabilite limitee, which as of the date hereof is owned by Airbus Industrie. "Maximum Foreign Use Percentage" shall have the meaning specified in Exhibit C. "Mortgage Convention" shall mean the Convention for the International Recognition of Rights in Aircraft, signed (ad referendum) at Geneva, Switzerland, on June 19, 1948, and amended from time to time, but excluding the terms of any adhesion thereto or ratification thereof containing reservations to which the United States of America does not accede. "Net Worth" shall mean, with respect to any Person, such Person's stockholders' equity minus any intangible assets. "Operative Documents" shall mean this Lease, each Lease Supplement, any sublease, the Tax Indemnification Agreement, the Financing Documents, the SLV Letter Agreement, and any certificate delivered or entered into pursuant to the foregoing, as amended, supplemented or otherwise modified. "Original Head Lease" shall mean this Aircraft Lease Agreement [GPA 1989 BN-11], with respect to the Aircraft, dated as of December 19, 1989, between Lessor, as lessor, and the Original Head Lessee, as lessee, as amended, supplemented or otherwise modified and as in effect immediately prior to the Restatement Date, as more particularly described in Annex I attached hereto. -14- 20 "Original Head Lease Tax Indemnification Agreement" shall mean the Head Lease Tax Indemnification Agreement [GPA 1989 BN-11], dated as of December 19, 1989, and amended and restated as of the Restatement Date, between the Original Head Lessee and Owner Participant, as amended, supplemented or otherwise modified from time to time. "Original Head Lessee" shall mean GPA Leasing USA Sub I, Inc., a Connecticut corporation. "Original Sublease" shall mean the Initial Sublease (as defined in the Original Head Lease) as in effect immediately prior to the Restatement Date. "Other Leases" shall mean the Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-7] amended and restated as of the Restatement Date between Wilmington Trust Company as Owner Trustee, Lessor, and America West Airlines, Inc. as Lessee, the Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-8] amended and restated as of the Restatement Date between Wilmington Trust Company as Owner Trustee, Lessor, and America West Airlines, Inc. as Lessee and the Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-9] amended and restated as of the Restatement Date between Wilmington Trust Company as Owner Trustee, Lessor, and America West Airlines, Inc. as Lessee, each as amended, supplemented or otherwise modified from time to time. "Other Letters of Credit" shall mean any and all letters of credit pursuant to Section 8(l) of the Other Leases. "Owner Participant" shall mean ______________, as Owner Participant under the Trust Agreement, and its successors and permitted assigns. "Owner Trustee" shall mean Wilmington Trust Company, as Owner Trustee under the Trust Agreement, and its successors and assigns. "Parent" shall mean GPA Group plc, a public limited company organized and existing under the laws of Ireland. "Partial Assignment" shall mean the A320 Partial Assignment, Assumption, Release and Amendment Agreement, dated as of December 30, 1988, among Parent, Braniff, Inc., and Manufacturer's Subsidiary, as amended, supplemented or otherwise modified. -15- 21 "Participation Agreement" shall mean the Participation Agreement [GPA 1989 BN-11], dated as of December 19, 1989, among Original Head Lessee, Parent, Owner Participant, Owner Trustee, Indenture Trustee and the "Lender" named therein, as amended, supplemented or otherwise modified from time to time and as in effect immediately prior to the Restatement Date. "Parts" shall mean all appliances, components, parts, instruments, appurtenances, accessories, furnishings and other equipment of whatever nature (excluding complete Engines or engines), including Buyer Furnished Equipment, which may now or from time to time be incorporated or installed in or attached to or were provided by the Manufacturer with the Airframe or any Engine or so long as title thereto shall remain vested in Lessor in accordance with the terms of Section 9 hereof after removal from such Airframe or Engine. Except as otherwise set forth herein, at such time as a replacement part shall be substituted for a Part in accordance with Section 9 hereof, the Part so replaced shall cease to be a Part hereunder. "Payment Location" shall have the meaning set forth in Exhibit C, as the same may be changed from time to time by Lessor as provided in Section 4(c). "Permitted Lien" shall mean any Lien referred to in clauses (i) through (vii) of the first sentence of Section 14 hereof. "Permitted Sublease" shall have the meaning specified in Section 6(a)(iii)(1). "Permitted Sublessee" shall mean a Certificated Air Carrier or, after the Restricted Use Period, (a) any Foreign Air Carrier, (b) the United States Government or an agency or instrumentality thereof which bears the full faith and credit of the United States of America or (c) any other Person approved in writing by the Owner Participant and the Indenture Trustee. "Person" shall mean and include any individual person, corporation, partnership, firm, joint stock company, joint venture, trust, estate, unincorporated organization, association, Governmental Entity, or organization or association of which any of the above is a member or a participant. -16- 22 "Purchase Agreement" shall mean the Amended and Restated Airbus A310/A320 Purchase Agreement, dated as of May 1, 1985, as amended and restated as of December 30, 1988 (insofar as the same relates to Model A320 Aircraft), between Manufacturer's Subsidiary and Braniff, Inc., including the Consent and Guaranty, together with Letter Agreements, Exhibits and Appendices thereto, as partially assigned to Parent pursuant to the Partial Assignment, to which Airbus Industrie, as guarantor, has consented, and as the same may from time to time be further amended, supplemented or otherwise modified to the extent permitted by the terms thereof. "Purchase Documents" shall mean the Purchase Agreement, the Partial Assignment and any other agreement, document or certificate delivered or entered into pursuant to the foregoing, as amended, supplemented or otherwise modified. "Removable Part" shall have the meaning set forth in Section 9(b). "Renewal Rent" shall mean the rent payable pursuant to Section 20. "Renewal Rent Payment Date" shall mean each day determined in accordance with Exhibit C upon which a payment of Renewal Rent becomes payable. If a Renewal Rent Payment Date shall fall on a day which is not a Business Day, any payment due on such Renewal Rent Payment Date shall be made on the next succeeding Business Day. "Renewal Term" shall mean the period described in Section 20 following the end of the Basic Term if Lessee shall have exercised its renewal option in accordance with Section 20. "Rent" shall mean Basic Rent or Renewal Rent, as the case may be, and Supplemental Rent, collectively. "Replacement Airframe" and "Replacement Engine" shall have the meanings specified in accordance with their description in Section 11. "Replacement Period" shall have the meaning specified in Section 11. -17- 23 "Responsible Officer" shall mean, with respect to Lessee, any of the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer or Controller. "Restricted Use Period" shall have the meaning specified in Exhibit C. "Return Occasion" shall mean the event that occurs when possession of the Aircraft is to be returned from Lessee to Lessor at the end of the Term of this Lease or upon Lessor taking possession pursuant to Section 18 or for any other reason. "Specified Investments" shall mean (i) direct obligations of the United States Government, the obligations of which bear the full faith and credit of the United States; (ii) obligations fully guaranteed by the United States; (iii) certificates of deposit issued by any commercial bank incorporated under the laws of the United States or one of the States thereof (but not exceeding $10,000,000 in principal amount or deposits at any given time for any one bank) having a combined capital surplus and undivided income of at least $750,000,000 and having a rating of "B" or better from Thompson BankWatch, Inc.; (iv) repurchase agreements (but not exceeding $10,000,000 in principal amount or deposits at any given time for any one bank) with any financial institution having combined capital surplus and undivided income of at least $750,000,000 and fully collateralized by an obligation of the type described in clauses (i) through (iii) as collateral pursuant to which an entity referred to in clause (iii) above or another financial institution having a net worth of at least $750,000,000 and having a rating of "B" or better from Thompson BankWatch, Inc. is obligated to repurchase any such obligation not later than ninety (90) days after the purchase of any such obligation; and (v) money market funds which invest solely in obligations described in clause (i) or (ii); provided that if all of the above investments are unavailable, the entire amounts to be invested may be used to purchase Federal funds from an entity described in clause (iii) above; and provided further that no investment shall be eligible as a "Specified Investment" unless the final maturity or date of return of such investment is on or before the date which is ninety (90) days from the date of purchase thereof. "Stipulated Loss Value" shall mean as of the applicable date during the Basic Term the amount set forth on Exhibit A hereto and, thereafter, the amount described in -18- 24 Section 20 (it being understood and agreed that the amounts set forth in Exhibit A take into account fully the amount and application of each installment of Basic Rent or Renewal Rent on each Stipulated Loss Value Date [(other than a Stipulated Loss Value Date that is a Basic Rent Payment Date or Renewal Rent Payment Date) so that no additional credit of such Basic Rent or Renewal Rent is to be made in respect thereof except as expressly provided herein on a Basic Rent Payment Date or a Renewal Rent Payment Date)]. In the event that it is necessary to determine a separate Stipulated Loss Value for the Airframe or an Engine, such Stipulated Loss Value shall be based on the ratio that the original cost to Lessor of the Airframe or such Engine bears to Lessor's Cost (as set forth in the Original Head Lease) for the Aircraft. "Stipulated Loss Value Date" shall mean each monthly date listed, or with respect to any Renewal Term determined as set forth, on Exhibit A hereto. "Supplemental Rent" shall mean any and all amounts, liabilities and obligations other than Basic Rent and Renewal Rent which Lessee assumes or agrees to pay to Lessor or any other Indemnitee hereunder or under any other Operative Document, including, without limitation, (i) any payment of Stipulated Loss Value and any payment provided for in Section 11 or 18; (ii) any payment of indemnity required by Section 10 or 13 hereof; (iii) any payment of an amount equal to average daily Basic Rent or Renewal Rent in connection with an extension of the Term of this Lease as a result of (a) an incipient Event of Loss and the operation of Section 11 hereof or (b) the need to correct any failure of the Aircraft to satisfy the requirements of Section 16 and Exhibit E hereof; (iv) [Intentionally Left Blank]; (v) an amount equal to any payment due to the Owner Trustee in respect of fees or expenses as provided in Section 21(j) hereof; (vi) an amount equal to any payment due to the Indenture Trustee in respect of fees or expenses as provided in the Indenture and/or Section 21(j) hereof; (vii) the Pro Rata Share of any payment due to any Pass Through Trustee in respect of fees or expenses pursuant to the Pass Through Trust Agreement; (viii) the Pro Rata Share of any payment due to the Subordination Agent in respect of fees, compensation, costs or expenses pursuant to the Intercreditor Agreement; (ix) an amount equal to the amount specified in clause (b) of the fourth paragraph of Section 2.02 of the Indenture; and (x) to the extent permitted by applicable Law, interest at the Interest Rate calculated: (1) on any part of any installment of Basic Rent or Renewal Rent, or average daily Basic Rent referred to in clause -19- 25 (iii) of this definition of "Supplemental Rent", as the case may be, not paid on the due date thereof for the period for which the same shall be overdue and (2) on any Supplemental Rent not paid when due hereunder from and including the due date until the same shall be paid. As used herein, "Pro Rata Share" means as of any date of determination a fraction the numerator of which is the aggregate Principal Amount then outstanding of the Equipment Notes issued under the Indenture and the denominator of which is the aggregate principal balance then outstanding of all "equipment notes" issued under the Indentures (as defined in the Intercreditor Agreement). "Tax Indemnification Agreement" shall mean the Amended and Restated Sublease Tax Indemnification Agreement [GPA 1989 BN-11], dated as of September 21, 1990, and as amended and restated as of the Restatement Date, between Original Head Lessee and Lessee, as the same may be amended, supplemented or otherwise modified from time to time. "Taxes" shall have the meaning specified in Section 10(a). "Taxing Authority" shall have the meaning specified in Section 10(a). "Term" shall mean, collectively, the Basic Term specified in Lease Supplement No. 3 and, if Lessee extends the Term in accordance with Section 20, the Renewal Term, in either case as extended or deemed extended as a result of the occurrence of an event described in clause (iii) to the definition of "Supplemental Rent" in this Lease, for which the Aircraft is leased hereunder pursuant to Section 2. "Trust Agreement" shall mean the Trust Agreement [GPA 1989 BN-11] dated as of December 19, 1989 as amended by Trust Supplement No. 1 and as further amended by Trust Supplement No. 2 between Lessor, in its individual capacity, and Owner Participant, as beneficiary, as the same may be amended, supplemented or otherwise modified from time to time. The term "Trust Agreement" shall also include each Trust Supplement. "Trust Estate" shall have the meaning specified in the Trust Agreement. "Trust Supplement" shall mean Trust Supplement No. 1 and Trust Supplement No. 2 and each subsequent Trust -20- 26 Supplement entered into thereunder and any further supplement to the Trust Agreement. "Trust Supplement No. 1" shall mean Trust Agreement Supplement [GPA 1989 BN-11] No. 1 dated the Delivery Date between Lessor and Owner Participant for the purpose of bringing the Aircraft and the Original Head Lease into the Trust Estate. "Trust Supplement No. 2" shall mean Trust Agreement Supplement [GPA 1989 BN-11] No. 2 dated the Restatement Date between Lessor and Owner Participant conforming the references in the Trust Agreement to this Agreement. "United States Government" shall mean the federal government of the United States of America and any board, commission, department, division, organ, instrumentality, court or agency thereof. "Wet Lease" shall mean any arrangement whereby Lessee agrees to furnish the Aircraft or the Airframe and Engine or engines installed thereon at that time to a third party pursuant to which such Aircraft or the Airframe and Engine or engines (i) shall be operated solely by regular employees of Lessee possessing all current certificates and licenses required under the Federal Aviation Act (it is understood that cabin attendants need not be regular employees of Lessee) and Lessee otherwise maintains operational control and possession thereof, and (ii) shall be maintained by Lessee in accordance with its normal maintenance practices and this Lease, and otherwise the insurance required hereunder shall be maintained and the Aircraft shall be used and operated in accordance with this Lease. Section 2. Agreement to Lease. Lessor hereby agrees to lease the Aircraft to Lessee, and Lessee hereby agrees to lease the Aircraft from Lessor, on the terms and subject to the conditions set forth in this Lease. Section 3. Delivery and Acceptance; Term. (a) Time of Delivery. The Aircraft was delivered to Lessee, and Lessee accepted delivery of the Aircraft, on December 29, 1989. (b) [Intentionally Left Blank] -21- 27 (c) Acceptance of Aircraft. The Aircraft leased hereunder was delivered to Lessee "AS IS," "WHERE IS" and SUBJECT TO EACH AND EVERY DISCLAIMER OF WARRANTY AND REPRESENTATION AS SET FORTH IN SECTIONS 5(a) AND (b) HEREOF. Lessee hereby agrees that it has accepted the Aircraft for all purposes of this Lease and Lessee's acceptance of the Aircraft was conclusive evidence that, as between Lessor and Lessee, the Aircraft was in all respects satisfactory to Lessee and was in compliance with this Lease. (d) Term of Lease. The Basic Term of this Lease shall commence on the Delivery Date and shall continue until the Expiration Date; provided, however, that the Term of this Lease may be earlier terminated pursuant to the provisions hereof. Section 4. Rent. (a) Rent. Lessee covenants and agrees to pay the following as Rent hereunder: (i) Basic Rent. The Basic Rent, as set forth in Exhibit C throughout the Basic Term hereof, in consecutive installments, in arrears as set forth on Schedule I attached to Exhibit C, due and payable on each Basic Rent Payment Date to the Lessor; and (ii) Supplemental Rent. Any and all Supplemental Rent, which shall be due and payable ten (10) Business Days after demand unless otherwise specifically provided, except for Supplemental Rent constituting interest on overdue amounts, which shall be due and payable on demand. In the event of any failure on the part of Lessee to pay any Supplemental Rent when due, Lessor shall have all rights, powers and remedies provided for herein or by law or equity or otherwise in the case of nonpayment of Basic Rent or Renewal Rent. Lessee's obligation to pay Supplemental Rent which is due and owing pursuant to the terms hereof shall survive the expiration or termination of Lessee's obligation to pay Basic Rent or Renewal Rent hereunder. (b) Minimum Payments. Notwithstanding any provision in this Lease or in any other Operative Document to the contrary, under all circumstances and in any event, (i) the Stipulated Loss Value, together with the payment of Supplemental Rent and all other Rent then due hereunder, as of any time and as of the date of any payment thereof shall -22- 28 (both before and after giving effect to any reductions therefrom) be in an amount at least sufficient to pay in full as of such time or date the aggregate unpaid principal amount of the Equipment Notes then outstanding and all accrued and unpaid interest (assuming interest has been timely paid) thereon, and (ii) Basic Rent payable on any Basic Rent Payment Date shall at least equal the aggregate amount of principal and interest due and payable on the Equipment Notes on such Basic Rent Payment Date. It is agreed, however, that no installment of Basic Rent or Stipulated Loss Value shall be increased or adjusted by reason of (A) any attachment or diversion of Rent on account of any Lessor's Lien or Lenders' Lien, (B) any modification of the terms of the Equipment Notes or the other Financing Documents made without the prior written consent of Lessee or (C) the acceleration of any Equipment Note due to the occurrence of any "Indenture Event of Default" (as defined in the Indenture) which does not constitute an Event of Default hereunder. It is further agreed that nothing in this Lease or any other Operative Document shall be deemed to constitute a guaranty of the value, utility or useful life of the Aircraft or a guaranty in respect of interest, principal or any other amounts payable in respect of or under the Equipment Notes. (c) Date, Place and Method of Payment. If any date on which a payment of Rent becomes due and payable is not a Business Day, the Rent otherwise due on such date shall be due and payable on the next succeeding Business Day. All Basic Rent, Renewal Rent and Supplemental Rent payable under this Lease shall be paid by wire transfer in immediately available currency of the United States of America, no later than 12:00 p.m. (noon), New York City time, on the date payable hereunder, and, so long as the Lien of the Indenture shall not have been discharged, to or as directed by Indenture Trustee in accordance with the payment instructions set forth in Exhibit C hereto or at such other address in the City of New York or Hartford, Connecticut as Indenture Trustee may direct by thirty (30) days prior written notice to Lessee, except for all Excepted Payments. All Excepted Payments, and, upon discharge of the Lien of the Indenture, all payments of Rent thereafter made hereunder, shall be paid in such immediately available funds no later than 12:00 p.m. (noon), New York City time, on the date payable hereunder, to Lessor or to Owner Participant, as appropriate, in accordance with the payment instructions set forth in Exhibit C or at such other address as Lessor may direct by thirty (30) days prior written notice to Lessee. -23- 29 (d) Prohibition Against Setoff, Counterclaim, Etc. This Lease is a net lease. Lessee's obligations to pay all Rent and to perform all other obligations hereunder are absolute and unconditional and shall not be affected or reduced by any circumstances, including, without limitation, (i) any setoff, counterclaim, recoupment, defense, or other right which Lessee may have against Lessor, Original Head Lessee, Owner Participant, Indenture Trustee, any Note Holder, any Manufacturer, any Person providing services with respect to the Aircraft, or any other Person, for any reason whatsoever (whether in connection with the transactions contemplated hereby or otherwise), including, without limitation, any breach by Lessor of its representations, warranties or covenants contained herein or in the other Operative Documents; (ii) any defect in the title, airworthiness, eligibility for registration under the Federal Aviation Act, condition, design, operation, or fitness for use of, or any damage to or loss or destruction of, the Aircraft (subject to the provisions of Section 11(a)(ii) hereof), any interruption or cessation in the use of or possession thereof by or availability to Lessee for any reason whatsoever, whether arising out of or related to an act or omission of Lessee, Lessor, Original Head Lessee, Owner Participant, Indenture Trustee, any Note Holder, any Manufacturer, any Person providing services with respect to the Aircraft or any other Person; (iii) any Liens with respect to the Aircraft; (iv) the invalidity or unenforceability or lack of due authorization or other infirmity of this Lease or any sublease or any absence of right, power or authority of Lessor, Original Head Lessee, Lessee or Indenture Trustee to enter into this Lease or the Indenture, as the case may be; (v) any insolvency, bankruptcy, reorganization, or similar proceedings by or against Lessor, Original Head Lessee, Lessee, any sublessee, Indenture Trustee or any Note Holder; (vi) any Taxes; or (vii) any other circumstance or happening of any nature whatsoever, whether or not similar to any of the foregoing; it being the expressed intention of Lessor and Lessee that all Rent payable hereunder shall be payable in all events, unless the obligation to pay the same shall be terminated pursuant to the express provisions of this Agreement. Except as expressly set forth elsewhere in this Agreement, 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, abate, cancel, quit, reduce, defer, suspend or surrender this Lease or the Aircraft or any obligation imposed upon Lessee hereunder or -24- 30 under the other Operative Documents (including, without limitation, payment of Rent), except in accordance with the terms hereof. Each payment of Rent made by Lessee shall be final. Lessee will not seek to recover all or any part of any payment of Rent for any reason whatsoever except manifest error. If for any reason whatsoever this Lease shall be terminated in whole or in part by operation of Law, except as specifically provided herein, Lessee waives all rights (if any) to any diminution in its Rent obligations hereunder and nonetheless agrees to pay to Indenture Trustee or Lessor as provided in Section 4(c) hereof an amount equal to each Basic Rent or Renewal Rent, as the case may be, payment and any Supplemental Rent payment at the time such payments would have become due and payable in accordance with the terms hereof had this Lease not been terminated in whole or in part, and so long as such payments are made and all other terms and conditions hereof are complied with by Lessee, Lessor and Lessee will deem this Lease to remain in full force and effect. The foregoing shall not, however, be construed as a waiver of Lessee's other rights to seek damages, specific performance, other remedies at law or equity or any combination thereof, as against the Original Head Lessee, Lessor, Indenture Trustee or any other Person having an interest herein through the Original Head Lessee, Lessor, Indenture Trustee or any other Person as shall be liable therefor, on account of any failure of the Original Head Lessee, Lessor, Indenture Trustee or any other such Person to perform its express obligations under this Lease and the other Operative Documents, or to enforce any judgment obtained therefor. Section 5. Representations, Warranties and Covenants. (a) Warranties and Disclaimer of Warranties. THE AIRCRAFT WAS DELIVERED AND IS BEING LEASED BY LESSOR TO LESSEE "AS IS" AND "WHERE IS". LESSEE EXPRESSLY AGREES THAT IT TOOK THE AIRCRAFT ON SUCH BASIS. LESSOR HAS NOT AND SHALL NOT BE DEEMED TO HAVE MADE, BY VIRTUE OF HAVING LEASED THE AIRCRAFT UNDER THIS LEASE OR BY HAVING ACQUIRED THE AIRCRAFT OR DONE OR FAILED TO DO ANY ACT OR ACQUIRED OR FAILED TO ACQUIRE ANY STATUS UNDER OR IN RELATION TO THIS LEASE, AND NEITHER LESSOR NOR OWNER PARTICIPANT HAS MADE, -25- 31 AND LESSOR FOR ITSELF AND OWNER PARTICIPANT, HEREBY SPECIFICALLY DISCLAIMS, ANY GUARANTY, REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE (EXCEPT AS HEREINBELOW PROVIDED), AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, MERCHANTABILITY, OR FITNESS FOR USE FOR A PARTICULAR OR ANY PURPOSE OF THE AIRCRAFT, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE AIRCRAFT, THE ABSENCE THEREFROM OF LATENT OR OTHER DEFECTS WHETHER OR NOT DISCOVERABLE, THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT OR AS TO ANY OTHER GUARANTY, REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT, INCLUDING WITHOUT LIMITATION ANY LIABILITY IN TORT, OBLIGATION OR LIABILITY ARISING FROM NEGLIGENCE, STRICT LIABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE OR DEALING OR USAGE OR TRADE, OR LOSS OR INTERRUPTION OF USE, PROFIT, OR BUSINESS, OR OTHER CONSEQUENTIAL DAMAGES; AND LESSEE HEREBY WAIVES, RELEASES, RENOUNCES AND DISCLAIMS EXPECTATION OF OR RELIANCE UPON ANY SUCH GUARANTY, REPRESENTATION OR WARRANTIES. NEITHER LESSOR NOR ANY OTHER INDEMNITEE SHALL HAVE ANY RESPONSIBILITY OR LIABILITY TO LESSEE OR ANY OTHER PERSON, REGARDLESS OF ANY NEGLIGENCE (OTHER THAN ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT WHICH IS NOT ATTRIBUTABLE TO ITS INTEREST IN THE AIRCRAFT) OF LESSOR OR ANY OTHER INDEMNITEE, AND LESSEE HEREBY WAIVES, RELEASES, RENOUNCES AND DISCLAIMS ANY RIGHTS OR REMEDIES, WITH RESPECT TO (i) ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED DIRECTLY OR INDIRECTLY BY THE AIRCRAFT OR BY ANY INADEQUACY THEREOF OR DEFICIENCY OR DEFECT THEREIN OR BY ANY OTHER CIRCUMSTANCE IN CONNECTION THEREWITH, (ii) THE USE, OPERATION OR PERFORMANCE OF THE AIRCRAFT OR ANY RISKS RELATING THERETO, (iii) ANY INTERRUPTION OF SERVICE, LOSS OF BUSINESS OR ANTICIPATED PROFITS OR DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR (iv) THE DELIVERY, OPERATION, SERVICING, MAINTENANCE, REPAIR, IMPROVEMENT OR REPLACEMENT OF THE AIRCRAFT. THE WARRANTIES AND REPRESENTATIONS SET FORTH IN THIS SECTION 5(a) ARE EXCLUSIVE AND IN LIEU OF ALL OTHER REPRESENTATIONS OR WARRANTIES WHATSOEVER WITH RESPECT TO THE AIRCRAFT, EXPRESS OR IMPLIED, AND LESSOR SHALL NOT BE DEEMED TO HAVE MADE ANY OTHER IMPLIED WARRANTIES, OR GUARANTEES, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OF MERCHANTABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, OR ANY IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR OR ANY USE, EXCEPT THAT: (A) Lessor represents and warrants that (x) on the Delivery Date Lessor had, and on the Restatement Date Lessor has, the right to lease the Aircraft hereunder and (y) on the Delivery Date the Aircraft was free of Head Lessor's Liens and on the Restatement Date the Aircraft is free of Lessor's -26- 32 Liens and Head Lessor's Liens and (B) Lessor covenants that it shall not create, incur, assume or suffer to exist any Lessor's Lien on the Aircraft. (b) Representations and Warranties of Lessor. Lessor hereby represents and warrants, as of the Restatement Date that its representations and warranties set forth in Section 9(b) of the Refunding Agreement were true when made and continue to be true and correct. (c) No Amendments to Financing Documents. Lessor covenants and agrees that Lessor will not, without the prior written consent of Lessee, amend, modify, supplement or waive any provision of any Financing Document in such a way as to materially increase Lessee's obligations hereunder or materially reduce Lessee's rights hereunder. The representations, warranties and covenants of Lessor under Sections 5(a) and 5(b) and this Section 5(c) shall survive the execution and delivery of this Lease and the delivery of the Aircraft and the Restatement Date. (d) Suppliers' Warranties. So long as a Default or an Event of Default has not occurred and is continuing and provided that the Aircraft continues to be maintained, modified and repaired as required hereunder, Lessor hereby assigns or, if by their terms not assignable, agrees otherwise to make available to Lessee the right to exercise in Lessee's name such rights as Lessor may have or may subsequently obtain (but without representation or warranty by or recourse to Lessor) with respect to any product warranty, service life policy, trademark, patent or copyright infringement indemnity, or airframe or propulsion system performance guaranty, of Airbus Industrie, the Manufacturer's Subsidiary, IAE or any subcontractor or vendor with respect thereto under the Purchase Agreement (except those which were given directly to Parent, the Original Head Lessee or any of their Affiliates and are not directly related to the operator's use of the Aircraft), to the extent that the same may be assigned or otherwise made available to Lessee, and Lessor agrees to exert its reasonable efforts, at Lessee's expense and upon its request, to enforce such rights as Lessor may have with respect thereto for the benefit of Lessee; provided, however, that upon and during the continuance of a Default or an Event of Default, such assignment or other rights which are otherwise made available to Lessee shall immediately and automatically without further action be deemed cancelled and, to the extent of any remaining -27- 33 interest held by Lessee, deemed reassigned to Lessor and all such rights shall revert to Lessor automatically including all claims thereunder whether or not perfected and all amounts payable shall be paid to and held by Lessor. In no event, however, shall Lessee have any right to amend, supplement or otherwise modify the Purchase Agreement (by change order or otherwise). In connection with the foregoing, Lessee agrees to be bound by and comply with all applicable terms, conditions and limitations of the provisions of the Purchase Agreement. Section 6. Possession and Use. (a) Possession. (i) Lease, Assignment and Transfer. LESSEE WILL NOT ASSIGN THIS LEASE OR ANY RIGHTS OR OBLIGATIONS HEREUNDER OR INTEREST HEREIN (EXCEPT AS PROVIDED IN SECTION 8(e) BELOW) OR SUBLEASE, WET LEASE OR OTHERWISE IN ANY MANNER TRANSFER, DELIVER OR RELINQUISH POSSESSION OR USE OF THE AIRCRAFT, 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 or Default shall have occurred and be continuing or would result therefrom and so long as the action to be taken shall not adversely affect Lessor's title to or other interest in, or the Lien of the Indenture on, the Aircraft, the Airframe or either of the Engines or this Lease or the insurance required to be maintained hereunder and Lessee is otherwise in full compliance with Section 12, and so long as all necessary approvals of the FAA and any other Governmental Entity having jurisdiction have been obtained, then Lessee, without the prior written consent of Lessor, may, only to the extent provided below and subject to the limitations of Sections 6(a)(ii) and 6(a)(iii) below: (1) subject any Engine to a normal interchange, maintenance, servicing or pooling agreement or similar arrangement with a Permitted Sublessee, in each case customary in the airline industry of which Lessee is a part and entered into in the ordinary course of its business; provided that no transfer of the registration of any Engine shall be effected in connection therewith; and provided, further, that (A) no such agreement or arrangement contemplates, results in or requires the transfer of title to any Engine, and (B) if Lessor's title to any Engine shall be divested under any such agreement or arrangement, such divestiture shall be deemed to be an Event of Loss with respect to -28- 34 such Engine and not an Event of Default and Lessee shall comply with Section 11(b) hereof in respect thereof; (2) deliver possession of the Aircraft, the Airframe or any Engine to the manufacturer thereof, or in accordance with the Maintenance Program to an FAA certified repair station, for testing, service, storage, repair, maintenance, inspection or overhaul work on such Aircraft, Airframe or Engine or any part thereof or for alterations or modifications in or additions to such Aircraft, Airframe or Engine to the extent required or permitted by the terms of Section 9 hereof; (3) transfer possession of the Aircraft or the Airframe to the United States of America or any instrumentality or agency thereof pursuant to a sublease; (4) (i) subject the Airframe to the Civil Reserve Air Fleet Program and transfer possession of the Airframe or any Engine to the United States Government pursuant to the Civil Reserve Air Fleet Program, so long as Lessee shall promptly notify Lessor upon transferring possession of the Airframe or any Engine to the United States Government pursuant to the Civil Reserve Air Fleet Program 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; or (ii) subject the Airframe to (A) a service contract with the United States Government, a copy of which shall be provided to Lessor, providing for possession to be held by the United States Government for a period not extending beyond the end of the Term, or (B) a requisition for use by the United States Government not constituting an Event of Loss; (5) install an Engine on an airframe (other than the Airframe) owned by Lessee free and clear of all Liens except (A) Permitted Liens and Liens which apply only to engines (other than the Engines), appliances, parts, instruments, appurtenances, accessories, furnishings and other equipment (other than Parts) installed on such airframe (but not to the airframe as an entirety) and (B) the rights of participants under -29- 35 normal interchange agreements which are customary in the airline industry and do not contemplate, permit, result in or require the transfer of title to the airframe or engines installed thereon; (6) install an Engine on an airframe leased to Lessee or owned by Lessee subject to a conditional sale or other security agreement; provided that: (A) such airframe is free and clear of all Liens except the rights of the parties to the lease or conditional sale or other security agreement covering such airframe and except Liens of the type permitted by clauses (A) and (B) of Section 6(a)(i)(5) and the Lien of any mortgage which provides that each Engine leased to Lessee hereby shall not become subject to the Lien thereof or to any rights of any party thereunder other than Lessee (with respect to Lessee's rights expressly granted hereunder), notwithstanding the installation of such Engine on any airframe subject to the Lien of such mortgage, unless and until Lessee shall become the owner of such Engine and Lessor shall have no further interest therein, all pursuant to the express terms of this Lease; and (B) there shall be in effect a written agreement of the lessor or secured party of such airframe (which may be contained in the lease or conditional sale or other security agreement covering such airframe) substantially similar in effect to the agreement of Lessor in Section 6(b) below whereby such lessor or secured party effectively and expressly agrees that neither it nor its successors or assigns will acquire or claim any right, title or interest in any Engine by reason of such Engine being installed on such airframe at any time while such Engine is subject to this Lease or is owned by Lessor, and a copy of such agreement shall be provided to Lessor upon written request; (7) install an Engine on an airframe owned by Lessee, leased to Lessee or purchased by Lessee subject to a conditional sale or other security agreement under circumstances where neither Section 6(a)(i)(5) or Section 6(a)(i)(6) is applicable; provided that such installation shall be deemed an Event of Loss with respect to such Engine and Lessee shall comply with Section 11(b) hereof in respect thereof, Lessor not intending hereby to waive any right or interest it may have to or in such Engine under applicable Law until compliance by Lessee with such Section 11(b); -30- 36 (8) enter into a Wet Lease for the Aircraft or the Airframe and engines installed thereon in the ordinary course of Lessee's business for a period not extending beyond the Term; provided that if Lessee shall enter into any Wet Lease for a period of more than six months (including renewal options) Lessee shall provide to Lessor written notice of such Wet Lease (such notice to be given at least ten (10) Business Days prior to entering into such Wet Lease); or (9) sublease the Aircraft or the Airframe to any Permitted Sublessee on the terms and conditions set forth in Section 6(a)(iii) below. (ii) Certain Limitations on Transfers. With respect to any transfer pursuant to Section 6(a)(i): (1) the rights of any transferee that receives possession by reason of a transfer permitted by Section 6(a) hereof (other than the transfer of an Engine which is deemed to have been an Event of Loss) and any Wet Lease shall be expressly subject and subordinate to all the terms of this Lease and the Lien of the Indenture (if it has not been discharged); (2) Lessee's obligations hereunder and under the other Operative Documents shall continue in full force and effect and Lessee shall remain primarily liable hereunder for the performance of all of the terms of this Lease to the same extent as if such transfer had not occurred and no provision of this Lease shall be deemed a waiver of the Lessor's rights hereunder or under the other Operative Documents nor discharge or diminish any of Lessee's obligations hereunder or under the other Operative Documents; (3) During the Restricted Use Period, no Wet Lease, Permitted Sublease or other relinquishment of possession of the Aircraft, the Airframe or any Engine pursuant to the terms of this Section 6(a) shall be permitted if such Wet Lease, Permitted Sublease or other relinquishment of possession would cause the Aircraft, the Airframe or such Engine to be "tax-exempt use property" within the meaning of Section 168(h) of the Code or cease to be "Section 38 property" within the meaning of Section 48(a) of the Code (as determined after the application of Section 47(a)(7) of the Code); -31- 37 (4) The term of any transfer, Wet Lease, Permitted Sublease or other relinquishment of possession shall not extend beyond the Basic Term or the Renewal Term (if Lessee shall have exercised its option to renew this Lease in accordance with the terms hereof); (5) No transfer, Wet Lease, Permitted Sublease or other relinquishment of possession of the Aircraft, the Airframe or any Engine shall in any way discharge or diminish any of Lessee's obligations to Lessor or any other Person hereunder for which obligations Lessee shall remain primarily liable; (6) The sublessee under any Permitted Sublease, in its consent thereto, shall confirm that from and after the occurrence and continuance of an Event of Default and, unless an Event of Default specified in Section 17(e), (f) or (g) of this Lease has occurred and is continuing, this Lease being deemed or declared in default, Lessor (and, so long as the Lien of the Indenture shall not have been discharged, Indenture Trustee) shall be entitled to enforce directly and in its own name all representations, warranties, indemnities, covenants and agreements under the applicable Permitted Sublease; and (7) Each Permitted Sublease shall (A) provide that (I) the Aircraft or Airframe may not be operated or used other than as provided in this Lease and shall be maintained and operated as required hereunder, (II) Lessor may avoid or terminate such sublease following an Event of Default hereunder and (III) to the extent not accomplished by an assignment of the Permitted Sublease, upon the occurrence of an Event of Default hereunder, Lessee's rights under such Permitted Sublease shall automatically be deemed assigned to Lessor; and (B) be a "net lease" in accordance with industry practice and shall be comparable to, or more restrictive than, this Lease and under such Permitted Sublease (except a sublease to the United States Government or a Foreign Air Carrier after the Restricted Use Period), Lessee as lessor under such Permitted Sublease, must be entitled to the same benefits under 11 U.S.C. Section 1110 as Lessor is entitled hereunder and such Permitted Sublease shall contain provisions regarding such Section 1110 which are substantially the same as the related provisions of this Lease. In addition, from and after the occurrence and continuance -32- 38 of an Event of Default, all rent and other amounts payable by the Permitted Sublessee under such Permitted Sublease shall be paid directly to Indenture Trustee and, upon discharge of the Lien of the Indenture, to Lessor. (iii) Permitted Subleases. With respect to any sublease pursuant to Sections 6(a)(i)(3) or (4) (to the extent permitted by Law) or Section 6(a)(i)(9) above: (1) Lessee may sublease the Aircraft or the Airframe to a Permitted Sublessee (each of which shall constitute a "Permitted Sublease") if (A) in any such case, the Permitted Sublessee under such sublease is not subject to a proceeding or final order under applicable bankruptcy, insolvency or reorganization laws on the date such sublease is entered into, (B) in the event that the Permitted Sublessee under such sublease is a Foreign Air Carrier (other than a Foreign Air Carrier principally based in Taiwan), the United States maintains diplomatic relations with the country in which such proposed Permitted Sublessee is principally based at the time such sublease is entered into (or, in the case of a sublease to a proposed Permitted Sublessee principally based in Taiwan, maintains diplomatic relations at least as good as those in effect on the Restatement Date) and (C) in the event that the Permitted Sublessee under such sublease is a Foreign Air Carrier, Lessor and the Indenture Trustee shall have received an opinion of counsel to Lessee, in form and substance reasonably satisfactory to Owner Participant and the Indenture Trustee, to the effect that (I) the terms of the proposed sublease will be legal, valid, binding and (subject to customary exceptions in foreign opinions generally) enforceable against the proposed Permitted Sublessee in the country in which the Permitted Sublessee is principally based, (II) there exist no possessory rights in favor of the Permitted Sublessee under such sublease under the laws of such Permitted Sublessee's country of domicile that would, upon bankruptcy or insolvency of or other default by Lessee, prevent the return or repossession of the Aircraft in accordance with the terms of this Lease, (III) (unless Lessee shall have agreed or is required to provide insurance covering the risk of requisition of use of the Aircraft by the government of the country of such Permitted Sublessee's country of domicile) the laws of such Permitted Sublessee's country of domicile require fair compensation by the -33- 39 government of such jurisdiction payable in currency freely convertible into dollars for the loss of use of the Aircraft in the event of the requisition by such government of such use, (IV) the Permitted Sublessee is either not entitled to sovereign immunity, or has effectively waived such sovereign immunity, with respect to its rights and obligations under the proposed sublease; (V) the laws of such Permitted Sublessee's country of domicile would give recognition to Lessor's title to the Aircraft, to the registry of the Aircraft in the name of the Lessor (or Lessee, as "lessee", or the proposed Permitted Sublessee, as "sublessee", as appropriate) and to the Lien of the Indenture; (VI) it is not necessary under the laws of such Permitted Sublessee's country of domicile, solely as a consequence of such subleasing and without giving effect to any other activity of Owner Participant, Owner Trustee or Indenture Trustee or any Affiliate thereof, as the case may be, for the Owner Trustee, the Owner Participant or the Indenture Trustee to qualify to do business in such jurisdiction; and (VII) if the Owner Participant so requests, (x) under the laws of such Permitted Sublessee's country of domicile there is no tort liability of the owner of an aircraft not in possession thereof (it being agreed that in the event this opinion cannot be given in a form reasonably satisfactory to Owner Participant, such opinion shall be waived if insurance reasonably satisfactory to Owner Participant is provided to cover such risk), and (y) such other matters as the Owner Participant reasonably requests, provided, however, that no sublease shall extend beyond the expiration of the Basic Term or any Renewal Term then in effect. Any Permitted Sublease shall expressly provide that the rights of any Permitted Sublessee shall be expressly subject and subordinate to all the terms of this Lease and to the Lien of the Indenture (if it has not been discharged), including, without limitation, the covenants contained in Sections 6(c), 6(d) and 6(e) hereof and Lessor's rights to repossession pursuant to Section 18 hereof and to avoid or terminate such Permitted Sublease upon such repossession, and Lessee shall remain primarily liable hereunder for the performance of all of the terms of this Lease to the same extent as if such Permitted Sublease had not occurred. No Permitted Sublease shall in any way discharge or diminish any of Lessee's obligations to Lessor hereunder or under the other Operative Documents or constitute a waiver of Lessor's rights or remedies hereunder -34- 40 or under the other Operative Documents, and such rights shall continue as if such Permitted Sublease had not occurred. Any Permitted Sublease shall expressly prohibit any further sub-sublease or assignment or any other similar transfer of the Aircraft, Airframe or any Engine or rights thereto by the Permitted Sublessee. Lessee shall provide to the Owner Participant and the Indenture Trustee (i) written notice of any Permitted Sublease hereunder (such notice to be given not later than ten Business Days prior to entering into any Permitted Sublease with any proposed Permitted Sublessee), and (ii) a copy of each Permitted Sublease together with an assignment, as security for Lessee's obligations hereunder, of such Permitted Sublease, and if Lessor or the Indenture Trustee so requests, a consent thereto from such Permitted Sublessee, in form and substance reasonably satisfactory to Lessor and the Indenture Trustee, within ten (10) Business Days following the effective date of such Permitted Sublease. (b) Reciprocal Recognition of Rights. In the event the lessor or secured party of any airframe leased to Lessee (or a Permitted Sublessee) or owned by Lessee (or a Permitted Sublessee) is subject to a conditional sale or other security agreement in accordance with Section 6(a)(i)(6) hereof, and the lease or conditional sale or other security agreement covering such airframe also covers an engine or engines owned 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 hereby agrees for the benefit of such lessor or secured party that Lessor will not 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 by such lessor or subject to a security interest in favor of such secured party. Lessor also hereby agrees for the benefit of the mortgagee under any mortgage complying with Section 6(a)(i)(6) hereof, relating to installation of an Engine on an airframe leased to Lessee (or a Permitted Sublessee), that Lessor will not acquire or claim, as against such mortgagee, any right, title or interest in any engine subject to the lien of such mortgage as the result of such engine being installed on the Airframe at any time while such engine is subject to the lien of such mortgage. (c) Lawful Insured Operations. Lessee will not permit the Aircraft, the Airframe or any Engine to be -35- 41 serviced, repaired, maintained, used or operated in violation of any Law of any Governmental Entity having jurisdiction, or contrary to the Manufacturers' operating manuals or instructions, or in violation of any airworthiness certificate or limitation, license or registration issued by any such authority or any manufacturer's specifications, service bulletins or other requirements, including, without limitation, any manufacturer's requirements as may be applicable to keep in full force and effect each material warranty, product or performance guaranty, service life policy or the like, in each case, to the extent made mandatory for Part 121 operators similarly situated to Lessee or the Permitted Sublessee if the Aircraft is registered with the FAA, or the applicable laws of any other jurisdiction in which the Aircraft may then be registered in accordance with Section 11 of the Refunding Agreement, unless the validity thereof is being contested in good faith and by appropriate proceedings, but only so long as such proceedings do not involve any danger of sale, forfeiture or loss of the Aircraft or impair the interest of Lessor therein or impair the validity or priority of the Lien of the Indenture or result in a risk of criminal liability of Lessor, Owner Participant or Indenture Trustee and are not inconsistent with any insurance required to be maintained by Lessee hereunder. In the event that such Law or other requirement requires alteration of the Aircraft during the Basic Term or the then-current Renewal Term, Lessee shall comply therewith at its sole expense and shall maintain the same in proper condition for operation under such Laws and other requirements. Lessee shall not operate in any manner or locate in any place the Aircraft, or suffer or permit the Aircraft to be operated by a Permitted Sublessee or otherwise in any manner or located by a Permitted Sublessee or otherwise in any place (i) unless the Aircraft is covered by insurance or United States Government indemnity as required by the provisions hereof or (ii) contrary to the terms of such insurance or United States Government indemnity or (iii) which prohibits the operation or location therein of Aircraft owned by a United States citizen. Lessee also agrees not to operate or locate the Aircraft or suffer or permit the Aircraft to be operated or located in any area excluded from coverage by any insurance policy issued pursuant to the requirements of this Lease or in any war zone unless insured or indemnified by the United States of America therefor, except in the case of operation pursuant to a sublease or contract with, or as a result of a requisition (not constituting an Event of Loss) by, the United States of America, and then only if Lessee has obtained insurance or an indemnity (in lieu of such -36- 42 insurance) from the United States of America covering such risks, in the amounts and otherwise as required by this Lease. (d) Maintenance. Lessee, at its own cost and expense, shall: (i) perform or cause to be performed all service, repair, maintenance, overhaul, inspections, alterations, modifications, and testing (A) in accordance with good airline industry practice and in such manner to provide complete data and documentation necessary to substantiate certification, (B) as may be necessary and required under, and in compliance with, applicable Law, including, without limitation, FAA rules, regulations and other requirements, any other applicable rules, regulations and requirements by any other applicable Governmental Entity, the Maintenance Program, airworthiness directives having a compliance date during the Term, and the service bulletins and other requirements of any manufacturer, including, without limitation, such requirements as may be applicable to keep in full force and effect any and all material warranties, product and performance guaranties, service life policies, indemnities or the like, (C) except during any period that a Permitted Sublease is in effect, in the same manner and with the same care, including regard for the status and technical condition of the Aircraft, as shall be the case with respect to similar aircraft and engines owned by Lessee without discrimination and as if Lessee owned the Aircraft and was going to use the Aircraft in continued regular customer service after the expiration of the Term, and consistent with good industry practice, and during any period in which a Permitted Sublease is in effect, in the same manner and with the same care, including regard for the status and technical condition of the Aircraft, as shall be the case with respect to similar aircraft and engines owned by such Permitted Sublessee without discrimination and as if the Permitted Sublessee owned the Aircraft and was going to use the Aircraft in continued regular customer service after the expiration of the Permitted Sublease, and consistent with good industry practice, provided, however, that in all circumstances the Aircraft shall be maintained by Lessee (or any Permitted Sublessee) in accordance with maintenance standards required by, or substantially equivalent to those required by the central civil aviation authority of the country of registry, and, to the extent not inconsistent therewith, the FAA and (D) so as to keep the Aircraft in as good a condition as when delivered to Lessee, ordinary wear and tear excepted, and in good operating condition; (ii) keep the Aircraft or cause the Aircraft to be kept in such condition as is -37- 43 necessary to enable the airworthiness certification of such Aircraft to be maintained in good standing at all times under the Federal Aviation Act and any other applicable law, or the applicable laws of any other jurisdiction in which the Aircraft may be registered in accordance with Section 11 of the Refunding Agreement (provided that if any grounding is fleetwide in nature and so long as Lessee or a Permitted Sublessee is contesting in good faith such grounding, Lessee shall not be deemed in violation of this maintenance covenant); and (iii) maintain in English all records, logs and other materials required by, and in a manner acceptable to, the FAA or any other Governmental Entity having jurisdiction and as provided under the Maintenance Program and Lessee's recordkeeping policies. (e) Registration and Insignia. Lessee shall cause the Aircraft at all times, at its expense, to be duly registered during the Restricted Use Period and, subject to Section 11 of the Refunding Agreement, thereafter under the Federal Aviation Act in the name of Lessor or any successor or assignee, so long as (i) while the Aircraft is registered under the Federal Aviation Act, each of the Lessor or its successors or assigns is a "citizen of the United States" as defined in Section 40102(a)(15) of the Federal Aviation Act and (ii) the applicable parties to the Refunding Agreement cooperate with Lessee with respect thereto as reasonably requested by Lessee. Lessee shall not register the Aircraft or permit the Aircraft to be registered under any Laws other than the Federal Aviation Act at any time except as provided in Section 11 of the Refunding Agreement and shall cause the Indenture to be duly recorded and maintained of record as a duly perfected mortgage on the Aircraft and this Lease at all times. At any time after the Restricted Use Period, Lessor, upon compliance with all of the terms of Section 11 of the Refunding Agreement, shall, at the request and sole expense of Lessee, cooperate with Lessee to take all actions reasonably required to change the registration of the Aircraft to another country. Lessee agrees at its expense to place such appropriate insignia, plates and other identification ("Lease Identification") in the cockpit of the Aircraft and on each Engine showing title thereto and the Lien of the Indenture as designated by Lessor and as Lessor may from time to time reasonably request. Unless otherwise requested, upon delivery of the Aircraft, Lessee shall fasten or cause to be fastened in the cockpit of the Airframe in a location reasonably adjacent to and not less prominent than the airworthiness certificate for the -38- 44 Aircraft, and on each Engine (if not prohibited by applicable Law), a Lease Identification in the form set forth in Exhibit C hereto or with any other appropriate information in any other form subsequently designated by Lessor to Lessee. Except as provided herein, Lessee will not allow the name of any Person to be placed on the Aircraft or either Engine as a designation that would be reasonably interpreted as a claim of ownership or Lien; provided, however, that Lessee may cause the Airframe and Engines to have placed thereon the customary colors and insignia of Lessee or any Permitted Sublessee under a Permitted Sublease. Section 7. Inspection. During the Term of this Lease, Lessee shall furnish to Lessor, Owner Participant and Indenture Trustee such information concerning the location, condition, use and operation of the Aircraft as Lessor, Owner Participant or Indenture Trustee may reasonably request. Lessee shall permit, or cause any sublessee to permit, any person designated by Lessor, Owner Participant or Indenture Trustee on reasonable prior notice at reasonable times to visit, inspect and survey the Aircraft (including, without limitation, a visual "walk around" inspection which may include going on board the Aircraft, and inspecting the Aircraft during maintenance checks when panels and bays are open and subject to view), its condition, use, and operation, and the records maintained in connection therewith, and to visit and inspect the properties and to discuss the affairs, finances and accounts of Lessee with the principal officers of Lessee, provided, that so long as no Default or Event of Default has occurred hereunder inspections shall be endeavored to be performed during regularly scheduled maintenance checks of the Aircraft. Each such inspection or survey shall be conducted so as to not unreasonably interfere with the business of Lessee or the maintenance or operation of the Aircraft. Upon Lessor's, Owner Participant's or Indenture Trustee's request, Lessee will notify such Person of the next scheduled maintenance check for the Airframe or any Engine. Lessor, Owner Participant and Indenture Trustee shall have no duty to make any such inspection and shall not incur any liability or obligation by reason of not making any such inspection. Lessor's, Owner Participant's or Indenture Trustee's failure to object to any condition or procedure observed or observable in the course of an inspection hereunder shall not be deemed to waive or modify any of the -39- 45 terms of this Lease with respect to such condition or procedure. Section 8. Additional Covenants of Lessee. Lessee covenants and agrees that: (a) Financial Information. Lessee agrees to furnish Lessor, until the expiration or other termination of the Term of this Lease, the following: (i) within sixty (60) days following the end of each quarter of Lessee's fiscal year, except the last such quarter of such year, commencing after the Restatement Date, a copy of Lessee's Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission or, if Lessee no longer files such report, an unaudited consolidated balance sheet of Lessee and its consolidated subsidiaries prepared by it as of the close of the period ended, together with the related statements of income and cash flows for such period, and in each case certified by a Responsible Officer of Lessee as having been prepared in accordance with GAAP and as fairly presenting the financial condition and results of operations and changes in financial position for such period then ended in accordance with such principles and practices (subject to normal year-end audit adjustments); (ii) within one hundred five (105) days after the close of each fiscal year of Lessee, a copy of Lessee's Annual Report on Form 10-K as filed with the Securities and Exchange Commission or, if Lessee no longer files such reports, an audited consolidated balance sheet, income statement, and cash flow statement of Lessee and its consolidated subsidiaries, as of the close of such fiscal year, and in each case as certified by independent public accountants, including their certificate and accompanying comments, as having been prepared in accordance with GAAP and as fairly presenting the financial condition and results of operations and changes in financial position for such period then ended in accordance with such principles and practices, without qualification as to the scope of the audit or non-conformity with GAAP; (iii) promptly upon their becoming available, copies of all reports on Form 8-K filed by Lessee under the Securities Exchange Act of 1934, as amended, and each other statement, report or circular (other than the exhibits thereto and any registration statements on Form S-8 or its -40- 46 equivalent) generally distributed to creditors or shareholders; (iv) prior to the expiration date of each policy of insurance required to be maintained hereunder, a certificate signed by the Approved Broker of Lessee as to the due compliance with the insurance provisions of Section 12 hereof with respect to the Aircraft, together with certificates of insurance evidencing such insurance and the opinion provided for in Section 12(f); (v) together with each set of financial statements referred to in clauses (i) and (ii), a certificate signed by a Responsible Officer of Lessee, to the effect that such officer has reviewed the relevant terms of this Lease and has made, or caused to be made under his or her supervision, a review of the transactions and condition of Lessee during the accounting period covered by such financial statements, and that such review has not disclosed the existence during such accounting period, nor does such officer have any knowledge of the existence, as at the date of such certificate, of any condition or event which constitutes a Default or an Event of Default, or, if such condition or event which constitutes a Default or an Event of Default existed or exists, specifying the nature and period of existence thereof and what action Lessee has taken or is taking or proposes to take with respect thereto or any event classified as an accident by the National Transportation Safety Board, or if such event has occurred, information about such event; (vi) as soon as practicable after becoming aware thereof, notice of damage or destruction to the Aircraft, either Engine or any Part with a repair or replacement cost (including labor charges) in excess of $1,000,000; (vii) immediately after Lessee knows or should know of the occurrence thereof, notice of a Default; and (viii) from time to time such other information as Lessor may reasonably request. (b) Maintenance of Corporate Existence. Except as provided in Section 8(e) below, during the term of this Lease, Lessee will preserve and maintain its corporate existence and its rights, privileges, licenses and franchises material to Lessee's ability to perform its obligations hereunder in each applicable jurisdiction. -41- 47 (c) Maintenance of Status. Lessee is, and shall remain so long as it shall be the Lessee under this Lease, a "citizen of the United States" as defined in Section 40102(a)(15) of the Federal Aviation Act, and Lessee is and shall maintain its status at all times as a Certificated Air Carrier, including, without limitation, its status so as to fall within the purview of 11 U.S.C. Section 1110 or any analogous statute. (d) Payment of Taxes. Lessee will pay or cause to be paid all Taxes imposed upon it, or upon its income or profits, or upon any property belonging to it, on or prior to the due date thereof, including any extensions which have been duly obtained or granted; provided, however, that Lessee shall not be required to pay any such Taxes, the payment of which is being diligently contested in good faith and by appropriate proceedings with appropriate reserves so long as there is no material possibility that either failure to pay such Taxes or such contest may result in any loss, sale, confiscation, forfeiture or seizure of the Aircraft, the Airframe or either Engine or any criminal liability on the part of Lessor, Indenture Trustee or any Note Holder. (e) Consolidation, Merger, Etc. Lessee shall not liquidate or dissolve; and Lessee shall not consolidate with or merge into or with any other corporation or other Person, and Lessee shall not convey, transfer, lease or otherwise dispose of all or substantially all of its property and other assets (in one or a series of transactions) to any corporation or other Person, unless: (i) the Person formed by or surviving such consolidation or merger or the Person which acquires by conveyance, transfer, lease or other disposition all or substantially all of such property and other assets or stock (the "Successor Entity"): (A) shall be a corporation organized and existing under the Laws of the United States of America or any State thereof or the District of Columbia; (B) immediately after giving effect to such transaction, shall be Lessee or shall have acquired or succeeded to all or substantially all of such property and other assets (including, without limitation, all or substantially all of Lessee's property and other assets) as an entirety and, unless the Owner Participant otherwise agrees, shall have a Net Worth of not less than Lessee's Net Worth immediately prior to such transaction; (C) shall be a "citizen of the United States" of America as defined in Section 40102(a)(15) of the Federal Aviation Act and a Certificated Air Carrier; and (D) shall execute and deliver to Lessor and Indenture -42- 48 Trustee such recordations and filings with any Governmental Entity and such other documents as Lessor determines shall be reasonably necessary or advisable (including, without limitation, to preserve and protect the interests of the Lessor and the priority of the Lien of the Indenture (if it has not been discharged)) to evidence, or in connection with, such consolidation, merger, sale, lease, transfer or other disposition and an agreement, in form and substance reasonably satisfactory to Lessor, which is a legal, valid, binding and enforceable assumption by such Successor Entity of the due and punctual performance and observance of each covenant and condition of this Lease and the other Operative Documents to which Lessee is a party and agreement to be bound thereby, and an officer's certificate to such effect, and to the effect that the other requirements of this paragraph have been satisfied, and a legal opinion from counsel to such effect and otherwise in such form and substance reasonably satisfactory to Lessor; and (ii) prior to and immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing. No such permitted disposition to a Successor Entity shall relieve or release Lessee of or from any obligations hereunder or under the other Operative Documents. (f) Information. Within 60 days after the end of each calendar year and within 60 days of a request by Lessor or Owner Participant, or such shorter period as may be set forth in any written request by the Internal Revenue Service for information or documents, Lessee shall furnish in writing to Lessor or Owner Participant such information and documents (or copies thereof) regarding the Aircraft as may be reasonably requested by Lessor or Owner Participant or the Internal Revenue Service in order to permit Lessor to file its Federal and state income tax returns (or to permit the filing of the Federal and state income tax returns of any affiliated group of corporations filing a consolidated return of which Lessor is a member), or to maintain or defend any claims related thereto and promptly, after reasonable notice, furnish to Lessor or Owner Participant -43- 49 such information as may be reasonably requested by Lessor or Owner Participant or the applicable Governmental Entity as may be required to enable Lessor or Owner Participant to file any reports required to be filed by it with any Governmental Entity because of its ownership or other interest in the Aircraft, the Airframe or the Engines. (g) Place of Business. At all times while this Lease is in effect, Lessee will not, without thirty (30) days prior written notice to Lessor and Indenture Trustee (so long as the Lien of the Indenture shall not have been discharged), change its chief executive office (as such term is defined under Article 9 of the Uniform Commercial Code as adopted in Arizona) or location of its books and records, from 4000 East Sky Harbor Boulevard, Phoenix, Arizona 85034, or such subsequent location of which Lessee shall have so notified Lessor and, if applicable, Indenture Trustee. (h) Certain Limitations on Use. Lessee shall use the Aircraft, Airframe or Engines only in commercial passenger operations and related cargo operations. Unless Owner Participant otherwise agrees, during the Restricted Use Period, Lessee shall not use the Aircraft, Airframe or Engines or permit the Aircraft, Airframe or Engines to be used "predominantly outside the United States" within the meaning of Section 48(a)(2) of the Code, or in such manner that the percentage of the income, deduction or credit attributable to the Aircraft, Airframe or Engines for federal income tax purposes during any taxable year of the Lessor considered to be from foreign sources exceeds the Maximum Foreign Use Percentage. Unless the Owner Participant otherwise agrees, prior to permitting the Aircraft to be operated in any member state of the European Union or other European country, Lessee shall deliver to Lessor (i) a representation and warranty to the effect that Lessee (or any Permitted Sublessee) has no knowledge of any dispute with Eurocontrol or other relevant air traffic control authority over delinquent charges payable by it and (ii) a letter from Lessee (or any Permitted Sublessee) addressed to Eurocontrol or other relevant air traffic control authority pursuant to which Lessee (or such Permitted Sublessee) authorizes the addressee to issue to Lessor, upon Lessor's request from time to time, a statement of account of all sums due by Lessee (or such Permitted Sublessee) to the authority in respect of all aircraft (including, without limitation,the Aircraft) operated by Lessee (or such Permitted Sublessee). -44- 50 (i) Section 1110. Lessee acknowledges that Lessor would not have entered into this amended and restated Lease unless it had available to it the benefits of a lessor under Section 1110 of Title 11 of the United States Code. Lessee covenants and agrees with Lessor that to better ensure the availability of such benefits, Lessee shall support any motion, petition or application filed by Lessor with any bankruptcy court having jurisdiction over Lessee, whereby Lessor seeks recovery of possession of the Aircraft under said Section 1110 and shall not in any way oppose such action by Lessor unless Lessee shall have complied with the requirements of said Section 1110 to be fulfilled in order to entitle Lessee to continued use and possession of the Aircraft hereunder. The acknowledgement, covenant and agreement contained in this Section 8(i) shall continue in full force and effect and survive the expiration or other termination of this Lease and are expressly made for the benefit of and shall be enforceable by the Lessor, the Owner Participant and, if the Lien of the Indenture has not been discharged, the Indenture Trustee. (j) Permits and Licenses. Lessee shall make or obtain, and maintain in full force and effect, each and every consent, license, approval, notice, registration, filing or other action with any Governmental Entity (i) necessary or advisable in connection with the operation or use of the Aircraft, the Airframe, any Engine or Part or the execution, delivery or performance of this Lease or the enforcement thereof against Lessee or (ii) necessary in connection with the execution, delivery or performance of the Operative Documents (other than the Lease) to which Lessee is a party or the enforcement thereof against Lessee. (k) Security Opinion; Annual Certificate. (i) During such times that the Aircraft is registered under the Federal Aviation Act, Lessee shall furnish to Lessor and to Indenture Trustee: (1) (X) prior to the expiration of the time period covered by the opinion of counsel rendered on the Restatement Date, any opinion of counsel rendered pursuant to Section 11(C) of the Refunding Agreement, and any opinion of counsel rendered pursuant to this Section 8(k)(i) and (Y) upon any change in Law that would render the opinion of counsel rendered on the Restatement Date or such immediately preceding opinion of counsel inaccurate, an opinion of counsel with respect to Lessee and -45- 51 the FAA reasonably satisfactory to each addressee of such opinion (which counsel may be internal legal counsel of Lessee and FAA counsel) stating, in the opinion of such counsel, that such action has been taken with respect to the recording, filing, re-recording and refiling of (i) the appropriate Operative Documents and any supplements and amendments thereto and (ii) such other appropriate documents, as is necessary to maintain the perfection of Lessor's title to and/or interest in and Indenture Trustee's security interest in the Aircraft and the Operative Documents for such period of time as reflects the then-current applicable Law, reciting the details of such actions; or (2) at any time that an opinion is not required pursuant to Section 8(k)(i)(1), annually, a certificate reasonably satisfactory to each recipient thereof signed by a Responsible Officer of Lessee certifying that no such action is necessary to maintain the perfection of such title and/or interest and security interest. (ii) During such times that the Aircraft is registered under any Laws other than the Federal Aviation Act, Lessee shall furnish to Lessor and to Indenture Trustee annually (but in any case, (X) prior to the expiration of the time period covered by any opinion of counsel rendered pursuant to Section 11(C) of the Refunding Agreement and any opinion of counsel rendered pursuant to this Section 8(k)(ii) and (Y) promptly upon any change in Law that would render such immediately preceding opinion of counsel inaccurate), an opinion of counsel reasonably satisfactory to each addressee of such opinion stating, in the opinion of such counsel, that such action has been taken with respect to the recording, filing, re-recording and refiling of (i) the appropriate Operative Documents and any supplements and amendments thereto and (ii) such other appropriate documents, as is necessary to maintain the perfection of Lessor's title to and/or interest in and Indenture Trustee's security interest in the Aircraft and the Operative Documents for such period of time as reflects the then-current applicable Law, reciting the details of such actions. -46- 52 (l) Letter of Credit. As security for the obligations to Lessor, Lessee shall provide to Lessor, as named beneficiary thereof, one or more irrevocable standby letters of credit, in form and substance acceptable to Lessor in its sole and absolute discretion (the "Letter of Credit"), including, without limitation, as to renewal provisions, with a face amount available for drawdown at all times equal to the amount set forth on Exhibit C (the "Face Amount"), which Letter of Credit shall: (i) provide that the full amount thereof shall be available for drawdown thereunder and payable in New York, New York, on demand at any time, if a Default under Section 17(e), (f) or (g) or an Event of Default has occurred, which amount may be applied, retained or utilized as provided in the penultimate paragraph of this Section 8(l); (ii) be maintained in full force and effect at all times until ninety-one (91) days after the Expiration Date with a commercial bank acceptable to Lessor, in its sole and absolute discretion, having a long-term unsecured debt rating of "A" or better by Standard & Poor's Rating Group (if the issuing bank's credit rating is lower than such rating, Lessee shall replace such Letter of Credit issuer within five Business Days of any such reduction in rating with a commercial bank meeting such rating requirement), provided, that the Letter of Credit set forth in Exhibit D-2 issued by The Industrial Bank of Japan, Limited, will be acceptable to Lessor for so long as The Industrial Bank of Japan, Limited maintains a long term unsecured debt rating at least equal to its rating on the date hereof; (iii) be expressly designated as transferrable and assignable; and (iv) permit partial drawings. If the Letter of Credit is still in effect at the end of the Term, or the Lessor is holding proceeds of the Letter of Credit that were retained and not applied as provided herein, then Lessor shall return the Letter of Credit to Lessee or terminate it, and/or return any retained and unapplied proceeds, ninety-one (91) days following the date of such expiration or other termination of this Lease so long as no Default or Event of Default has occurred or is continuing hereunder or under any Other Lease, upon payment in full of all amounts then due and owing to Owner Trustee and Owner Participant under the Operative Documents. -47- 53 If an Event of Default has occurred or is continuing under this Lease or an Event of Default has occurred or is continuing under any Other Lease (as therein defined), in addition to any other rights and remedies Lessor may have hereunder, under any Other Lease, any sublease and any and all other remedies available at Law (including, without limitation, the Uniform Commercial Code as adopted in New York) or equity and upon exercising its rights under the Letter of Credit and any Other Letters of Credit, Lessor shall be entitled, in each case as it may elect in its sole and absolute discretion, to (i) hold any amounts drawn under the Letter of Credit or Other Letters of Credit as security for Lessee's obligations under this Lease or the Other Leases, (ii) retain any amounts drawn under the Letter of Credit or Other Letters of Credit for its own account and apply (including, without limitation, by way of set off against) such drawn amounts as it may elect (it being understood that amounts not so applied will be held as security for Lessee's obligations under this Lease and the Other Leases) to remedy any breach by Lessee of this Lease or any other Operative Documents or Other Leases or (iii) recompense Lessor, Owner Participant or any of their respective Affiliates for any loss, damage, cost or expense or other Claim due or owing hereunder or under the Other Leases; provided, however, that in the case of any drawing in respect of any claim for the payment of Rent, Lessee's right to apply the same to such claim shall be limited to amounts which would (absent such Event of Default) be distributable under the Indenture at the time such payment is made to Lessor, Owner Participant or any of their respective Affiliates (and shall not include any amounts distributable to Indenture Trustee in its individual capacity or to the Note Holders); provided further, however, that neither the amount so applied at any one time nor the aggregate amount so applied at different times shall reduce the amount of any installment or payment of Rent (whether upon the termination of the Lease or otherwise) payable by Lessee to an amount insufficient to pay in full the amounts required to be paid on account of the principal of and any interest on the Equipment Notes or otherwise owing to a Note Holder. Lessee shall not be entitled to any refund or credit with respect to any amounts so applied. Any amount retained shall be considered the property of Lessor and Lessor may commingle such amount with its general funds and Lessee, further, hereby absolutely and irrevocably disclaims, to the maximum extent permitted by applicable Law, any interest therein. Lessee shall not be entitled to any interest or other earnings on such retained amount and such amount shall not be refundable. On application of all or any portion of the amounts drawn under the Letter of Credit or any Other -48- 54 Letters of Credit in accordance with this Section 8(l) or the Other Leases, Lessee shall on demand reinstate the amount of the Letter of Credit or Other Letters of Credit, as the case may be, to its or their full Face Amount or provide to Lessor one or more additional Letters of Credit meeting the requirements of this Section 8(l), so that the Letter of Credit and each of the Other Letters of Credit at all times equals the original Face Amount provided for herein. During such times as Lessor shall elect to hold all or part of the proceeds of the Letter of Credit or Other Letters of Credit as security for Lessee's obligations to Lessor under the Lease and the Other Leases, Lessee shall not be obligated to reinstate the amount of the Letter of Credit or Letters of Credit, as the case may be, in respect of the proceeds so held. Section 9. Replacement of Parts; Alterations, Modifications and Additions. (a) Replacement of Parts. Lessee, at its own cost and expense, will promptly replace, or cause to be replaced, 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, in the ordinary course of maintenance, service, repair, overhaul or testing, Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) may at its own cost and expense remove any Parts, whether or not worn out, lost, stolen, destroyed, seized, confiscated, damaged beyond repair or permanently rendered unfit for use, provided that Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) shall replace at its own cost and expense such Parts as promptly as possible. All replacement Parts shall be free and clear of all Liens (except for pooling arrangements to the extent permitted by paragraph (c) of this Section and Permitted Liens), be in at least the equivalent or better modification status and service bulletin accomplishment status, be fully interchangeable as to form, fit and function and shall be in as good operating condition as, and have a value, remaining useful life and utility at least equal to, the Parts replaced (assuming such replaced parts were in the condition and repair in which they were required to be maintained by the terms hereof). All Parts which are at any time removed from the Aircraft shall remain the property of Lessor, subject to the Lien of the Indenture if it has not been discharged, and subject to this Lease no matter where located until such time as such Parts shall be replaced by parts which have been incorporated or installed in or attached to the Aircraft and which meet the requirements for replacement -49- 55 Parts specified above. Immediately upon any replacement Part becoming incorporated or installed in or attached to the Aircraft as above provided, or as provided in Section 9(c), without further act, (i) title to the removed Part shall thereupon vest in Lessee free and clear of all rights of Lessor, Indenture Trustee, Owner Participant and Note Holders and shall no longer be deemed a Part hereunder, (ii) title to such replacement Part shall thereupon vest in Lessor and become subject to the Lien of the Indenture if it has not been discharged, and (iii) such replacement Part shall become subject to the Lien of the Indenture (if it has not been discharged) and this Lease and be deemed a Part for all purposes hereof to the same extent as the Part which it has replaced. (b) Alterations, Modifications and Additions. Lessee, at its own cost and expense, shall make or cause to be made such alterations and modifications in and additions to the Airframe and each Engine to the extent made mandatory for Lessee (or a sublessee) in respect of the Aircraft, Engines or Parts from time to time to meet the applicable standards of the FAA or under any Law of any Governmental Entity having jurisdiction or issued by the manufacturer of the Airframe, Engines or Parts. In addition, so long as no Default or Event of Default has occurred and is continuing, Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee), at its own expense, may from time to time make such alterations and modifications in and additions to the Airframe and either Engine as Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) may deem desirable in the proper conduct of its business, provided, no such alteration, modification or addition diminishes the value, remaining useful life or utility, or impairs the condition or airworthiness, of the Airframe, either Engine or any Part below that immediately prior to such alteration, modification or addition assuming that the Airframe, Engines and Parts were then of the value, utility and remaining useful life and in the condition and airworthiness required by the terms of this Lease. Except as otherwise provided herein, title to all Parts incorporated or installed in or attached or added to the Aircraft as the result of such alteration, modification or addition, shall immediately vest in Lessor and become subject to the Lien of the Indenture (if it has not been discharged) and this Lease, without the necessity for any further act of transfer, document or notice. Notwithstanding the foregoing sentence of this Section 9(b), Lessor agrees that so long as no Default or Event of Default shall have occurred and be continuing Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) may, at such time during the Term for the Aircraft, remove any Part of such Aircraft, provided, that (i) such Part is in -50- 56 addition to, and not in replacement or substitution for, any Part originally incorporated or installed in or attached to, or delivered with, the Aircraft on the Delivery Date or any Part in replacement of, or substitution for, any such originally incorporated, installed, attached or delivered Part, (ii) such Part is not required to be incorporated or installed in or attached or added to the Aircraft pursuant to the terms of Section 6 or this Section 9 or to maintain the insurance required by Section 12 and (iii) such Part can be removed from the Aircraft without causing any material damage thereto and without diminishing or impairing the value, utility, remaining useful life, condition or airworthiness which the Aircraft would have had at such time had such alteration, modification or addition not occurred. Upon the removal by Lessee of any such Part as provided in the preceding sentence, title thereto shall, without further act, vest in Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) and such Part shall no longer be deemed part of the Aircraft (such a part is herein called a "Removable Part"). Any Part not removed by Lessee as above provided prior to the return of the Aircraft to Lessor hereunder, whether pursuant to Section 16, Section 18 or otherwise, shall remain the property of Lessor. If any Removable Part is (i) owned by any third party and leased to Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee), (ii) sold to Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) subject to a conditional sale contract or other security interest or (iii) leased to Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) pursuant to a lease which is subject to a security interest in favor of any third party, then Lessor will not acquire or claim, as against such lessor, conditional vendor or secured party, any right, title or interest in any such Removable Part as the result of such Removable Part being installed on the Aircraft; provided, however, that (A) Lessor's inability to so acquire or claim is subject to the express condition that such lessor, conditional vendor, or secured party shall have agreed in writing (which agreement may be contained in the lease, conditional sale agreement or security agreement) not to acquire or claim, as against Lessor, any right, title or interest in the Aircraft, or any Part other than its interest in such Removable Part by reason of such Removable Part being installed thereon, and (B) any Removable Part not removed by Lessee upon the termination or expiration of this Lease, at such time, shall become the property of Lessor and be subject to this Lease, and provided, further, that (1) if removal of any such Part shall affect the operation of the Aircraft in any way whatsoever, Lessee shall replace such Part with an owned Part of the same value, utility and remaining useful life and (2) Lessee shall repair any -51- 57 unsightly area of the Aircraft as a result of such removal and make all other repairs which are advisable and result from such removal. In the event Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) replaces a Part which is not required to be replaced under Section 9(a) or 9(b) hereof, Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) may remove the replacement Part so long as it reinstalls the original Part and such original Part is free and clear of all Liens, other than Permitted Liens, is in at least the same modification status and service bulletin accomplishment status, is fully interchangeable as to form, fit and function, has been overhauled, repaired and inspected by an agency acceptable to the FAA or other Governmental Entity having jurisdiction, and is in as good operating condition as, and has a utility, remaining useful life and a value at least equal to that of such Part when it was removed from the Aircraft. Notwithstanding any other provision hereof, and without limiting the foregoing, Lessee (or, if a Permitted Sublease is in effect, Permitted Sublessee) may install in the Aircraft audio visual, entertainment or telephonic equipment (including seats with such equipment installed therein) (any or all of which are hereafter referred to as "Excluded Property") in the ordinary course of business, and Lessor shall not claim or acquire title thereto and the rights of the owners thereof therein shall not constitute a default hereunder; provided that (i) any such Excluded Property shall be removed prior to the date of a Return Occasion without causing any damage to the Aircraft and without diminishing or impairing the value, utility, remaining useful life or condition which the Aircraft would have had at such time had such Excluded Property not been installed, (ii) any equipment or seats which such Excluded Property replaces shall be properly stored with the interests of Lessor and, if the Lien of the Indenture is in effect, the Indenture Trustee, duly noted thereon and acknowledged by any applicable bailee or warehouse, and properly reinstalled on the Aircraft prior to the date of a Return Occasion, and (iii) Lessee (or such Permitted Sublessee) shall make all repairs which are required as a result of such removal and/or reinstallation. In no event shall Lessor bear any liability or cost for any alteration, modification, or addition, or for any grounding or suspension of certification of the Aircraft, or for any loss of revenue arising therefrom. (c) Pooling. Any Part removed from the Airframe or either Engine as provided in Section 9(a) may so long as -52- 58 no Default or Event of Default shall have occurred and be continuing or would result therefrom be subjected by Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) to a normal pooling arrangement customary in the airline industry of which Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) is a part entered into in the ordinary course of Lessee's or such Permitted Sublessee's business, provided the Part replacing such removed Part shall be incorporated or installed in or attached to the Aircraft in accordance with Section 9(a) as promptly as possible, and in any event within sixty (60) days, 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 Section 9(a) may be owned by another Person subject to such a normal pooling agreement; provided, however, that Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee), at its own expense, as promptly thereafter as possible, and in any event within sixty (60) days, either (i) causes title to such replacement Part to vest with Lessor in accordance with Section 9(a) (and to be subjected to the Lien of the Indenture if it has not been discharged) by Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) acquiring title thereto for the benefit of and transferring title to Lessor free and clear of all Liens except Permitted Liens, whereupon such replacement Part shall become subject to this Lease and the Lien of the Indenture (if in effect) without the necessity for any further act, document or notice, or (ii) replaces such replacement Part by incorporating or installing in or attaching to the Aircraft a further replacement Part owned by Lessee (or, if a Permitted Sublease is in effect, a Permitted Sublessee) free and clear of all Liens other than Permitted Liens and by causing title to such further replacement Part to vest in Lessor as above provided and to be subjected to the Lien of the Indenture if it has not been discharged, whereupon such replacement Part shall become subject to this Lease and the Lien of the Indenture (if in effect) without the necessity for any further act, document or notice. Section 10. General Tax Indemnification. (a) Indemnity. Lessee agrees that each payment of Basic Rent hereunder shall be free and clear of, and without deduction for, any and all withholdings on account of Taxes of any nature whatsoever, whether or not an exclusion pursuant to Section 10(b) applies, except as required by law. If any such deduction or withholding of Taxes is required with respect to such payments of Basic Rent, Lessee shall pay an additional amount of Basic Rent such that the net amount actually received by Lessor, after -53- 59 such deduction or withholding, will be equal to all such amounts that would be received by Lessor if no such deduction or withholding had been required, but only to the extent necessary to ensure that the holders of the outstanding Equipment Notes receive such amount as may be required by the Indenture. If Lessee pays any amount to Lessor (or to any taxing authority for the account of Lessor) as a result of the application of the preceding sentence with respect to any withholding Tax which is an excluded tax in respect of Lessor pursuant to Section 10(b), then Lessor (or, in the case of Taxes imposed on the Owner Trustee, the Owner Participant to the extent such Tax would give rise to a Lessor's Lien for which the Owner Participant would be liable) shall reimburse Lessee for such withholding Tax within 30 days of written notice accompanied by evidence of payment for such withholding Taxes (exclusive of interest, penalties and additions to Tax) paid by Lessee provided that in any circumstance in which the Lessor is required to reimburse the Lessee for any such withholding Taxes and the Lessee has not received such reimbursement from Lessor or the Owner Participant, then to the extent of such shortfall and so long as no Lease Event of Default has occurred and is continuing, Lessee shall be entitled to obtain reimbursement from Lessor by reducing the succeeding payments of Rent payable to Lessor (other than any portion of Rent that may be required by the Indenture to be paid to the holders of any outstanding Equipment Notes issued thereunder) until the aggregate amount of reduction is equal to the sum of the amount of such shortfall and interest on that amount at the Interest Rate from the date reimbursement is required to be made until the date of such reduction in Rent. Except as provided in Section 10(b), and taking into account any payments received by Lessor pursuant to the second sentence of this Section 10(a), Lessee agrees to pay, and to indemnify and hold each Indemnitee harmless from, any and all taxes (including, without limitation, sales, personal property, transfer, fuel, leasing, use, registration, occupational, license, value added, excess profits, excise, gross receipts, franchise, stamp, income and minimum taxes), levies, withholdings, assessments or other taxes, duties or charges of any nature, together with any fines, penalties, charges or interest thereon (collectively, "Taxes"), howsoever levied or imposed, whether levied or imposed upon or with respect to or asserted against any Indemnitee, Lessee, the Aircraft, the Airframe, any Engine or any Part thereof or interest therein, or otherwise, with respect to any period beginning, or events or circumstances occurring, on or after the Restatement Date, by any Federal, state or local government or taxing authority in the United States of America or by any foreign government or any taxing authority or governmental subdivision of a foreign country or of a -54- 60 territory or possession of the United States (each such governmental subdivision or taxing authority referred to as a "Taxing Authority"): (i) upon or with respect to, based upon or measured by (A) the Aircraft, the Airframe, any Engine or any Part thereof, or interest therein, (B) the manufacture, purchase, ownership, delivery, leasing, acceptance, rejection, assigning, possession, use, operation, location, settlement of any insurance claim, sale, mortgaging, pledging, financing, subleasing, rental, retirement, abandonment, registration, preparation, installation, modification, repair, maintenance, replacement, transportation, storage, transfer of title, return or other disposition of the Aircraft, the Airframe, any Engine or any Part thereof or interest therein; (C) the rentals, receipts, income or earnings arising therefrom (including without limitation the Rent) or (D) interest, principal and other amounts paid or payable with respect to the Equipment Notes, or (ii) upon or with respect to the Operative Documents (including the Equipment Notes), any interest in any thereof, or any future amendment, supplement, waiver or consent thereto requested by Lessee with respect to any thereof, or the execution, delivery, or performance of any thereof, or the acquisition or subsequent transfer thereof or the issuance of the Equipment Notes or any other document executed and delivered in connection with the consummation or confirmation of the transactions contemplated by the Operative Documents or any Indemnitee's interest in any of the foregoing, or the execution, amendment, supplement, issuance, reissuance, refinancing or delivery of any of the foregoing, or (iii) the Trust Indenture Estate or the property, or the income or other proceeds received with respect to the property, held by the Indenture Trustee under the Indenture, or (iv) the payment of the principal of, or interest or premium on, or other amounts payable with respect to the Equipment Notes, whether as originally issued or pursuant to any refinancing, modification or reissuance or any other obligation evidencing any new loan, or (v) otherwise with respect to or in connection with the transactions contemplated by the Operative Documents. -55- 61 (b) Exclusions. The following Taxes shall not be subject to indemnification under subsection (a) of this Section 10: (i) In the case of any Indemnitee, any Taxes imposed on, based on, or measured by, the gross or net income, receipts, capital, or net worth, franchises, excess profits or conduct of business of such Indemnitee (including minimum taxes, withholding taxes and taxes on or measured by any item of tax preference) imposed by the Federal government of the United States of America (other than Taxes included in the calculation of an after-tax payment, Covered Income Taxes described in subsection (c) of this Section 10, or Taxes in the nature of sales or use Taxes, license Taxes or property Taxes), (ii) In the case of any Indemnitee, Taxes imposed on, based on, or measured by the income, receipts, capital, or net worth, franchises, excess profits or conduct of business of such Indemnitee (including minimum taxes, withholding taxes and taxes on or measured by any items of tax preference), imposed by any state, local or foreign government or taxing authority (other than Taxes included in the calculation of an after-tax payment, Taxes in the nature of sales Taxes, use Taxes, license Taxes or property Taxes, and Covered Income Taxes described in subsection (c) of this Section 10), (iii) In the case of any Indemnitee, Taxes which are the direct result of gross negligence or willful misconduct of such Indemnitee, (iv) In the case of any Indemnitee, any Taxes imposed as a result of a voluntary or involuntary bankruptcy of such Indemnitee (other than, in the case of Owner Trustee, as a result of the occurrence of an Event of Default) or any sale, transfer of title, transfer or other disposition by such Indemnitee or a related Indemnitee (for such purpose, Owner Trustee, Owner Participant and the general partners of Owner Participant are related Indemnitees with respect to each other) of the Aircraft, the Airframe, any Engine or any Part thereof or interest therein, or any interest in the Rent or part thereof or any interest in the Operative Documents or part thereof, unless such sale, transfer or disposition occurs in connection with (y) an Event of Default and the exercise by any Indemnitee of its remedies under the Lease or the Indenture, as the case may be, and (z) the substitution, pooling or interchange of the Aircraft, the Airframe, any Engine or any Part pursuant to the -56- 62 terms of the Lease; provided, however, that in all cases Owner Participant and Owner Trustee shall consider in good faith such request as Lessee shall make concerning the appropriate jurisdiction in which such sale, transfer or disposition shall be made, (v) In the case of any Indemnitee, Taxes imposed as a result of a transferee of such Indemnitee of any interest in the Aircraft, the Airframe, any Engine or any Part or any interest in the Operative Documents being a foreign entity or not having its principal office in the United States other than a disposition attributable to the exercise of default remedies under the Lease, or in the case of a default caused by the acts or omissions of Lessee, any sublessee, assignee, or successor of Lessee or person in possession of the Aircraft, default remedies under the Indenture, (vi) Any interest, penalties, fines and additions to tax imposed on an Indemnitee (other than Taxes that are due and payable with a return when properly filed) resulting from such Indemnitee's failure to file returns that are timely and proper, provided such failure was not attributable to such Indemnitee contesting any claim in accordance with this Section 10 or to a failure by Lessee to satisfy its obligations related to such return, (vii) In the case of an Indemnitee other than the Indenture Trustee or the Trust Indenture Estate, Taxes which arise out of or are caused by (i) any breach of an obligation required by the Operative Documents or material misrepresentation of such Indemnitee, or (ii) a failure by such Indemnitee to fulfill its contest obligations, provided such failure adversely affects such Indemnitee's ability to contest, and, in the case of the Indenture Trustee or the Trust Indenture Estate, Taxes imposed as a result of a breach of such Indemnitee's representations, warranties or covenants contained in Section 9(a), 12, or 16 of the Refunding Agreement in any material respect, or from a failure by such Indemnitee to fulfill its contest obligations, (viii) So long as no Event of Default shall have occurred and be continuing, Taxes attributable to the Aircraft related to acts or events occurring after the later of the termination of the Lease and the redelivery of the Aircraft, (ix) In the case of each Pass-Through Trust, each Pass-Through Trustee (in its individual capacity and as trustee under the Pass-Through Trusts), the -57- 63 Subordination Agent and each Liquidity Provider, United States withholding taxes imposed as a result of the place of organization or other status of a holder of an interest in a Pass-Through Trust, (x) In the case of the Indenture Trustee, each Pass-Through Trust, each Pass-Through Trustee (in its individual capacity), the Subordination Agent and each Liquidity Provider, Taxes imposed with respect to the Equipment Notes as a result of activities of such Indemnitee unrelated to the transactions contemplated by the Operative Documents, and (xi) In the case of a general partner of the Owner Participant, any Taxes to the extent such Taxes when added to the Taxes of the same type imposed on Owner Participant and all other general partners and which are subject to indemnification, exceed the Taxes that would have been imposed on Owner Participant alone had Owner Participant been a U.S. corporation (it being understood that in the case of multiple general partners, the Taxes subject to this exclusion shall be apportioned pro-rata in accordance with each general partner's interest in the partnership. For purposes of the exclusions provided in this Section (b), reference to "such Indemnitee" shall mean, in the case of Owner Participant, Owner Participant or any partner of Owner Participant, and, in the case of each general partner of Owner Participant, Owner Participant or any other partner or partners of Owner Participant. Notwithstanding anything to the contrary contained in this Section 10 (other than Section 10(b)(xi)), the provisions of this Section 10(b) shall not apply to, and Lessee shall hold each Indemnitee harmless against, and indemnify each Indemnitee on an after-tax basis (as provided under Section 10(e)) for, any Taxes imposed by any Taxing Authority, with respect to any period beginning, or events or circumstances occurring, on or after the Restatement Date in connection with or relating to the transactions undertaken pursuant to the Foreign Financing documents (and any other documents or agreements relating thereto unless such documents or agreements are or relate solely to Operative Documents other than the Foreign Financing Documents) including, without limitation, Taxes based on or measured by gross or net income or receipts, sales Taxes, value-added Taxes and any Taxes required to be withheld and paid over to the United States Federal government pursuant to Subtitle A of the 1986 Code or any successor provisions with respect to any amounts paid or deemed to be paid to the Foreign Lessor by any Indemnitee pursuant to the Foreign Financing documents, but excluding any net income taxes payable to the United States Federal government or any state or local Taxing Authority as a consequence of a determination that the Lease is not a true lease for Federal income tax purposes by reason of the terms and conditions of the Operative Documents or the exercise of any rights specifically granted thereunder. -58- 64 (c) Covered Income Tax. For purposes of subsection (b)(i) and (b)(ii) of this Section 10, a Covered Income Tax means (i) in the case of any Indemnitee other than the Indenture Trustee or the Trust Indenture Estate, any Tax based on or measured by gross or net income, receipts, capital or net worth, franchises, excess profits or conduct of business (other than taxes which are in the nature of sales or use taxes, license taxes or property taxes) imposed on an Indemnitee by any state or local Taxing Authority in whose jurisdiction such Indemnitee did not otherwise have sufficient business activities or business presence to be subject to tax solely as a result of (x) the operation of the Aircraft in such jurisdiction or (y) the transactions contemplated by the Operative Documents, to the extent such taxes are directly attributable to such operation of the Aircraft or to such transactions. For purposes of determining whether or not the Indemnitee engaged in business, maintained an office or other place of business or was otherwise located in the jurisdiction of a Taxing Authority, Indemnitee shall be defined as including all entities with which such Indemnitee is combined, integrated or consolidated in such Taxing Authority's jurisdiction; (ii) in the case of any Indemnitee other than the Indenture Trustee or the Trust Indenture Estate, any Tax based on or measured by gross or net income, receipts, capital or net worth, franchises, excess profits or conduct of business (other than taxes which are in the nature of sales or use taxes, license taxes, or property taxes) imposed on such Indemnitee by any foreign jurisdiction (i) which are imposed as a result of Lessee's or sublessee's activities in such foreign jurisdiction in connection with the transactions contemplated by the Operative Documents or (ii) which are withholding taxes on Basic Rent to the extent such withholding taxes would otherwise result in Basic Rent payments being insufficient to cover principal and interest payments on the Equipment Notes; (iii) in the case of the Indenture Trustee or the Trust Indenture Estate any Tax based on or measured by gross or net income, receipts, capital or net worth, franchises, excess profits or conduct of business (including minimum taxes, withholding taxes, and taxes on or measured by any item of tax preference) imposed on such Indemnitee by a Taxing Authority in or of any foreign jurisdiction or a territory or possession of the United States, other than any such Tax which would -59- 65 not have been imposed in the absence of such Indemnitee's (including for purposes of this definition, all entities with which such Indemnitee is combined, integrated, or consolidated in such Taxing Authority's jurisdiction) engaging in business, maintaining an office or other place of business or otherwise being located in such jurisdiction other than merely by reason of such Indemnitee's participation in the transactions contemplated by the Operative Documents; and (iv) in the case of the Indenture Trustee or the Trust Indenture Estate, a tax imposed by any Taxing Authority other than the Federal government of the United States of America based on, or measured by gross income or receipts (including minimum taxes, withholding taxes, and taxes on or measured by any item of tax preference), to the extent such Tax is attributable to the operation or registration of the Aircraft in such jurisdiction or to the transactions contemplated by the Operative Documents or is the result of the activities of Lessee, sublessee, or any Affiliate of either thereof in such jurisdiction, including residence. (d) Reports and Returns. In case any report or return is required to be made by Lessee with respect to any Taxes which are subject to indemnification by Lessee under this Section 10, Lessee will either make such report or return in such manner as will show the ownership of the Aircraft in Owner Trustee or the interest of Owner Participant or its permitted assigns and send a copy of such report or return to Owner Trustee and Owner Participant or will notify Owner Trustee or Owner Participant of such requirement and make such report or return in such manner as shall be reasonably satisfactory to Owner Participant or Owner Trustee. If actual notice is given by any taxing authority to an Indemnitee that a report or return is required to be filed with respect to any such Taxes, the Indemnitee shall promptly notify Lessee of such required report or return and Lessee shall either file such report or return in the manner prescribed in the preceding sentence, or shall use its best efforts to cause such report or return to be filed by the appropriate entity. Each Indemnitee agrees to respond to any reasonable request of Lessee for information not within Lessee's control and within the control of and reasonably available to such Indemnitee with respect to the filing of any such report or return, but Lessee agrees to pay any reasonable costs, fees, disbursements or other charges of independent counsel or independent accountants incurred in connection with such request. -60- 66 (e) After-Tax Basis. Lessee further agrees that, with respect to any payment or indemnity under this Section 10 and under Section 13 hereof, such payment or indemnity shall include the net amount necessary to hold the recipient of the payment or indemnity harmless on an after-tax basis from all Taxes required to be paid or credited by such recipient with respect to such payment or indemnity under the laws of any Taxing Authority (as determined, in the case of the Owner Participant, on a hypothetical basis based on the assumption that Owner Participant is subject to the highest federal corporate income tax rate applicable in the year of payment and the State Rate (as defined below). For this purpose, "State Rate" shall mean the actual state and local tax rate imposed upon the Owner Participant, taking into account all available allocations, apportionments, credits and deductions, such information to be provided by the certification of a Responsible Officer of Owner Participant (the "Certification"). At the request of the Lessee and at the Lessee's expense, the accuracy of such information shall be verified by the firm of certified public accountants regularly employed by the Owner Participant, or any other national firm of independent certified public accountants selected by Owner Participant and reasonably acceptable to Lessee. The Certification as verified as described in the preceding sentence (if requested by Lessee) shall be conclusive and binding on all parties. In no event shall Owner Participant be required to make available or disclose any tax returns or related information to any parties other than the certified public accountants verifying the Certification. (f) Tax Benefit. If, by reason of any payment made to or for the account of an Indemnitee by Lessee pursuant to this Section 10 or Section 13 hereof, such Indemnitee subsequently actually realizes a tax deduction or credit (including foreign tax credit and any reduction in Taxes) not previously taken into account in computing the amount of such payment, such Indemnitee shall promptly pay to Lessee, but only if there shall then be no Event of Default and if Lessee shall have made all payments then due and owing to such Indemnitee under the Operative Documents, an amount equal to the sum of (A) the actual reduction in Taxes, if any, realized by such Indemnitee which is attributable to such deduction or credit and (B) the reduction calculated on the same basis as the Gross-Up in Taxes realized by such Indemnitee as a result of any payment made by such Indemnitee pursuant to this sentence; provided, however, that such Indemnitee shall not be obligated to make any payment pursuant to this Section 10 or Section 13 hereof to the extent that the amount calculated pursuant to (A) above would exceed (x) the amount of all prior payments by Lessee to such Indemnitee, pursuant to this Section 10 or -61- 67 Section 13 hereof, net of any amount paid in respect of Taxes required to be paid by such Indemnitee in respect of the receipt or accrual of such amounts received by such Indemnitee from Lessee, less (y) the portion of all prior payments computed pursuant to (A) above by such Indemnitee to Lessee hereunder. (g) Payment. If a claim is made against any Indemnitee for any Taxes which may be subject to indemnification by Lessee hereunder and if such Indemnitee has notice thereof, such Indemnitee shall promptly notify Lessee; provided that the failure to provide such notice shall not release Lessee from any of its obligations hereunder except to the extent Lessee's right to contest such claim is precluded thereby. Any amount payable as an indemnity to any Indemnitee or any amount payable to Lessee pursuant to this Section 10 is to be paid to such party directly, in immediately available funds, within thirty (30) days after receipt of a written demand therefor from such Indemnitee or Lessee, as the case may be, except in the case of a payment to an Indemnitee to the extent that such Taxes are being contested in good faith pursuant to this Section 10, in which event the payment of such indemnity shall be made by the due date for the payment of any Taxes that are the subject of such contest taking into account all extensions of the due date that are available as a result of the contest. In the event an Indemnitee makes a tax payment with respect to any such Taxes (other than with funds advanced to such Indemnitee on an interest-free basis by Lessee pursuant to this Section 10), Lessee shall reimburse the amount of such payment and also shall pay to the Indemnitee interest on the amount of such payment by such Indemnitee at the Interest Rate from the date of any such payment by such Indemnitee to the date of such reimbursement by Lessee to the Indemnitee hereunder. In the event an amount is payable to Lessee under this Section 10 or Section 13, the Indemnitee owing such amount shall pay interest on such amount at the Interest Rate from the date of receipt by such Indemnitee of any amount giving rise to such obligation to pay Lessee until the date of payment to Lessee. (h) Contest. In the event that an Indemnitee receives a written notice of a claim which, if sustained, would require the payment of an indemnity by Lessee pursuant to this Section 10, such Indemnitee shall promptly notify Lessee of such claim and, if requested by Lessee, shall in good faith contest or shall permit Lessee, if desired by Lessee and, in the case of a contest involving Owner Participant, permitted by Owner Participant, and such contest may be conducted in whole or in part separately in the name of Lessee without involving Taxes of such Indemnitee not indemnified hereunder, to contest in the name -62- 68 of Lessee and/or the Indemnitee, the validity, applicability or amount of such Taxes by (x) resisting payment thereof if practicable, (y) not paying the same except under protest, if protest is necessary and proper, and (z) if payments be made, using reasonable efforts to obtain a refund thereof in appropriate administrative and judicial proceedings; provided, however, that the Indemnitee shall not be required to undertake or allow in its name or on its behalf any contest unless the following conditions are satisfied: (i) no Event of Default has occurred and is continuing, (ii) a threshold amount of $75,000 for any individual claim and $150,000 for recurring claims is at issue, (iii) Lessee shall have (a) furnished Indemnitee with a written opinion of tax counsel selected by Indemnitee and reasonably acceptable to Lessee to the effect that a reasonable basis (as defined in ABA Opinion 85- 352) exists for the initial administrative or judicial contest and that the Indemnitee is more likely than not to prevail in any appeal of a trial court decision, and (b) agreed to pay Indemnitee for all reasonable costs and expenses which Indemnitee may incur in contesting such claim, (iv) there is no substantial risk of forfeiture of the Aircraft, (v) if such contest is to be initiated by the payment of, and the claiming of a refund for, such Taxes, Lessee shall advance or cause to be advanced to such Indemnitee (if such Indemnitee is the Indenture Trustee or the Trust Indenture Estate) sufficient funds (on an interest-free basis) to make such payments and shall have agreed to indemnify such Indemnitee against any adverse tax consequences of such advance, (vi) no claim shall be appealed to the U.S. Supreme Court, and (vii) Lessee shall have admitted its liability to indemnify Owner Participant should a proposed adjustment prove to be correct, provided that such admission may be conditioned on a binding judicial or administrative adjudication of Lessee's responsibility to indemnify Owner Participant, and provided further that in no event will such adjudication cause Lessee to delay in fulfilling its contest obligations. -63- 69 (i) Refund. If any Indemnitee shall obtain a refund of all or any part of any Taxes paid by Lessee or from an advance by Lessee, such Indemnitee shall pay Lessee the amount of such refund together with any interest paid thereon attributable to the Taxes paid or advanced by Lessee less the amount of any Taxes payable by such Indemnitee in respect of the receipt of such refund and interest after giving credit to Lessee for any savings by such Indemnitee in respect to any such Taxes by reason of deductions, credits, allocations or allowances in respect of the payment of any such Taxes; provided that such amount shall not be payable before such time as Lessee shall have made all payments or indemnities then due to the Lessor and the Indemnitee under the Lease and all other Operative Documents, and provided further that no amount shall be payable during any period in which an Event of Default under the Lease has occurred and is continuing unremedied unless this Lease has terminated and Lessee has paid all amounts due the Lessor thereunder. (j) Diligence. Lessee shall not be deemed to be in default under any of the above indemnification provisions of this Section 10 so long as Lessee or the Indemnitee shall diligently prosecute such contest in accordance with the provisions of this Section 10. Notwithstanding the foregoing, if a claim is made against any Indemnitee for any Taxes which, if successful, would result in the imposition of Taxes under circumstances which would require Lessee to indemnify such Indemnitee, the Indemnitee shall be released from its responsibility to contest such claim, or part thereof, if it agrees in writing not to seek indemnification from Lessee in respect of the claim, or such part thereof to be contested. In the event an Indemnitee fails to contest, or refuses to permit Lessee to contest, a claim or part thereof which the Indemnitee has the obligation to contest or to permit Lessee to contest under this Section 10, then Lessee shall not be obligated to indemnify the Indemnitee for such claim or such part thereof. (k) Affiliated Group. In the event that the Indemnitee is a member of an affiliated group (within the meaning of Section 1504(a) of the Code) which files a consolidated Federal income tax return, the term "Indemnitee" shall mean and include such affiliated group. (l) Survival. The provisions of this Section 10 shall survive the expiration or termination of any of the Operative Documents. Section 11. Loss, Damage and Requisition. -64- 70 (a) Event of Loss with Respect to the Airframe. Subject to the other provisions of this Section 11, upon an Event of Loss with respect to the Airframe or the Airframe and any Engines then installed thereon, Lessee shall forthwith (and, in any event, within five (5) Business Days after such occurrence) give Lessor written notice of such occurrence and within thirty (30) days after such occurrence give Lessor written notice of its election, subject to the terms hereof and of the Indenture, to perform one of the following two options (it being agreed that if Lessee shall not have given Lessor notice of such election within thirty (30) days after such occurrence, Lessee shall be deemed to have elected to perform the option set forth in the following clause (ii)), provided, that Lessee shall not have the right to select the option set forth in clause (i) if a Default or an Event of Default shall have occurred and be continuing at the time of such election or at the time of replacement: (i) Within one hundred twenty (120) days (the "Replacement Period") after the date of the Event of Loss (but in no event later than the last day of the Term) Lessee shall convey, or cause to be conveyed to Lessor as provided in Section 11(c) hereof, to be subjected to the Lien of the Indenture if it has not been discharged, and to be leased by Lessee hereunder in replacement of the Airframe and such Engines then installed thereon, title to a replacement Airframe (together with the same number of replacement Engines as the Engines), such replacement Airframe and Engines (A) to be free and clear of all Liens (it being understood that, upon such conveyance, such replacement Airframe and replacement Engines may be subject to Permitted Liens), (B) to have a value, utility and remaining useful life, determined in accordance with the Appraisal Procedure as provided in Section 11(c) hereof, at least equal to, and to be in at least as good operating condition as, the Airframe and the Engines, if any, so replaced (assuming the Airframe and the Engines were maintained in accordance with the requirements of this Agreement, whether or not they are in fact so maintained), and (C) to be a like Airbus A320-231 model aircraft with equivalent or better modification status delivered by the Manufacturer not earlier than June 30, 1988 and, in the case of Engines, in compliance with Section 11(b); provided that if Lessee shall not perform its obligation to effect such replacement under this clause by the end of the Replacement Period, Lessee shall then be deemed to have elected to comply, and shall comply, with the provisions of clause (ii) of this Section 11(a); provided, further, that the payment specified therein shall be deemed to have become due and payable on the Stipulated Loss Value Date occurring on or immediately preceding the last day of the Replacement -65- 71 Period. Upon compliance with the foregoing, Lessor will, subject to the rights of any insurers, transfer to Lessee, "AS IS, WHERE IS," without recourse, representation or warranty (except a warranty that such Airframe and Engines are free and clear of Lessor's Liens and Head Lessor Liens), all of Lessor's right, title and interest, if any, in and to the Airframe and the Engines suffering the Event of Loss as well as all of Lessor's right, title and interest in and to any Engine constituting part of the Aircraft and replaced as provided above but not installed thereon at the time of the Event of Loss. For all purposes hereof, a replacement Airframe shall be deemed part of the property leased hereunder and shall be deemed the "Airframe" as defined herein. No Event of Loss resulting in replacement of the Airframe or Engines under this Section 11(a)(i) shall result in any reduction of Rent. (ii) On a Stipulated Loss Value Date on or before one hundred twenty (120) days after the date of the Event of Loss (or, if earlier, with respect to insurance proceeds, on the date on which insurance proceeds with respect to the Event of Loss are received by the loss payee) Lessee shall pay to Lessor in immediately available funds the sum of (A) the Stipulated Loss Value of the Aircraft as shown on Exhibit A for such Stipulated Loss Value Date, plus all Basic Rent or Renewal Rent, as the case may be, payable on each Basic Rent Payment Date or Renewal Rent Payment Date, respectively, prior to the date of payment of such Stipulated Loss Value which has not been paid when due, [plus, if such Stipulated Loss Value Date is also a Basic Rent Payment Date or a Renewal Rent Payment Date, the amount of Basic Rent or Renewal Rent, as the case may be, payable by Lessee on such Stipulated Loss Value Date, or, if such Stipulated Loss Value Date occurs after the last day of the Term,] plus an amount equal to the average daily Basic Rent or Renewal Rent, as the case may be, in effect on the last day of the Term, for each day from and including the last day of the Term to and excluding such Stipulated Loss Value Date, and (B) all Supplemental Rent payable, whereupon (1) the obligation of Lessee to pay Basic Rent or Renewal Rent, as the case may be, hereunder with respect to the Aircraft for any period commencing after the date on which such Stipulated Loss Value is paid shall terminate; provided that Lessee shall remain liable for, and shall pay on or before the date the Stipulated Loss Value and Supplemental Rent are paid, all payments of Basic Rent or Renewal Rent, as the case may be, for the Aircraft due on or before the date of such payment of Stipulated Loss Value and Supplemental Rent, (2) the Term shall terminate with respect to such Aircraft, and (3) Lessor will, subject to the rights of any insurers, transfer to Lessee, "AS IS, WHERE IS," without recourse, representation or warranty (except a warranty that such -66- 72 Airframe and Engines are free and clear of Lessor's Liens), all of Lessor's right, title and interest, if any, in and to the Airframe and Engines suffering the Event of Loss, as well as all of Lessor's right, title and interest, if any, in and to any Engine constituting part of the Aircraft but not installed thereon at the time of the Event of Loss. (b) Event of Loss with Respect to an Engine. Upon an Event of Loss with respect to an Engine only, Lessee shall give Lessor prompt written notice thereof and shall, at its own cost and expense, within sixty (60) days after such occurrence convey or cause to be conveyed to Lessor as replacement for the Engine suffering an Event of Loss, title to another IAE Model V2500 engine of like model and equivalent or better modification status or, at Lessee's option, an IAE engine of an improved model, in each such case which has a value, remaining useful life and utility determined in accordance with the Appraisal Procedure at least equal to such Engine and is suitable for installation and use on the Airframe without diminishing the value, remaining useful life or utility of such Airframe, free of all Liens (it being understood that, upon such conveyance, such replacement Engine may be subject to Permitted Liens) and being in as good operating condition as (including no greater number of cycles or hours than) the Engine being replaced assuming the Engine being replaced was serviceable and otherwise in the condition and repair required by the terms hereof immediately prior to the Event of Loss. Prior to or at the time of any such conveyance, Lessee, at its own cost and expense, will (i) furnish Lessor with a full warranty bill of sale, in form and substance reasonably satisfactory to Owner Participant and Indenture Trustee, as applicable, with respect to such replacement Engine; (ii) cause supplements, in form and substance reasonably satisfactory to Owner Participant and Indenture Trustee (if the Lien of the Indenture has not been discharged), subjecting such replacement Engine to this Lease, the Indenture (if then in effect) and the Trust Agreement (if in effect), to be duly executed by Lessee, if applicable, and duly filed for recordation pursuant to the Federal Aviation Act; (iii) furnish Lessor and Indenture Trustee (if the Lien of the Indenture has not been discharged) with such evidence of title to such Replacement Engine and of compliance with the insurance provisions of Section 12 hereof with respect to such Replacement Engine as Owner Participant or Indenture Trustee (if the Lien of the Indenture has not been discharged) may reasonably request; (iv) furnish Owner Participant and Indenture Trustee (if the Lien of the Indenture has not been discharged) with an opinion of Lessee's counsel addressed to such parties and to Lessor to the effect that title to such Replacement Engine has been duly conveyed to Lessor free and clear of all Liens (except -67- 73 Permitted Liens), and is duly leased hereunder and subject to the Lien of the Indenture (if it has not been discharged), the instruments subjecting such Replacement Engine to the Lien of the Indenture and the Lease, and subjecting to any relevant Assigned Sublease and Sublease Agreement, as the case may be, have been duly filed for recordation pursuant to the Federal Aviation 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 in order to establish and perfect, in the United States and, if the Aircraft is registered outside the United States, in the jurisdiction of registration, the legal title to such Replacement Engine and the Lien of the Indenture on such Replacement Engine; (v) furnish a certificate signed by a Responsible Officer of Lessee certifying that, upon consummation of such replacement, no Default or Event of Default will exist hereunder; (vi) furnish such documents and evidence with respect to Lessee, Owner Participant or Indenture Trustee (if the Lien of the Indenture has not been discharged), as such parties or their respective counsel may reasonably request in order to establish the consummation of the transactions contemplated by this Section 11(b), the taking of all corporate proceedings in connection therewith and compliance with the conditions set forth in this Section 11(b), in each case in form and substance satisfactory to such party; (vii) furnish such Uniform Commercial Code financing statements covering the Replacement Engine as may be requested by Lessor or Indenture Trustee (if the Lien of the Indentures has not been discharged); (viii) furnish Owner Participant with an opinion of tax counsel mutually satisfactory to Owner Participant and Lessee and which opinion is reasonably satisfactory to Owner Participant to the effect that such replacement will have no adverse tax consequences to Lessor and Owner Participant; (ix) furnish the appraisal referred to above; and (x) furnish Owner Trustee and Indenture Trustee with the opinion of counsel to Lessee specified in Section 5.06(a)(5)(i) of the Indenture. Upon full compliance by Lessee with the terms of this Section 11(b), Lessor will, subject to the rights of any insurers, transfer to Lessee, "AS IS, WHERE IS" without recourse, representation or warranty (except a warranty that such Engine is free and clear of Lessor's Liens), all of Lessor's right, title and interest, if any, in the Engine which suffered the Event of Loss. For all purposes hereof, each such Replacement Engine shall be deemed an "Engine" as defined herein and shall be deemed part of the same Aircraft as was the Engine replaced thereof. No Event of Loss covered by this Section 11(b) shall result in any reduction in Rent. -68- 74 (c) Conveyance of Replacement Airframe. Prior to or at the time of any conveyance of a replacement Airframe pursuant to Section 11(a) above, Lessee, at its own cost and expense, will furnish Lessor with the following documents which shall have been duly authorized, executed and delivered by the respective parties thereto and shall be in full force and effect on said date: (i) a full warranty bill of sale, in form and substance satisfactory to Owner Participant and Indenture Trustee (if the Lien of the Indenture has not been discharged), and an AC Form 8050-2 Bill of Sale (or such other form of bill of sale as may be approved by the FAA on said date), executed by the owner thereof, in favor of Lessor and cause supplements, reasonably satisfactory to Owner Participant and Indenture Trustee (if the Lien of the Indenture has not been discharged), to this Lease, the Indenture (if then in effect) and the Trust Agreement (if then in effect), with respect to such replacement Airframe and to be duly filed for recordation pursuant to the Federal Aviation Act or other applicable Governmental Entity; (ii) the certificate specified in Section 12(f) hereof demonstrating compliance with the insurance requirements of Section 12 with respect to the replacement Airframe and Engines; (iii) an opinion (addressed to Indenture Trustee, Lessor, and Owner Participant) of Lessee's counsel (and such other evidence of title as Owner Participant or Indenture Trustee (if the Lien of the Indenture has not been discharged) may reasonably request) to the effect that, upon such conveyance, Lessor will acquire good title to such replacement Airframe free and clear of all Liens (it being understood that, upon such conveyance, such replacement Airframe may be subject to Permitted Liens), that such replacement Airframe will be leased hereunder to the same extent as the Airframe replaced thereby and will be subject to the Lien of the Indenture (if it has not been discharged), the instruments subjecting such Replacement Airframe and Replacement Engine to the Lien of the Indenture and the Lease, and subjecting to any relevant Assigned Sublease and Sublease Assignment, as the case may be, have been duly filed for recordation pursuant to the Federal Aviation 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 in order to establish and perfect, in the United States and, if the Aircraft is registered outside the United States, in the jurisdiction of registration, the legal title to such Replacement Airframe and Replacement Engine and the Lien of the Indenture on such Replacement Airframe and Replacement Engine, and that Lessor, and Indenture Trustee as assignee of Lessor, is entitled to the benefits of Section 1110 of Title 11 of the United States Code with respect to such replacement airframe and engines to the same extent as with respect to the Airframe and Engines then installed thereon -69- 75 prior to such replacement; (iv) a certificate signed by a Responsible Officer of Lessee certifying that, upon consummation of such replacement, no Default or Event of Default will exist hereunder; (v) such documents and evidence with respect to Lessee, Owner Participant or Indenture Trustee (if the Lien of the Indenture has not been discharged), as such parties or their respective counsel may reasonably request in order to establish the consummation of the transactions contemplated by this Section 11(c), the taking of all corporate proceedings in connection therewith and compliance with the conditions set forth in this Section 11(c), in each case in form and substance satisfactory to each such party, including evidence that the Aircraft of which the replacement Airframe is a part has been duly certificated by the FAA as to type and airworthiness in accordance with the terms of this Lease and application for registration of such replacement Airframe in the name of Lessor has been duly made with the FAA or other applicable Governmental Entity and Lessee has temporary or permanent authority to operate the replacement Airframe; (vi) furnish such Uniform Commercial Code financing statements covering the replacement Airframe as may be reasonably requested by Lessor or Indenture Trustee; (vii) furnish Owner Participant with an opinion of tax counsel mutually satisfactory to Owner Participant and Lessee and which opinion is reasonably satisfactory to Owner Participant to the effect that such replacement will have no adverse tax consequences to Lessor and Owner Participant; (viii) an appraisal prepared in accordance with the Appraisal Procedure which confirms that the replacement Airframe and any replacement Engine has a value, utility and remaining useful life at least equal to that of the Airframe and Engines which suffered the Event of Loss assuming that the same were maintained in accordance with the requirements of this Lease whether or not they are in fact so maintained; and (ix) furnish Owner Trustee and Indenture Trustee with the opinion of counsel to Lessee specified in Section 5.06(a)(5)(i) of the Indenture. Upon full compliance by Lessee with the terms of this Section 11(c), Lessor will, subject to the rights of any insurers, transfer to Lessee "AS IS, WHERE IS," without recourse, representation or warranty (except a warranty that such Airframe is free and clear of Lessor's Liens and Head Lessor Liens), all of Lessor's right, title and interest in and to the Aircraft which suffered the Event of Loss. No Event of Loss with respect to the Aircraft under the circumstances contemplated by the terms of this Section 11(c) shall result in any reduction in Rent. For all purposes of this Lease, each such replacement Aircraft (together with any Engines constituting part of the Aircraft being replaced as to which an Event of Loss has not occurred) shall be deemed part of the property -70- 76 leased hereunder and shall be deemed the "Aircraft" as defined herein. (d) Application of Proceeds and Payments. Any payments received at any time by Lessor or by Lessee from any insurer (including a Governmental Entity providing an indemnity in lieu thereof) with respect to an Event of Loss shall be applied in the manner specified in Sections 12(c) and (e) hereof. Subject to Section 11(f) below, any payments (other than insurance or such indemnity proceeds) received at any time by Lessor or Lessee from any Governmental Entity or other Person with respect to an Event of Loss will be applied as follows (after reimbursement of Lessor, Indenture Trustee and Owner Participant for their reasonable out-of-pocket costs and expenses): (i) unless clause (ii) below is applicable, so much of such payments as shall not exceed the Stipulated Loss Value and other payments required to be paid by Lessee pursuant to Section 11(a)(ii) of this Lease shall be paid to Lessor in reduction of Lessee's obligation to pay such Stipulated Loss Value and other payments, if not already paid by Lessee, or, if already paid by Lessee, shall (unless a Default or an Event of Default shall have occurred and be continuing) be applied by Lessor to reimburse Lessee for its payment of such Stipulated Loss Value and other payments and the balance, if any, of such payment remaining thereafter shall be paid over to, or retained by, Lessor; or (ii) if such payments are received as a result of an Event of Loss with respect to the Airframe or an Engine which is being replaced pursuant to Section 11(a)(i) or Section 11(b) hereof, all such payments shall be paid over to, or retained by, Lessee if Lessee shall have fully performed or, concurrently therewith fully performs, the terms of Sections 11(a)(i) and (c) or Section 11(b) hereof, as the case may be, and of Section 15 hereof with respect to the Event of Loss for which such payments are made and if no Default or Event of Default shall have occurred and be continuing. (e) Requisition for Use by Government with Respect to the Aircraft. Subject to Section 11(f) below, in the event of the requisition for use by a Governmental Entity of the Aircraft, the Airframe or an Engine (other than a requisition constituting an Event of Loss), Lessee shall promptly notify Lessor and Indenture Trustee (if the Lien of the Indenture has not been discharged) thereof and all of Lessee's obligations under this Lease with respect to such Airframe or Engine shall continue to the same extent as if such requisition had not occurred. All payments received by Lessor or Lessee from the Governmental Entity for the use -71- 77 of such Airframe or Engine during the Term shall be paid over to, or retained by, Lessee if no Default or Event of Default shall have occurred and be continuing; and all other payments received by Lessor or Lessee from the Governmental Entity shall be paid over to, or retained by, Lessor. If the Airframe and such Engines or engines are not returned by the end of the Term, an Event of Loss shall be deemed to have occurred on the last day of the Term and, on the last day of the Term, Lessee shall either pay to Lessor the amount provided herein for an Event of Loss to the Airframe and such Engines or engines on such date or provide a replacement Aircraft and Engine on such date in the condition provided for in Section 16 and Exhibit E. In the event of the requisition for use by the Governmental Entity of any Engine without the requisition for use of the Airframe, Lessee will replace such Engine hereunder by complying with the terms of Section 11(b) to the same extent as if an Event of Loss had occurred with respect to such Engine, and thereafter any payments received by Lessor or Lessee from the Governmental Entity with respect to such requisition shall be paid over to, or retained by, Lessee. (f) Application in Default. Any amount referred to in clause (i) or (ii) of Section 11(d) or Section 11(e) which is otherwise payable to Lessee shall not be paid to Lessee, or, if it has been previously paid to or retained by Lessee, shall be paid by Lessee to Lessor, if at the time of such payment or retention a Default or an Event of Default shall have occurred and be continuing. In such case, all such amounts shall be paid to and held by Indenture Trustee so long as the Lien of the Indenture shall not have been discharged and thereafter by Lessor as security for the obligations of Lessee, or, at the option of Lessor or the Indenture Trustee, as the case may be, applied by Lessor or the Indenture Trustee, as the case may be, toward payment of any of Lessee's obligations at the time due hereunder, as Lessor or the Indenture Trustee, as the case may be, may elect, including, without limitation, by reason of this Lease being declared or deemed in default. At such time as there shall not be continuing any such Event of Default or Default, all such amounts at the time held by Lessor or Indenture Trustee in excess of the amount, if any, which Lessor or Indenture Trustee has elected for application as provided above, shall be paid to Lessee. Section 12. Insurance. (a) Public Liability and Property Damage Insurance. Lessee will carry and maintain in effect, or cause to be carried and maintained in effect, at its own cost and expense, with Approved Insurers, comprehensive aircraft and general public liability insurance (including, -72- 78 without limitation, contractual liability, liability war risk and passenger legal liability products, completed operation liability covering maintenance of aircraft, but excluding manufacturer's product liability insurance), and property damage insurance with respect to the Aircraft, in an amount not less than three hundred fifty million dollars ($350,000,000), combined single limit, per occurrence or such higher amount, and of such type and terms, as are customarily carried by prudent Certificated Air Carriers, similarly situated to Lessee, operating aircraft of similar size and engines and as hereinafter provided. Each and any policy of insurance carried in accordance with this Section 12(a), and each and any policy obtained in substitution or replacement for any of such policies, (i) shall designate Lessor (in both its individual and trustee capacity), Owner Participant, the general partners of Owner Participant, Indenture Trustee (in both its individual and trustee capacity) and the other Indemnitees and their respective permitted assigns, as additional insureds as their interests may appear (but without imposing upon any such Person any obligation imposed upon the insured, including, without limitation, the liability to pay any premiums for any such policies), (ii) shall expressly provide that, in respect of the interests of Lessor, Owner Participant, the general partners of Owner Participant, Indenture Trustee and the other Indemnitees and their respective permitted assigns, in such policies, the insurance shall not be invalidated as to an insured or additional insured by any act or omission of Lessee or any other insured or additional insured and shall insure Lessor, Owner Participant, the general partners of Owner Participant, Indenture Trustee and the other Indemnitees and their respective permitted assigns, regardless as to any insured or additional insured of any breach or violation by Lessee or any other insured or additional insured of any warranty, declaration or condition contained in such policies, (iii) shall provide that if such insurance is cancelled for any reason whatsoever, or is changed in any adverse way with respect to the interests of Lessor, Owner Participant, the general partners of Owner Participant, Indenture Trustee and the other Indemnitees or if such insurance is allowed to lapse for non-payment of premium, such cancellation, change or lapse shall not be effective as to Lessor, Owner Participant, the general partners of Owner Participant, Indenture Trustee and the other Indemnitees, and their respective permitted assigns, until thirty (30) days, in each instance (seven (7) days or such lesser period of time as is the insurance industry standard for war/allied perils coverage), after notice to Lessor, Owner Participant, the general partners of Owner Participant and Indenture Trustee from such insurer or insurers, of such prospective cancellation, change or lapse, (iv) shall include coverage for any country in or over which -73- 79 the Aircraft is located or operated, and (v) shall provide that, as against Lessor, Owner Participant, the general partners of Owner Participant, Indenture Trustee and the other Indemnitees, and their respective permitted assigns, each insurer shall waive any rights of set-off, counterclaim or any other deduction, whether by attachment or otherwise, and waives any rights it may have to be subrogated to any right of any insured against Lessor, Owner Participant, the general partners of Owner Participant, Indenture Trustee, or the other Indemnitees, or their respective permitted assigns, with respect to the Aircraft. Each liability policy shall be primary without right of contribution from any other insurance which may be carried by Lessor, Owner Participant, the general partners of Owner Participant, Indenture Trustee or the other Indemnitees, or their respective permitted assigns, and 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. Lessee shall cause its insurers to agree that the indemnity and hold harmless provisions of Section 13 are insured as a contractual assumption of liability by Lessee's insurers, subject to the terms, coverage, conditions, limitations and exclusions of the policy of insurance. Without limiting the foregoing, the type and amount of the insurance carried by Lessee hereunder shall be no less in amount and no less comprehensive or favorable to Lessor, Owner Participant, the general partners of Owner Participant, Indenture Trustee and the other Indemnitees than that carried by Lessee with respect to other A320-231 aircraft or similar-size aircraft owned or leased by Lessee. (b) Insurance Against Loss or Damage. Lessee, at its own expense, will maintain in effect, or cause to be carried and maintained in effect, with Approved Insurers "all-risk" ground and flight aircraft hull insurance (which shall include, but not be limited to, hijacking, a disappearance clause and coverage against strikes, riots, commotions or labor disturbances, air piracy, malicious acts or acts of sabotage and unlawful seizure or wrongful exercise of control of the Aircraft in flight by a person on board such Aircraft acting without the consent of Lessee) covering the Aircraft, and "all-risk" coverage including transit insurance with respect to Engines and Parts while not installed on such Aircraft or an aircraft, which in each case considering all policy terms, limitations and exclusions is of the type, terms and amount customarily maintained by prudent Certificated Air Carriers similarly situated to Lessee and operating similar size aircraft and engines and as hereinafter provided. Lessee shall also maintain, or cause to be maintained, war risk and allied -74- 80 perils hull insurance reasonably acceptable to Lessor with Approved Insurers. In addition, at least ten (10) Business Days (or, in the case of an emergency, at least two (2) Business Days) prior to permitting the Aircraft, Airframe or Engines to be operated or located outside of the United States of America, other than in Canada or Mexico, Lessee shall notify Lessor thereof. If Owner Participant or Indenture Trustee reasonably requests at any time and if such insurance is then customarily being obtained by or for Persons leasing or financing similarly-sized aircraft operating on similar routes to operators located in the jurisdiction of Lessee's or, if a Permitted Sublease is in effect, the Permitted Sublessee's jurisdiction of domicile, Lessee shall pay or reimburse Lessor for political risk, repossession, expropriation, confiscation and similar insurance as Lessor may arrange or cause to be arranged; provided that Indenture Trustee shall not be obligated to request such insurance and shall not be liable for any failure to request such insurance. Anything herein to the contrary notwithstanding, at all times while the Aircraft is subject to this Lease, the insurance required by this Section 12(b) shall be for an amount on an "agreed value" basis not less than the Stipulated Loss Value from time to time determined for the Aircraft. Without limiting the foregoing, the type and amount of insurance carried by Lessee hereunder shall be no less comprehensive or favorable to Lessor, Owner Participant, Indenture Trustee and the other Indemnitees than that carried by Lessee with respect to similar-size aircraft owned or leased by Lessee. Each and any policy of insurance obtained and maintained pursuant to this Section 12(b), and each and any policy obtained in substitution or replacement for any such policies, (i) shall designate Lessor as owner of the Aircraft, shall designate, so long as the Lien of the Indenture has not been discharged, Indenture Trustee and, thereafter, Lessor, as sole loss payee, as provided below and shall designate Lessor, Owner Participant, Indenture Trustee (in both its individual capacity and its trustee capacity) and the other Indemnitees and their respective permitted assigns as additional insureds, as their respective interests may appear (but without imposing upon Lessor, Owner Participant, Indenture Trustee and the other Indemnitees and their respective permitted assigns, any obligation imposed upon the insured, including, without limitation, the liability to pay any premiums for any such policies), (ii) shall expressly provide that, in respect of the interests of such an additional insured and its permitted assigns, in such policies, the insurance shall not be invalidated as to an insured by any act or omission of Lessee or any other additional insured, and shall insure each such additional insured and its permitted assigns, -75- 81 regardless of any breach or violation of any warranty, declaration or condition contained in such policies by the Lessee or another additional insured, (iii) shall provide that if such insurance is cancelled for any reason whatsoever, or is changed in any adverse way with respect to the interests of Lessor, Owner Participant, Indenture Trustee and to the other Indemnitees and their respective permitted assigns, or if such insurance is allowed to lapse, such cancellation, change or lapse shall not be effective as to Lessor, Owner Participant, Indenture Trustee, the other Indemnitees or their respective permitted assigns, until thirty (30) days (seven (7) days or such lesser period of time as is the insurance industry standard for war/allied perils coverage) after written notice to Lessor, Owner Participant and Indenture Trustee from such insurer or insurers, as the case may be, of such prospective cancellation, change or lapse, (iv) shall include coverage for any country in or over which the Aircraft may at any time be located or operated, (v) shall provide that, as against Lessor, Owner Participant, Indenture Trustee the other Indemnitees and their respective permitted assigns, each insurer shall waive any rights of set-off, counterclaim or any other deduction, whether by attachment or otherwise, and waives any rights it may have to be subrogated to any right of any insured against Lessor, Owner Participant, Indenture Trustee and the other Indemnitees and their respective permitted assigns, with respect to the Aircraft, (vi) shall provide that in the event of any damage or loss which is an Event of Loss hereunder and which results in a payment, such payment shall be payable directly to Indenture Trustee as sole loss payee, so long as the Lien of the Indenture shall not have been discharged and thereafter to Lessor, as sole loss payee, and (vii) shall provide that in the event of any damage or loss which is not an Event of Loss hereunder and which results in a payment, such payment shall be payable directly to Indenture Trustee, as sole loss payee for the account of all interests, so long as the Lien of the Indenture shall not have been discharged and thereafter to Lessor, as sole loss payee for the account of all interests. The insurance required under this Section 12(b) may incorporate deductible amounts which shall not exceed one million dollars ($1,000,000). Each of Lessor, Owner Participant and the general partners of Owner Participant shall have the right to carry additional and separate excess or contingent insurance for its own benefit at its own expense, without, however, thereby limiting Lessee's obligations under this Section 12, and Lessee shall not carry any such insurance if it would conflict with or adversely affect other insurance carried by Lessor, Owner Participant or the general partners of Owner Participant with respect to the Aircraft. Lessee shall have -76- 82 the right to carry insurance in excess of the amounts required hereunder and the proceeds of such excess insurance shall be payable to Lessee, provided, however, that such insurance does not conflict with or adversely affect the insurance required hereunder or any excess or contingent insurance carried by Lessor, Owner Participant or the general partners of Owner Participant. Lessee shall give Lessor reasonable prior written notice of any insurance to be carried by Lessee in addition to that required to be carried by Lessee as provided herein. In the event that separate policies are maintained to cover "all-risk" ground and flight aircraft, hull and war risks and allied perils insurance, Lessee shall include a 50/50 provisional claims settlement clause as contained in the policies of insurance maintained by Lessee with respect to all other aircraft in Lessee's fleet, and a copy of the 50/50 provisional claims settlement clause in effect on the Restatement Date shall be attached to the insurance certificate issued on the Restatement Date. (c) Application of Insurance Proceeds for an Event of Loss. It is agreed that insurance payments which arise from insurance required to be carried by Lessee pursuant to this Section 12 and received as the result of the occurrence of an Event of Loss shall be applied as follows (after reimbursement of Lessor, Owner Participant and Indenture Trustee for their reasonable out-of-pocket costs and expenses): (i) unless clause (ii) below is applicable, so much of such payments as shall not exceed the Stipulated Loss Value and other payments required to be paid by Lessee pursuant to Section 11(a)(ii) of this Lease shall be paid to Indenture Trustee so long as the Lien of the Indenture has not been discharged and thereafter to Lessor in reduction of Lessee's obligation to pay such Stipulated Loss Value and any other payments if not already paid by Lessee, or, if already paid by Lessee, shall (unless a Default or an Event of Default shall have occurred and be continuing) be applied by Indenture Trustee or Lessor, as the case may be, to reimburse Lessee for its payment of such Stipulated Loss Value and other payments and the balance, if any, of such payment remaining thereafter shall be paid over to, or retained by, Lessor; or (ii) if such payments are received as a result of an Event of Loss with respect to the Airframe or an Engine which is being replaced pursuant to Section 11(a)(i) or Section 11(b) hereof, all such payments shall be paid over by the Indenture Trustee or Lessor, as the case may be, to, or retained by, Lessee if Lessee shall have -77- 83 fully performed or, concurrently therewith fully performs, the terms of Section 11(a)(i) and (c) or Section 11(b) hereof, as the case may be, and of Section 15 hereof with respect to the Event of Loss for which such payments are made and if no Default or Event of Default shall have occurred and be continuing. (d) Application of Insurance Proceeds for Other than an Event of Loss. The insurance payments of any property damage loss to the Airframe or any Engine not constituting an Event of Loss with respect thereto will be applied in payment for the actual costs of repairs or for replacement property which Lessee has incurred in accordance with the terms of Section 9, 11 or 12(c) of this Lease against such documentation evidencing payment by Lessee as Lessor may reasonably request to reimburse Lessee for such repairs or replacements already paid for by Lessee, and any balance remaining after compliance with such Sections with respect to such loss shall be paid to Lessor. Lessee shall be entitled to receive from the insurer any insurance proceeds not in excess of five hundred thousand dollars ($500,000) as soon as such funds are paid and shall promptly receive such additional insurance proceeds from the loss payee upon invoices for repair work in progress, replacement parts which are ordered or for work completed as provided above in this Section 12(d). Any amount referred to in this Section 12(d) which is payable to Lessee shall not be paid to Lessee if at the time of such payment any Default or Event of Default shall have occurred and be continuing, but shall be held by Lessor as security for the obligations of Lessee under this Lease or applied as provided in Section 12(e). (e) Application in Default. Any amount referred to in clause (ii) of Section 12(c) or Section 12(d) which is otherwise payable to Lessee shall not be paid to Lessee, or if it has been previously paid to or retained by Lessee, shall be paid by Lessee to Indenture Trustee, so long as the Lien of the Indenture shall not have been discharged, and thereafter to Lessor, if at the time of such payment or retention a Default or an Event of Default shall have occurred and be continuing. In such case, all such amounts shall be paid to and held by Indenture Trustee, so long as the Lien of the Indenture shall not have been discharged, and thereafter held by Lessor as security for the obligations of Lessee, or, at the option of Indenture Trustee or Lessor, applied by Indenture Trustee or Lessor toward payment of any of Lessee's obligations at the time due hereunder, including, without limitation, by reason of this Lease being declared or deemed declared in default, as Indenture Trustee or Lessor may elect. At such time as there shall not be continuing any such Event of Default or -78- 84 Default, all such amounts at the time held by Indenture Trustee or Lessor in excess of the amount, if any, which Indenture Trustee or Lessor has elected for application as provided above, shall be paid to Lessee. (f) Certificates. On or before the Delivery Date, and thereafter on any renewal by the Lessee of the insurance required hereby (but in no event less than once in every twelve (12) month period), Lessee will furnish to Lessor and Indenture Trustee a certificate executed and delivered by an Approved Insurer or the Approved Broker, describing in reasonable detail, and in accordance with customary practice, insurance carried on the Aircraft and Lessee shall also furnish an opinion or report by the Approved Insurer or the Approved Broker certifying that the insurance then maintained on the Aircraft complies with the terms of this Lease. Lessee will cause the Approved Broker to agree to advise Lessor, Owner Participant and Indenture Trustee in writing at least thirty (30) days (seven (7) days or such lesser period of time as is the insurance industry standard for war/allied perils coverage) prior to the expiration, non-renewal, termination or cancellation for any reason (including, without limitation, failure to pay premium therefor) or material modification of any such insurance. In the event Lessee shall fail to maintain insurance as herein provided, Lessor, Owner Participant or Indenture Trustee at their respective options, may provide such insurance and, in such event, Lessee shall, upon demand, reimburse Lessor, as Supplemental Rent, or any other such other Person who may have provided such insurance, for the cost thereof. (g) Reinsurance. Lessee (or if a Permitted Sublease is in effect, the Permitted Sublessee) may carry primary insurance outside of the aviation insurance markets in New York, London or Paris if the relevant primary insurer shall have obtained reinsurance and such reinsurance (i) is on the same terms as the original insurance and includes the provisions required by this Agreement; (ii) provides in case of any bankruptcy, insolvency, liquidation, dissolution or similar proceedings of or affecting the original insurer that the reinsurers' liability will be to make such payment as would have fallen due under the relevant policy of reinsurance if the original insurer had (immediately before such bankruptcy, insolvency, liquidation, dissolution or similar proceedings) discharged its obligations in full under the original insurance policies in respect of which the then relevant policy of reinsurance has been effected; and (iii) contains a "cut-through" clause in the following form (or otherwise, satisfactory to Owner Participant): -79- 85 "The Reinsurers and the Reinsured hereby mutually agree that in the event of any claim arising under the reinsurances in respect of a total loss or other claim where as provided by the Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-11] dated as of June __, 1997 and made between Wilmington Trust Company, as Owner Trustee, and America West Airlines, Inc. such claim is to be paid to the person named as sole loss payee under the primary insurances, the Reinsurers will in lieu of payment to the original insured, its successors in interest and assigns pay to the person named as sole loss payee under the primary insurances effected by the original insured that portion of any loss due for which the Reinsurers would otherwise be liable to pay the original insurer (subject to proof of loss), it being understood and agreed that any such payment by the Reinsurers will (to the extent of such payment) fully discharge and release the Reinsurers from any and all further liability in connection therewith." (h) Storage. During any period that the Aircraft is in storage or otherwise grounded, Lessee may carry or cause to be carried, in lieu of the insurance required by Sections 12(a) and (b) above, insurance otherwise conforming with the provisions of said Sections 12(a) and (b) except that the scope of the risk and the type of insurance, and the amount of the insurance in the case of the insurance described in Section 12(a) above (but not the amount of insurance to be carried under Section 12(b) above), shall be the same as from time to time applicable to similar size passenger aircraft that comprise Lessee's fleet in similar storage or grounding, and in any event (including, without limitation, at any time when there shall be in existence a Permitted Sublease), the same as from time to time customarily carried by similarly-situated, prudent Certificated Air Carriers for passenger aircraft of similar size as the Aircraft in similar storage or grounding. (i) Amounts Held. So long as no Default or Event of Default has occurred and is continuing, any amount held by Lessor or Indenture Trustee, as the case may be, until application by Lessor or Indenture Trustee, as the case may be, pursuant to this Section 12 shall be invested as provided in Section 21(h) hereof. (j) After the Term. Lessee shall continue to maintain at its expense the insurance described in Section 12(a) for three years after the expiration or termination of the Basic Term or Renewal Term, if Lessee has elected to renew the Lease in accordance with Section 20, covering each Indemnitee as its interest may appear and specifically insuring the indemnity contained in Section 13 to the extent of the coverage of such policy. -80- 86 (k) Governmental Indemnity. In lieu of certain of the insurance described in Section 12 above, Lessee may provide a United States governmental indemnity, to the extent and subject to the terms and conditions specified in Section 6(c). Section 13. General Indemnity. Lessee hereby agrees to indemnify, reimburse, defend and hold harmless each Indemnitee on a net after-tax basis, as provided in Section 10(e), within fifteen (15) days after demand from and against any and all claims (whether or not based on strict liability), damages (whether direct, indirect, incidental, special or consequential), losses, charges, fees, liabilities, obligations, demands, suits, judgments, actions and other legal proceedings (whether civil or criminal), penalties, fines, other sanctions, and any reasonable costs and expenses in connection herewith, including, without limitation, costs and expenses set forth in Section 21(j) hereof and reasonable attorney's fees and expenses of whatever kind or nature (any and all of which are hereafter referred to as "Claims") imposed on, or asserted by or against, or suffered or incurred by, any Indemnitee, from (and including) the Restatement Date, including, without limitation, injury, death or property damage of passengers, shippers and others, environmental control, noise and pollution regulations, which in any way may result from, pertain to, or arise in any manner out of, or are in any manner related to (1) the Operative Documents, the Purchase Documents or the Financing Documents, or any of the transactions contemplated thereby; (2) the Aircraft, the Airframe, any Engine or any engine used in connection with the Airframe or any Part thereof, including, but not limited to, (A) the importation, exportation, condition, manufacture, design, purchase, ownership, registration, reregistration, deregistration (other than any deregistration caused by the failure of the registered owner of the Aircraft to be a "citizen of the United States" as defined under the Federal Aviation Act and the regulations thereunder or to file the documentation necessary to continue FAA registration of the Aircraft), delivery, nondelivery, assignment, leasing, subleasing, sub-subleasing, acceptance, rejection, possession, repossession, control, return, financing, Liens (excluding Lessor's Liens, Head Lessor's Liens and Lenders' Liens, but including the Lien of the Indenture), use, performance, modification, maintenance, overhaul, operation, pooling, interchange, repair, testing, sale, return or other disposition or application of the Aircraft, the Airframe, any Engine, any engine used in connection with the Airframe or any Part (including, but not limited to, latent and other defects whether or not discoverable by Lessee or Lessor, -81- 87 Claims related to any actual or alleged violation of Law, loss or damage to any property of passengers, shippers or otherwise or any Claim related to patent, copyright, trademark or other infringement) either in the air or on the ground, and including, without limitation, any interest therein of an Indemnitee or imposition of a Lien thereon (excluding Lessor's Liens, Head Lessor's Liens and Lenders' Liens but including the Lien of the Indenture), or the rentals, receipts or earnings therefrom (including, without limitation, the Rent and any other amounts paid or payable with respect thereto); or (B) any defect in the Aircraft, the Airframe, any Engine, any engine used in connection with the Airframe or any Part thereof arising from the material or any article used therein, whether from the design, testing or use thereof from any maintenance, service, repair, overhaul or testing of such Aircraft, Airframe, Engine, engine or Part, or otherwise regardless of when such defect shall be discovered, whether or not such Aircraft, Airframe, Engine, engine or Part is at the time in the possession of Lessee, and regardless of where such Aircraft, Airframe, Engine, engine or Part may then be located; or (3) the breach of any representation, warranty or covenant made by Lessee hereunder or under any of the other Operative Documents or any Default or Event of Default; provided, however, that the indemnity provided for in this Section 13 shall not apply to any portion of a Claim of an Indemnitee to the extent it results from: (i) the gross negligence or willful misconduct of such Indemnitee or any of its directors, officers, employees, servants or agents (except any such gross negligence or willful misconduct as may be attributed to an Indemnitee due to its interest in the Aircraft, the Airframe, an Engine, any Operative Document, any Purchase Document or any Financing Document), (ii) the material breach of any express representation, warranty or covenant made by such Indemnitee herein or in any other Operative Document, or the Financing Documents (not resulting from a breach by Lessee of any of its representations, warranties or covenants in the Operative Documents or in the Financing Documents), (iii) any Taxes, whether or not Lessee is required to indemnify such Taxes under Section 10 hereof or the Tax Indemnification Agreement (it being understood that Section 10 hereof and the Tax Indemnification Agreement exclusively provide for Lessee's liability with respect to Taxes), (iv) any Claim which relates solely to events which occurred prior to but excluding the Restatement Date (other than Claims related to the condition, manufacture or design of the Aircraft) and any Claim concerning payment for or the ownership of Buyer Furnished Equipment, (v) an underlying act which occurs after the Aircraft has been returned to Lessor in accordance with the terms hereof and the Term of this Lease has been terminated or has expired and the return is not -82- 88 related to an Event of Default, (vi) as to such Indemnitee, an underlying act which occurs after a disposition or other transfer (voluntary or involuntary) by such Indemnitee of all or any part of its interest in the Aircraft, the Airframe, any Engine, or any Part, or in the Financing Documents, the Purchase Documents or the Operative Documents, except as contemplated under or pursuant to the Operative Documents, the Financing Documents or the Purchase Documents and except as resulting from the exercise of its remedies during the period while an Event of Default has occurred and is continuing and prior to the time such Indemnitee has received payment of all amounts owing to it hereunder or thereunder and except any Claim which is alleged or does relate to the period prior to such disposition or (vii) the authorization or giving or withholding of any future amendments, supplements, waivers or consents with respect to any of the Financing Documents, the Purchase Documents or the Operative Documents, which amendments, supplements, waivers or consents were not requested by Lessee or are not required to give effect to the provisions of the Operative Documents, the Financing Documents or the Purchase Documents (provided, however, in no event will Lessee be liable for any Claims resulting from, pertaining to or arising from or related to Lessor's granting or creating a Lessor's Lien or the granting or creation of a Head Lessor's Lien). Upon full payment of the indemnities herein, Lessee shall be subrogated to all rights and remedies which such Indemnitee may have against any third party against whom such Indemnitee has the right to assert a Claim which arises under any action described in this Section 13 (except Claims under such Indemnitee's own insurance policies or under the indemnification provisions of any of the Financing Documents). Without limiting Lessee's liability under this Section 13, Lessee hereby waives and releases any Claim now or hereafter existing against any Indemnitee, on account of any Claims for or on account of or arising or in any way connected with injury to or death of personnel of Lessee or loss or damage to property of Lessee or the loss of use of any property which may result from or arise in any manner out of or in relation to the importation, exportation, ownership, purchase, registration, reregistration, deregistration (except as to Owner Participant or Lessor as and to the extent such Indemnitee is responsible under the Refunding Agreement for Claims related to such deregistration), delivery, non-delivery, assignment, leasing, subleasing, manufacture, acceptance, rejection, possession, return, financing, performance, modification, maintenance, condition, use, operation, pooling, interchange, repair, testing, sale, return or other disposition of the Aircraft, the Airframe, any Engine or any -83- 89 engine used in connection with the Airframe or any Part thereof, either in the air or on the ground, or which may be caused by any defect in such Aircraft, Airframe, Engine, engine or Part from the material or any article used therein or from the design or testing thereof, or use thereof or from any maintenance, service, repair, overhaul, or testing of such Aircraft, Airframe, Engine, engine or Part, claims for infringement, loss of or injury to any person, loss of or damage to any property or environmental damage, regardless of when such defect may be discovered, whether or not such Aircraft, Airframe, Engine, engine or Part is at the time in the possession of Lessee, and regardless of the location of such Aircraft at any such time except to the extent that such Claim results from (i) the gross negligence or willful misconduct of such Indemnitee (except any such gross negligence or willful misconduct as may be attributed to an Indemnitee due to its interest in the Aircraft, the Airframe, an Engine, any Operative Document, any Purchase Document or any Financing Document), (ii) the material breach of any of its express representations, warranties or covenants hereunder, under any other Operative Document or Financing Document (not resulting from a breach by Lessee of any of its representations, warranties or covenants in the Operative Documents or in the Financing Documents), (iii) any Taxes, whether or not Lessee is required to indemnify such Taxes under Section 10 hereof or the Tax Indemnification Agreement (it being understood that Section 10 hereof and the Tax Indemnification Agreement exclusively provide for Lessee's liability with respect to Taxes), (iv) any Claim which relates solely to events which occurred prior to but excluding the Restatement Date (other than Claims related to the condition, manufacture or design of the Aircraft) and any Claim concerning payment for or the ownership of Buyer Furnished Equipment, (v) an underlying act which occurs after the Aircraft has been returned to Lessor in accordance with the terms hereof and the Term of this Lease has been terminated or has expired and the return is not related to an Event of Default, (vi) an underlying act which occurs after a disposition or other transfer (voluntary or involuntary) by such Indemnitee of all or any part of its interest in the Aircraft, the Airframe, any Engine, or any Part, or in the Financing Documents, the Purchase Documents or the Operative Documents (except as contemplated under or pursuant to the Operative Documents, the Financing Documents or the Purchase Documents and except as resulting from the exercise of its remedies during the period while an Event of Default has occurred and is continuing and prior to the time such Indemnitee has received payment of all amounts owing to it hereunder and except any Claim which is alleged or does relate to the period prior to such disposition), (vii) the authorization or giving or withholding of any future amendments, -84- 90 supplements, waivers or consents with respect to any of the Financing Documents, the Purchase Documents or the Operative Documents, which amendments, supplements, waivers or consents were not requested by Lessee or are not required to give effect to the provisions of the Operative Documents, the Financing Documents or the Purchase Documents or (viii) a Lessor's Lien, a Head Lessor's Lien or a Lenders' Lien attributable to such Indemnitee. Each Indemnitee shall, at Lessee's sole cost and expense and with Lessee's cooperation, be entitled to conduct the defense of any Claim against it; provided, however, that Lessee shall, at the request of any Indemnitee and so long as no Event of Default has occurred and is continuing, assume and conduct promptly and diligently, at its sole cost and expense, the defense of such Indemnitee against any Claim of a third party with counsel reasonably acceptable to such Indemnitee; and provided, further, however, that Lessee shall have the right as well as the obligation to assume such defense to the extent required under the terms of the applicable insurance policies so long as no Default or Event of Default has occurred and is continuing. In the event Lessee shall so assume the defense of any Claim, such Indemnitee shall cooperate with Lessee in defending such Claim, but any expenses incurred by such Indemnitee in connection therewith shall either be paid by Lessee to such Indemnitee in advance, or reasonable security shall be provided by Lessee to such Indemnitee for such payments. Neither Lessee nor an Indemnitee shall enter into a settlement or other compromise with respect to any Claim which Lessee or such Indemnitee is defending hereunder in excess of $100,000 without the prior written consent of the other, which consent shall not be unreasonably withheld. Each Indemnitee agrees to give Lessee prompt notice of any Claims by a third party hereunder following such Indemnitee's actual knowledge of such Claims by third parties, but the failure of such Indemnitee to give the notice required by this Section 13 shall not constitute a release by Lessor or such Indemnitee of, or reduce, any of the obligations or liabilities of Lessee to such Indemnitee in respect of any such Claim or otherwise affect the obligations or liabilities of Lessee to any Indemnitee in respect of any such Claim, except to the extent that Lessee's ability to control the defense thereof where Lessee has the right to control the defense thereof is materially prejudiced as a result solely of such failure of such Indemnitee to give such notice. An Indemnitee or Lessee shall supply the other with such information requested by the other as is reasonably -85- 91 necessary or advisable for the other to control the defense of a Claim to the extent permitted by this Section. Nothing in this Section shall be construed as a guaranty by Lessee of payments due pursuant to any indebtedness incurred with respect to the purchase of the Aircraft or of the residual value of the Aircraft. Notwithstanding anything herein or in any other Operative Document to the contrary, with respect to any Claim for which any Indemnitee is entitled to indemnification under more than one provision of this Lease or any other Operative Document, such Indemnitee shall be entitled to recovery for such Claim only pursuant to one such provision as it may select in its sole discretion (and, for the avoidance of doubt, such Indemnitee shall not be entitled to any double recovery for the same Claim). The indemnities contained in this Section 13 shall continue in full force and effect notwithstanding the expiration or other termination of this Lease or any of the other Operative Documents and are expressly made for the benefit of and shall be enforceable by each Indemnitee. Section 14. Liens. Lessee shall not directly or indirectly create, incur, assume, or suffer to exist any Lien on or with respect to the Aircraft, the Airframe, any Engine or any Part thereof, title thereto, or any interest of Lessor therein or in this Lease, except (i) the respective rights of Lessor, Lessee, Owner Participant, Indenture Trustee and any other Indemnitee as herein provided or provided under the other Operative Documents or the Financing Documents; (ii) Head Lessor's Liens, Lessor's Liens and Lenders' Liens; (iii) Liens for Taxes either not yet due or being diligently contested in good faith by appropriate proceedings in accordance with Section 10 and so long as adequate reserves are maintained with respect to such Liens and only so long as neither such proceedings nor such Liens involve any material danger of the sale, forfeiture or loss of any of the Aircraft, the Airframe or any Engine or any Part, or any interest of Lessor or Indenture Trustee therein or any risk of criminal liability of Lessor or Indenture Trustee; (iv) inchoate materialmen's, mechanics', workmen's, repairmen's employees', or other like inchoate Liens arising in the ordinary course of business for sums not overdue by more than 45 days or being diligently contested in good faith and only so long as neither such proceedings nor any such Liens involve any material danger of the sale, forfeiture or loss of any of the Aircraft, the Airframe or any Engine or any Part, or any interest of Lessor or Indenture Trustee -86- 92 therein; (v) the rights of other Persons to the extent expressly permitted by the provisions of Section 6(a), 9(c) or 19; (vi) Liens arising out of any judgment or award against Lessee (or any Permitted Sublessee) unless the judgment or award shall not, within thirty (30) days after the entry thereof, have been discharged, vacated, reversed, or execution thereof stayed pending appeal or shall not have been discharged, vacated or reversed within thirty (30) days after the expiration of such stay and only so long as such Liens shall not involve any material danger of the sale, forfeiture or loss of any of the Aircraft, the Airframe or any Engine or any Part, or any interest of Lessor or Indenture Trustee therein and provided that the execution of such judgment or award or an attachment relating thereto shall not have occurred within such thirty (30) day period; and, (vii) any other Lien with respect to which Lessee (or a Permitted Sublessee) shall have provided a bond adequate in the reasonable opinion of Indenture Trustee (if the Lien of the Indenture has not been discharged) and Owner Participant. Lessee shall promptly, at its own expense, take or cause to be taken such action as may be necessary to duly discharge any Lien (except for the Liens referred to in clauses (i) through (vii) of this Section 14) directly or indirectly created, incurred, assumed, or suffered to exist by Lessee if the same shall arise at any time. Section 15. Protection of Title and Further Assurances. Forthwith upon the execution and delivery of this Lease, the Indenture, the Trust Agreement, Lease Supplement, Indenture Supplement and Trust Supplement, and any other supplement from time to time required by the terms hereof, Lessee will cause this Lease, the Indenture, the Trust Agreement, Lease Supplement, Indenture Supplement, Trust Supplement and such other supplements to be duly filed and recorded, and maintained of record, in accordance with the applicable laws of the government of registry of the Aircraft. If any filing or recording is reasonably necessary to protect the interests of Lessor or Indenture Trustee, Lessee shall, at its own cost and expense (except it shall be at Lessor's expense if in connection with a change in ownership of the Aircraft or any other transfer or assignment by Lessor other than as contemplated hereunder or under the Financing Documents or in connection with an Event of Default) and upon request by Lessor, cause any financing statements and any and all additional instruments and other documents, so far as permitted by applicable Law, to be kept, filed, and recorded and to be re-executed, refiled and re-recorded at all times in the appropriate office pursuant or in relation to any applicable Laws of any Governmental Entity, to protect and preserve the rights and interests of -87- 93 Lessor or Indenture Trustee hereunder, under the Indenture and in the Aircraft, and Lessee shall furnish to Lessor and Indenture Trustee, evidence, reasonably satisfactory to Lessor and Indenture Trustee, of each such filing or refiling and recordation and re-recordation. Without limiting the foregoing, Lessee shall do or cause to be done, at Lessee's cost and expense (except it shall be at Lessor's expense if in connection with a change in ownership of the Aircraft or any other transfer or assignment by Lessor other than as contemplated hereunder or under the Financing Documents or in connection with an Event of Default), any and all acts and things within its control which may be required under the terms of the Mortgage Convention to protect and preserve the title of Lessor, the Lien of the Indenture, this Lease, and the interests of Lessor and Indenture Trustee within the jurisdiction of any signatory which has ratified the Mortgage Convention in such jurisdiction and in the territories thereof in which Lessee, any Permitted Sublessee or any wet lessee may operate the Aircraft, as Lessor may reasonably request. Lessee shall also do or cause to be done, at its own expense (except it shall be at Lessor's expense if in connection with a change in the ownership of the Aircraft or any other transfer or assignment by Lessor other than as contemplated hereunder or under the Financing Documents or in connection with an Event of Default), any and all acts and things which may be required under the terms of any other Law involving any jurisdiction in which Lessee, any Permitted Sublessee or any wet lessee may operate the Aircraft, which Lessor may reasonably request, to protect and preserve the title of the Lessor, this Lease, the Indenture and Lessor's and Indenture Trustee's interest in the Aircraft and under any of the Operative Documents or Financing Documents within any such jurisdiction. In addition, at Lessee's expense, Lessee will promptly and duly execute and deliver to Lessor or Indenture Trustee, as applicable, such further documents and assurances and take such further actions as Owner Participant or Indenture Trustee may from time to time reasonably request in order to more effectively carry out the intent and purpose of this Lease and the other Operative Documents and the Financing Documents and to protect the rights and remedies created or intended to be created in favor of Lessor or Indenture Trustee hereunder and the other Operative Documents and the Financing Documents including, without limitation, if reasonably requested by Owner Participant or Indenture Trustee, at the expense of Lessee (except it shall be at Lessor's expense if in connection with a change in the ownership of the Aircraft or any other transfer or assignment by Lessor or Indenture Trustee other -88- 94 than as contemplated hereunder or under the Financing Documents or in connection with an Event of Default), the execution and delivery of supplements or amendments hereto in recordable form, subjecting to this Lease, the Indenture and the other Financing Documents, any replacement Aircraft or Engine and the recording or filing of counterparts thereof in accordance with the laws of any appropriate jurisdiction. Section 16. Return of Aircraft and Records. (a) Return. On any Return Occasion, Lessee, at its own expense and risk, shall return the Aircraft to Lessor (or any Person designated by Lessor) in at least the condition specified in this Section and Exhibit E hereto at any Lessee system location in the continental United States selected by Lessor, or such other location as Lessor and Lessee may agree, fully equipped with all required Engines, or other engines owned by Lessee (which shall thereupon become Engines as hereinafter provided) meeting the conditions specified in this Section and Exhibit E, duly installed thereon by delivering the same to the Lessor at such location. Lessee shall comply with Section 11(b) and this Section 16 with respect to any engines installed on the Aircraft returned to Lessor hereunder and meeting the conditions described herein which were not originally installed on the Aircraft. (b) Status Upon Return. Upon any Return Occasion hereunder, the Aircraft shall be: (i) free and clear of all Liens, except for the Lien of the Indenture, Head Lessor's Liens, Lessor's Liens and Lenders' Liens, (ii) duly certified as an airworthy aircraft by the FAA under Part 121 of the regulations promulgated under the Federal Aviation Act and with a current and valid Airworthiness Certificate installed on the Aircraft, unless such certificate shall have been suspended or revoked as a result of the suspension or revocation of the registration of the Aircraft under the Federal Aviation Act due to the ineligibility of the Aircraft to be registered in the name of Lessor under the Federal Aviation Act (whether by means of a voting trust agreement or otherwise) in which case the Aircraft shall nevertheless meet all conditions for such certification and for the issuance of such certificate; (iii) in full airworthy condition for over water and EROPS operation according to the FAA standards required to allow the Aircraft to be operated under, and in full compliance with, such Airworthiness Certificate and Part 121 of the regulations promulgated under the Federal Aviation Act for such operation, such compliance to be by means of such mechanical repairs or modifications or such inspections as may be required thereby, but not by operational -89- 95 restrictions, by logbook entries or other method of acceptance of such restrictions; (iv) in full compliance with Lessee's Maintenance Program; (v) to the extent the owner of the Aircraft is a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Federal Aviation Act and reasonably cooperative with Lessee at Lessee's expense with respect to effecting such registration, duly registered in the name of the Lessor or other then owner of the Aircraft under the Federal Aviation Act; (vi) in full compliance with the maintenance and operation provisions of this Lease and all FAA airworthiness directives, mandatory service bulletins and equivalent requirements which by their terms require compliance on or before the last day of the Term (without regard to any deferral, waiver, deviation or exemption granted by the FAA specifically to Lessee delaying such compliance); (vii) in good and airworthy operating condition, and in the same condition (including, without limitation, in a passenger configuration suitable for passenger revenue service) as when delivered to Lessee hereunder, ordinary wear and tear excepted, with no open or outstanding deferred maintenance items, scheduled or unscheduled, with all systems and components fully serviceable and operational and with no placards restricting operation or use, and (viii) with all remaining warranties, indemnities, policies and guarantees referred to in Section 5(d) made available to Lessor in a manner and by documents in form and substance reasonably satisfactory to Lessor. (c) Engines. In the event any engine not owned by Lessor shall be installed on the Aircraft on any Return Occasion, without limiting Lessee's obligations under the Tax Indemnification Agreement, such engine shall be of the same model and equivalent modification status as the Engines or, at Lessee's option, an IAE engine of an improved model suitable for installation and use on the Airframe without diminishing the value, remaining useful life or utility of such Airframe, in each such case having a value, remaining useful life and utility at least equal to (as determined in accordance with the Appraisal Procedure), and be in an operating condition as good as the Engines, assuming the Engines were in the condition and repair as required by the terms hereof immediately prior to such termination and shall conform to the return condition requirements set forth in this Section 16 and Exhibit E, and Lessee, at its own expense and concurrently with such delivery, shall cause such engine to become an Engine by complying with Section 11(b) hereof. Lessee's obligation to comply with the terms of this Section 16(c) shall be conditioned on Lessor's transferring to Lessee all of Lessor's right, title and interest in and to any Engine not installed on the Aircraft at the Return Occasion "AS IS, WHERE IS," without any -90- 96 representation, warranty or recourse of any kind whatsoever, express or implied, except a warranty that such Engine is free and clear of Lessor's Liens. (d) Records and Documents. Upon the return of the Aircraft, Lessee shall deliver to Lessor (i) all logs, manuals and data, and inspection, modification, overhaul and other records, related to the Aircraft, including, without limitation, those required to be maintained with respect thereto under applicable rules and regulations of the FAA, together with a detailed description of the Maintenance Program then applied to the Aircraft and shall provide Lessor and its designees access to the Maintenance Program which is sufficient for a Person to maintain the Aircraft under an FAA approved maintenance program after the Term or to transition maintenance to another program, including, without limitation, another registry, or, in the event an Event of Default shall have occurred, to continue to maintain the Aircraft under the Maintenance Program, in each case as Lessor may reasonably request, and all documentation with respect to the Aircraft set forth on Exhibit B or otherwise delivered to Lessee at delivery thereof, and (ii) all records necessary or required by the FAA to certify and place the Aircraft on an FAA or other country's, as the case may be, approved maintenance program. All of the foregoing shall, at Lessee's expense, be up-to-date and in the latest revision status as of the last day of the Term, including, without limitation, all software and other electronically-held materials which have been supplied by or on behalf of Manufacturer, Manufacturer's Subsidiary or Original Head Lessee, which must be updated to the latest revision status as of the last day of the Term within such software base and all data therein or pertaining thereto shall be deemed property of Lessor and shall be delivered to Lessor. If hard, i.e., non-computerized, copies of English language maintenance records are not available, then Lessee shall cause the appropriate action to be taken with the pertinent regulatory agencies to ensure that Lessor and the FAA are provided with all requested necessary and proper guarantees of methods of compliance, component overhaul and management, scheduling, quality control, serial number verification, etc. These records shall be all inclusive to the Aircraft, Airframe, Engines, components, rotables, and assemblies and, as a minimum, extend to include all activities associated with each of the last completed maintenance checks, repairs, scheduled inspections and functional tests, and overhauls performed under Lessee's Maintenance Program. All components and assemblies identified with safe life limits shall be identified with their service histories, accumulated cycles or flight hours as applicable and remaining service lives on a separate listing. All components and assemblies which are identified on the -91- 97 maintenance records by part numbers and serial numbers other than the manufacturer's shall be provided with interchange or cross reference listing necessary to establish complete traceability. All documentation, flight, and maintenance records as specified by United States Federal Aviation Regulations 91.173, 91.174, and each paragraph of regulation 121.380 which normally accompany the transfer of an aircraft which has been operating in regulated commercial air service, shall be delivered to Lessor with the Aircraft. Any documents or records required to be delivered hereunder shall be in English. (e) Condition of Aircraft. Upon any Return Occasion, Lessee shall return such Aircraft to Lessor in such condition that the Aircraft shall also comply with each and every condition and requirement set forth elsewhere in this Lease, including Exhibit E hereto. (f) Final Inspection. Upon any Return Occasion, Lessee shall make the Aircraft available to Lessor at the location where the "block 'C' Check" (or equivalent level designated check or checks) required hereunder to be performed immediately prior to redelivery is to be performed for detailed inspection of the documents referred to in paragraph (d) above and the Airframe, Engines and Parts structure and parts, at Lessee's expense (excluding compensation to representatives of Lessor), in order to verify that the condition of such Aircraft complies with the requirements set forth above (such inspection being hereinafter referred to as the "Final Inspection"). The Final Inspection shall be combined with such "block 'C' Check" (or equivalent level check or checks) and may include such other items as reasonably requested by Lessor. Lessee shall give Lessor not less than thirty (30) days prior written notice of the commencement date of such Final Inspection. The period allowed for the Final Inspection shall be the same period during which such "block 'C' Check" is being performed and shall have such duration as to permit the opening of any areas of the Aircraft which are necessary or advisable to satisfy Lessor as to compliance with the requirements of this Section 16 and Exhibit E. The Final Inspection shall commence on the date so noticed which shall be on or before the expiration of the Term with respect to the Aircraft and shall continue on consecutive days until all activity required above to be conducted has been concluded. To the extent that any portion of the Final Inspection extends beyond the expiration of the Term, unless Lessor has terminated the Lease pursuant to Section 18(g) hereof, the Term with respect to the Aircraft undergoing the Final Inspection shall be deemed to have been automatically extended, and all obligations hereunder continued, on a daily basis until the Final Inspection shall have been -92- 98 concluded and Lessee shall pay Rent during any such extension in an amount equal to the average daily Basic Rent or Renewal Rent, as the case may be, paid in respect of the last year of the Basic Term or Renewal Term, as the case may be (and Stipulated Loss Value during such extension shall equal the Stipulated Loss Value on the last day of the Basic Term or Renewal Term, as the case may be); provided, however, that Lessee shall not be required to pay Rent with respect to the Aircraft during the period of extension to the extent that Lessor is responsible for the delay in completion of the Final Inspection. All storage expenses attributable to any Term extension pursuant to the preceding sentence shall be payable by Lessee, except that Lessee shall not be liable for any storage expenses which are incurred after the sixtieth (60th) day after the Term to the extent that storage continues thereafter due to Lessor's delay in completion of the Final Inspection. (g) Aircraft Records and Documents. In order to enable Lessor to prepare for the Final Inspection of the Aircraft pursuant to Subsection 16(f) above, Lessee agrees to make available to Lessor at a maintenance base of Lessee with adequate facilities for short-term maintenance, where the Final Inspection is to occur, not later than ten (10) days prior to the commencement of such Final Inspection, the Aircraft Records and Documents listed in Exhibit B hereto, together with such other documentation (including, without limitation, original airworthiness directive compliance documents and other work documents) regarding the condition, use, maintenance, or operation as Lessor may reasonably request or require to substantiate the status of the Aircraft. (h) Corrections and Subsequent Corrections. To the extent that the Aircraft or any Engine fails upon a Return Occasion to conform to any requirement imposed by this Lease, Lessor may, at its option, (i) continue the Lease in effect in the manner provided for in Section 16(f) above with regard to automatic extension until such time as such Aircraft is brought up to the condition required by this Section 16, including Exhibit E, or (ii) accept the return of such Aircraft and thereafter have any such nonconformance corrected, at such time as Lessor may deem appropriate but not to commence later than ninety (90) days following the return of such Aircraft, at commercial rates then charged by the Person selected by Lessor to perform such correction. Lessee's obligations to pay such Supplemental Rent shall survive the Expiration Date or other termination of this Lease. Nothing set forth in this paragraph shall constitute a limitation on Lessor's or Owner Participant's ability to recover from Lessee any damages, expenses or losses pursuant to Sections 13 or 18 hereof -93- 99 suffered as a result of Lessee's failure to effect the return of the Aircraft at the time, in the place and in the condition as specified in this Section 16 and Exhibit E hereto. (i) Functional Flight Check. Immediately prior to the expiration of the Term, Lessor will be permitted to conduct a non-commercial functional flight check flight of no more than two (2) hours duration in accordance with the Manufacturer's functional flight check procedures at Lessee's expense to demonstrate the airworthiness of the Aircraft and proper functioning of all systems and components. A qualified pilot and up to five (5) other representatives selected by Lessor may take part in such flight to verify compliance of the Aircraft with the requirements of this Lease, provided, that Lessor shall be responsible for the charges of such qualified pilot and representatives. Lessee may combine the functional flight check provided in this Section 16(i) with the delivery flight specified in Section 16(a) and such functional flight check shall include the landing. Any discrepancy or malfunction detected during any functional flight check (including a functional flight check combined with a delivery flight) shall be corrected, at Lessee's expense, and prior to the expiration of the Term. To the extent that any actions to correct any such discrepancy or malfunction extend beyond the Term, the provisions of the first sentence of Section 16(h) shall apply. All storage expenses attributable to any Term extension pursuant to the preceding sentence shall be payable by Lessee. (j) Export Certificate of Airworthiness. Lessee shall, at Lessee's expense, take such action as Lessor may reasonably request to assist Lessor in obtaining any required documents in relation to the export of the Aircraft from the United States (including, without limitation, a valid and subsisting export certificate of airworthiness with respect to the Aircraft and export license) and in relation to the deregistration of the Aircraft. (k) Service Bulletin and Modification Kits. Lessee shall deliver to Lessor, at no cost to Lessor, all service bulletin kits furnished without charge by the manufacturer for installation on the Aircraft which have not been so installed together with appropriate instructions for installation. In the event such uninstalled kits were purchased or manufactured by Lessee, then Lessor shall be advised of such kits by Lessee and have a right of first refusal to purchase such kits at Lessee's cost for a period of ninety (90) days after return. -94- 100 (l) Storage Upon Return. Upon any Return Occasion, Lessee shall, at Lessor's request and at Lessee's risk and expense, in addition to other storage referred to above, arrange for the parking, storage and insurance of the Aircraft for a period not exceeding sixty (60) days at such reasonable location as Lessor requests where Lessee has or can arrange for storage. Lessee shall pay or cause to be paid all costs and expenses for such parking, storage and insurance. (m) Resale/Release Cooperation. During the last twelve (12) months of the Term, with reasonable notice and at reasonable times, Lessee will cooperate, and cause any Permitted Sublessee to cooperate, in all reasonable respects, with the efforts of Lessor to sell or lease the Aircraft after the end of the Term, by permitting prospective purchasers or lessees, except to the extent prohibited by applicable Law, to inspect the Aircraft and the records relating thereto to the extent it does not unreasonably interfere with the operation or maintenance of the Aircraft or the conduct of Lessee's business. Section 17. Events of Default. Any one or more of the following occurrences or 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 other Governmental Entity): (a) Lessee shall fail to make (i) any payment of Basic Rent, Renewal Rent or Stipulated Loss Value to Lessor within three (3) Business Days after the date on which such payment is due, or (ii) any other payment of Supplemental Rent due hereunder within ten Business Days after the date on which such payment is due and Lessee has received written demand therefor by the party entitled thereto; provided that any failure of Lessee to pay to Lessor or the Owner Participant when due any Excepted Payments (as defined in the Indenture) shall not constitute an Event of Default unless Lessor or Owner Participant delivers notice to Lessee; or (b) Lessee shall fail to obtain and maintain in full force and effect any insurance required under the provisions of Section 12 hereof or shall operate the Aircraft outside of the scope or in violation of the terms of the insurance or United States Government indemnity coverage required to be maintained with respect to such Aircraft; or -95- 101 (c) Any representation or warranty made by Lessee herein or in the Refunding Agreement or in any certificate furnished by Lessee in connection herewith or therewith is or was incorrect at the time made in any material respect and such incorrectness shall not have been cured within thirty (30) days after the receipt by Lessee of a written notice from Lessor or the Indenture Trustee advising Lessee of the existence of such incorrectness; or (d) Lessee shall fail to perform or observe any covenant, condition, or agreement to be performed or observed by it pursuant to this Lease or the Refunding Agreement, and such failure shall continue uncured for thirty (30) days after written notice thereof is given by Lessor or Indenture Trustee to Lessee; provided, however, that if Lessee shall have undertaken to cure any such failure which arises under the first or second sentence of Section 6(c) or Section 6(d), as such provisions of Section 6 relate to maintenance, service, repair or overhaul, or Section 9, and notwithstanding the diligence of Lessee in attempting to cure such failure, such failure is not cured within said thirty (30) day period but is curable with future due diligence, there shall exist no Event of Default under this Section 17 so long as Lessee is proceeding with due diligence to cure such failure and such failure is remedied not later than one hundred eighty (180) days after receipt by Lessee of such written notice; or (e) Lessee consents to the appointment of a custodian, receiver, trustee or liquidator of itself or all or any material part of Lessee's property or Lessee's consolidated property, or Lessee admits in writing its inability to, or is unable to, or does not, pay its debts generally as they come due, or makes a general assignment for the benefit of creditors, or Lessee files a voluntary petition in bankruptcy or a voluntary petition seeking reorganization in a proceeding under any bankruptcy or insolvency Laws (as now or hereafter in effect), or an answer admitting the material allegations of a petition filed against Lessee in any such proceeding, or Lessee by voluntary petition, answer or consent seeks relief under the provisions of any other bankruptcy, insolvency or other similar Law providing for the reorganization or winding-up of corporations, or provides for an agreement, composition, extension or adjustment with its creditors, or any corporate action (including, without limitation, any board of directors or shareholder action) is taken by Lessee in furtherance of any of the foregoing, whether or not the same is fully effected or accomplished; or (f) An order, judgment or decree is entered by any court appointing, without the consent of Lessee, a -96- 102 custodian, receiver, trustee or liquidator of Lessee, or of all or any material part of Lessee's property, or Lessee's consolidated property, or all or any material part of Lessee's property or Lessee's consolidated property is sequestered, and any such order, judgment or decree of appointment or sequestration remains in effect, undismissed, unstayed or unvacated for a period of ninety (90) days after the date of entry thereof or at any time an order for relief is granted; or (g) An involuntary petition against Lessee in a proceeding under the Federal bankruptcy laws or other insolvency Laws (as now or hereafter in effect) is filed and is not withdrawn or dismissed within ninety (90) days thereafter or at any time an order for relief is granted in such proceeding, 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 assumes jurisdiction over, or custody or control of, Lessee or of all or any material part of Lessee's property, or Lessee's consolidated property and such jurisdiction, custody or control remains in effect, unrelinquished, unstayed or unterminated for a period of ninety (90) days or at any time an order for relief is granted in such proceeding; or (h) Lessee's cessation of business as a commercial passenger Certificated Air Carrier or, except in either case in connection with a labor dispute, announcement thereof or Lessee's suspension of its business as a commercial passenger Certificated Air Carrier, or for any reason the preponderant business activity of Lessee shall cease to be that of a commercial passenger Certificated Air Carrier; or (i) Lessee's loss or suspension of its United States air carrier license or certificate under Part 121 of the Federal Aviation Regulations or certificate under Section 41102(a) of the Federal Aviation Act. Section 18. Remedies. Upon the occurrence of any Event of Default and at any time thereafter so long as the same shall be continuing, Lessor may, at its option, declare by written notice to Lessee this Lease to be in default, provided, however, that this Lease shall be deemed to be declared in default automatically without the necessity of such written declaration upon the occurrence of any Event of Default described in paragraph (e), (f) or (g) of Section 17 hereof; and at any time thereafter, so long as any outstanding Event of Default shall not have been remedied, Lessor may do one or -97- 103 more of the following with respect to all or any part of the Airframe and any or all of the Engines as Lessor in its sole discretion shall elect, to the extent permitted by, and subject to compliance with any mandatory requirements of, applicable Law then in effect: (a) Demand that Lessee, and Lessee shall upon the written demand of Lessor and at Lessee's cost and expense, immediately return, and the Lessee hereby agrees that it shall return promptly all or such part of, the Aircraft to Lessor in the manner specified in such notice, in which event such return shall not be delayed for the purposes of complying with the return conditions specified in Section 16 and Exhibit E hereof (none of which conditions shall be deemed to affect Lessor's possession of the Aircraft) or delayed for any other reason; provided, however, that Lessee shall remain and be liable to Lessor for amounts provided for herein or other damages resulting from the Aircraft or any Engine not being in the condition required by Section 16 and Exhibit E. Notwithstanding the foregoing, at Lessor's option, Lessee shall be required thereafter to take such actions as would be required by the provisions of this Lease if such Aircraft were being returned at the end of the Term hereof with respect to such Aircraft. In addition, Lessor or Lessor's agent, at its option and to the extent permitted by applicable Law, may but shall not be obligated to enter upon the premises where all or any part of the Aircraft, Airframe and/or Engines are located to take immediate possession of and, at Lessor's option, remove the same (and/or any engine which is not an Engine but which is installed on the Airframe, subject to the rights of the owner, lessor or secured party thereof) by summary proceedings or otherwise, all without liability accruing to Lessor or Lessor's agent for or by reason of such entry or taking of possession or removal whether for the restoration of damage to property, or otherwise, caused by such entry or taking, except direct damages to the extent caused by Lessor's gross negligence or willful misconduct. (b) With or without taking possession thereof, sell or cause to be sold, the Aircraft, Airframe or Engine or any part thereof, or Lessor's interest therein, at private or public sale, as Lessor in its sole discretion may determine, or otherwise dispose of, hold, use, operate, or lease to others, or keep idle the Aircraft, Airframe or Engine, as Lessor in its sole discretion may determine, all free and clear of any rights of Lessee or any Permitted Sublessee and except as hereinafter set forth in this Section 18. Lessor may be the purchaser at any such sale. (c) Whether or not Lessor shall have exercised, or shall thereafter at any time exercise, any of its rights -98- 104 under paragraph (a) or paragraph (b) above, Lessor, by written notice to Lessee specifying a payment date which shall be a Stipulated Loss Value Date, may demand that Lessee pay to Lessor, and Lessee shall pay to Lessor, on the Stipulated Loss Value Date specified in such notice, as liquidated damages for loss of bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent, as the case may be, due for the period commencing after the Stipulated Loss Value Date specified for payment in such notice), any unpaid Rent for the Aircraft to and including the Stipulated Loss Value Date specified in such notice, plus whichever of the following amounts as Lessor may specify, in its sole and absolute discretion, in such notice: (i) an amount equal to the excess, if any, of the sum of the Stipulated Loss Value for the Aircraft, Airframe or Engine computed as of the date specified in such notice plus, if such date is a Basic Rent Payment Date or a Renewal Rent Payment Date, an amount equal to the Basic Rent or Renewal Rent, as the case may be, due on such date, over the fair market sale value of the Aircraft, Airframe or Engine as of the date specified in such notice or (ii) an amount equal to the excess, if any, of the sum of the Stipulated Loss Value for the Aircraft, Airframe or Engine computed as of the date specified in such notice plus, if such date is a Basic Rent Payment Date or a Renewal Rent Payment Date, an amount equal to the Basic Rent or Renewal Rent, as the case may be, due on such date, over the fair market rental value of the Aircraft for the remainder of the Term as of the date specified in such notice. (d) In the event Lessor, pursuant to paragraph (b) above, shall have sold the Aircraft, Airframe or Engine or its interest therein, Lessor, in lieu of exercising its rights under paragraph (c) above, may, if it shall so elect, demand that Lessee pay Lessor, and Lessee shall pay to Lessor on such demand, as liquidated damages for loss of bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent, as the case may be, due for the period commencing after the Stipulated Loss Value Date immediately prior to the date such sale occurs), any unpaid Rent due to and including the date of sale, plus the amount by which the Stipulated Loss Value of such Aircraft, Airframe or Engine, computed as of such Stipulated Loss Value Date, exceeds the net proceeds of such sale (after deducting all costs of such sale). (e) In lieu of exercising its rights under paragraph (b), (c) or (d) above, by notice to Lessee, Lessor may require Lessee to pay, on the next Stipulated Loss Value Date, to Lessor, and Lessee hereby agrees that it will so pay to Lessor, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal -99- 105 Rent, as the case may be, payable in advance for the period on and after the Stipulated Loss Value Date), any unpaid Basic Rent or Renewal Rent, as the case may be, for such Aircraft due and unpaid for any period prior to and including, and any Basic Rent or Renewal Rent payable on, the Stipulated Loss Value Date, plus, an amount equal to the Stipulated Loss Value for the Aircraft computed as of such Stipulated Loss Value Date; and upon such payment of liquidated damages and the payment of all other Rent then due hereunder and the discharge of the Lien of the Indenture pursuant to Section 10.01 thereof, Lessor shall, at Lessee's expense, transfer, without recourse or warranty (except as to the absence of Lessor's Liens and the Lien of the Indenture), all right, title and interest of Lessor in and to the Aircraft to Lessee or as it may direct and Lessor shall, at Lessee's expense, execute and deliver such documents evidencing such transfer and take such further action as Lessee shall reasonably request. (f) In the event that Lessor, pursuant to paragraph (b) above, shall have relet the Aircraft, Airframe or Engine under a long term lease, Lessor, in lieu of exercising its rights under paragraph (c) above with respect to such Aircraft, Airframe or Engine, may, if it shall so elect, demand that Lessee pay Lessor, and Lessee shall pay Lessor on such demand, as liquidated damages for loss of bargain and not as a penalty (in lieu of the Basic Rent or Renewal Rent, as the case may be, for such Aircraft due after the time of reletting) any unpaid Rent for such Aircraft due up to the date of reletting, plus the amount, if any, by which the aggregate Basic Rent or Renewal Rent, as the case may be, for such Aircraft which would otherwise have become due over the Basic Term or Renewal Term, as the case may be, discounted periodically (equal to installment frequency) to present worth as of the date of reletting at the rate of 8.50% per annum, exceeds the aggregate basic rental payments to become due under the reletting from the date of such reletting to the date upon which the Term for such Aircraft, Airframe or Engine would have expired but for Lessee's default, discounted periodically (equal to installment frequency) to present worth as of the date of the reletting at the rate of 8.50% per annum. (g) Cancel, rescind and/or terminate this Lease by written notice to Lessee which cancellation, rescission and/or termination shall be effective upon dispatch, whereupon Lessee's right to possess and use the Aircraft, Airframe or Engine shall immediately cease, however, Lessee shall be and remain liable for damages and losses suffered by Lessor and all other amounts payable by Lessee hereunder. -100- 106 (h) Lessor may exercise any other right or remedy which may be available to it under applicable laws, or may proceed by appropriate court action or actions, either at law or in equity, to enforce any other remedy or right Lessor may have hereunder, under the other Operative Documents, at law or in equity, including, without limitation, proceed by court order to enforce performance by Lessee of the applicable covenants of this Lease or to recover damages for the breach thereof. In addition to the foregoing, Lessee shall be liable (without duplication of the remedies above and of Lessee's obligations under Section 10 and Section 13 hereof and subject to the exclusions set forth therein) for any and all unpaid Rent before, during or after the exercise of any of the above mentioned remedies (including without limitation interest on unpaid amounts with respect to all amounts not paid when due, including, without limitation, any amounts payable pursuant to the foregoing provisions of this Section 18), and, except as specified above, until satisfaction of all of Lessee's obligations to Lessor hereunder and for all legal fees and other costs and expenses incurred by any Indemnitee by reason of the occurrence of any Event of Default or the exercise of an Indemnitee's remedies with respect thereto, including all costs and expenses incurred in connection with the return of the Aircraft in accordance with the terms of Section 16 and Exhibit E hereof or in placing the Aircraft, Airframe or Engine in the condition and with airworthiness certification as required by such Section and such Exhibit and costs and expenses related to the Lease, the Refunding Agreement, the Indenture, the Pass Through Trust Agreements, the Intercreditor Agreement or each Liquidity Facility. All liquidated damages payable pursuant to the foregoing shall bear interest, which shall be payable on the date the payment of such liquidated damages is due at a rate equal to the Interest Rate from and including the date due to and excluding the date actually paid. In effecting any repossession, Lessor, its representatives and agents, to the extent permitted by applicable Law, (i) shall have the right to enter upon any premises where it reasonably believes the Aircraft, the Airframe, an Engine or Part to be located, (ii) shall not be liable, in conversion or otherwise, for the taking of any personal property of Lessee which is in or attached to the Aircraft, the Airframe, an Engine or Part which is repossessed, (iii) shall not be liable or responsible, in any manner, for any damage or injury to any of Lessee's property in repossessing and holding the Aircraft, the Airframe, an Engine or Part except for direct damages caused by Lessor's gross negligence or willful misconduct and (iv) -101- 107 shall have the right to maintain possession of and dispose of the Aircraft, the Airframe, an Engine or Part on any premises owned by Lessee or under Lessee's control. If requested by Lessor, Lessee shall, at its sole expense, assemble and make the Aircraft, the Airframe, an Engine or Part available at a place designated by Lessor in accordance with Section 16 and Exhibit E hereof. Lessee hereby agrees that, in the event of the return to or repossession by Lessor of the Aircraft, the Airframe, an Engine or Part, or otherwise upon the occurrence of an Event of Default, any rights in any warranty (express or implied), service life policy, infringement indemnity, performance guaranty or the like heretofore made available to Lessee or otherwise held by Lessee shall without further act, notice or writing be deemed automatically cancelled and shall be enforceable solely by and for the benefit of, and assigned to, Lessor. Lessee shall be liable to Lessor (without duplication) for all expenses, disbursements, costs and fees incurred in (i) repossessing, storing, preserving, shipping, maintaining, repairing and refurbishing the Aircraft, the Airframe, an Engine or Part to the condition required by Section 16 and Exhibit E hereof and (ii) preparing the Aircraft, the Airframe, an Engine or Part for sale or lease, advertising the sale or lease of the Aircraft, the Airframe, an Engine or Part and selling or releasing the Aircraft, the Airframe, an Engine or Part. Lessor is hereby authorized and instructed, at its option, to make expenditures which Lessor considers advisable to repair and restore the Aircraft, the Airframe, an Engine or Part to the condition required by Section 16 and Exhibit E hereof, all at Lessee's sole expense. For the purpose of this Section 18, the "fair market rental value" or the "fair market sales value" of the Aircraft, Airframe, an Engine or Part shall be determined pursuant to the Appraisal Procedure. At any sale of the Aircraft, the Airframe, an Engine or Part pursuant to this Section, Owner Participant may bid for and purchase such property and Lessee agrees that the amounts paid therefor shall be used in the computations contemplated herein and Lessee shall remain liable for any deficiency. No remedy referred to in this Section is intended to be exclusive, but, to the extent permitted by Law, each shall be cumulative and in addition to any other remedy referred to above or otherwise available to Lessor at law or in equity; and, to the extent permitted by Law, the exercise or beginning of exercise by Lessor of any one or more of such remedies shall not preclude the simultaneous or later -102- 108 exercise by Lessor of any or all of such other remedies. No waiver by Lessor of any Event of Default shall in any way be, or be construed to be, a waiver of the same Event of Default in the future or any other prior or future Event of Default. To the extent permitted by Law, Lessee hereby waives any right it may have to require Lessor to mitigate damages in connection with the remedies described in Sections 18(c), (d), (e) or (f) above. Lessee hereby irrevocably appoints Lessor as Lessee's attorney-in-fact (which appointment is coupled with an interest) to execute all documents deemed necessary to release, terminate and void Lessee's interest in the Aircraft leased hereunder or otherwise to more effectively carry out Lessor's rights and remedies and to file said documents for recordation with the FAA, under the Uniform Commercial Code, and with any other appropriate Governmental Entity, and otherwise act in Lessee's name and place with respect to the Aircraft, provided that an Event of Default has occurred and is continuing and this Lease has been declared or deemed to be in default. The provisions of this Section 18 shall continue in full force and effect and survive the expiration or other termination of this Lease and are expressly made for the benefit of and shall be enforceable by Lessor, Owner Participant and, if the Lien of the Indenture has not been discharged, Indenture Trustee. Section 19. Security for Obligations. In order to secure the Equipment Notes, Lessor has created, by the Indenture, a security interest in the Trust Indenture Estate, including, without limitation, this Lease and all Rent and other sums payable hereunder, except as provided in the Indenture and subject in each case to Liens permitted hereunder. The Indenture provides, among other things for the assignment by Lessor to Indenture Trustee of its right, title and interest in, to and under this Lease, to the extent set forth in the Indenture, for the creation of a first-mortgage lien on and perfected security interest in all of Lessor's right, title and interest in and to the Aircraft in favor of Indenture Trustee. Lessee hereby consents to such assignment and to the creation of such mortgage and security interest and acknowledges receipt of copies of the Trust Agreement and the Indenture, it being understood that such consent shall not affect any requirement or the absence of any requirement for any consent under any other circumstances. Until the Lien of the Indenture has been discharged, Lessee will furnish to Indenture Trustee counterparts of all notices and other writings of any kind required to be delivered hereunder by Lessee to Lessor. Until the Lien of the Indenture has been -103- 109 discharged, (a) Lessee shall make all payments of Rent, Stipulated Loss Value and all other amounts payable hereunder (other than Excepted Payments) to or as directed by Indenture Trustee as provided in Sections 4(c) and 4(d), and (b) Indenture Trustee shall be entitled to exercise the rights of Lessor (but not Owner Participant) (other than Expected Rights) herein as and to the extent provided herein or in the Indenture and any express reference to Indenture Trustee in any Section of this Lease shall not give rise to any implication that Indenture Trustee may not exercise the rights of Lessor in any other Section of this Lease as and to the extent provided in the Indenture. The provisions of this Lease and the Refunding Agreement which require or permit action by, the payment of monies to, the consent or approval of, the furnishing of any instrument or information to, or the performance of any other obligation to, Indenture Trustee, shall not be effective, and the Sections hereof containing such provisions shall be read as though there were no such requirements or provisions and all moneys otherwise payable to Indenture Trustee hereunder shall be paid to Lessor, after Lessee shall have received from Indenture Trustee notice of discharge of the Lien of the Indenture. Any payment or performance by Lessee to or as directed by Indenture Trustee shall constitute payment or performance of such obligation to Lessor by Lessee under this Lease. Any payment or performance of an obligation of Lessee under this Lease by a Permitted Sublessee shall constitute payment or performance of such obligation by Lessee. Section 20. Renewal Option. Lessee may renew this Lease as provided in the following clause (i) and subject to the following clause (ii): (i) Exercise of Renewal Option. Provided that this Lease has not been previously terminated and that no Default or Event of Default shall have occurred and be continuing at the time of the giving of irrevocable notice hereinafter referred to in this clause (i) or at the time of the commencement of the Renewal Term, Lessee, at its option, may renew this Lease for one Renewal Term consisting of a period equal to five years. The right to renew this Lease for such Renewal Term pursuant to this clause (i) shall be exercised upon irrevocable notice from Lessee received by Lessor of Lessee's election to so renew this Lease not less than twelve (12) months and not more than -104- 110 twenty-four (24) months prior to the last day of the Basic Term. The Renewal Rent for the Renewal Term shall be the "fair market rental value" of the Aircraft for such Renewal Term (the "renewal fair market rental value") as determined in accordance with the Appraisal Procedure. For purposes of this paragraph (i), the Appraisal Procedure shall be initiated by Lessee no earlier than nine (9) months prior to the end of the Basic Term. If Lessee shall fail to exercise its option to extend the term of this Lease for the Renewal Term in accordance with the provisions of this paragraph, all of Lessee's rights to extend the Term for such Renewal Term shall expire. Lessee shall pay all reasonable costs and expenses, including, without limitation, reasonable legal fees and expenses, incurred by Lessor, Owner Participant and the Indenture Trustee in connection with the exercise of such option. (ii) Provisions Applicable During Renewal Term. All provisions of this Lease, including, without limitation, as to Rent and Stipulated Loss Value (which shall be, with appropriate adjustments, in no event less than the greater of 120% of the "fair market sales value" of the Aircraft as of the first day of the Renewal Term as determined pursuant to the Appraisal Procedure or the amount set forth on Exhibit A as of the end of the Basic Term), shall remain in effect and be applicable during such Renewal Term, except that Lessee shall pay to the Lessor, semi-annually in arrears as Renewal Rent on each Renewal Rent Payment Date, the amount for such Renewal Term as determined in accordance with clause (i) of this Section 20. Section 21. Miscellaneous. (a) Severability, Amendment, and Construction. 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 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. To the extent permitted by Law, each of Lessor and 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 expressed to be a supplement or amendment to, or waiver or termination of this Lease signed by an officer of the party against which the enforcement of the change, waiver, discharge, or termination is sought. This Lease -105- 111 shall constitute an agreement of lease, and nothing herein shall be construed as conveying to Lessee any right, title, or interest in the Aircraft or any Engine or Part except as a lessee only. Without limiting the foregoing, the parties hereto agree to treat this Agreement as a lease for United States federal income tax purposes and Lessee will not file a tax return which is inconsistent with the foregoing and nothing contained herein shall be construed as an election by Lessor to treat Lessee as having acquired the Aircraft for the purpose of the investment credit allowed by Section 38 of the 1954 Code or any similar or successor statute. The headings in this Lease are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. (b) GOVERNING LAW. THIS LEASE HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY, AND PERFORMANCE WITHOUT REGARD TO PROVISIONS GOVERNING CONFLICTS OF LAW WHICH MIGHT LEAD TO THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION. (c) Notices. All notices and instructions between Lessor and Lessee required or permitted under the terms and provisions hereof shall be in writing and shall be sent to Lessor or Lessee at their respective addresses set forth in Exhibit C hereto (or such other addresses as the parties may designate from time to time in writing). All notices, reports or other documents provided to Lessor or Lessee shall be provided concurrently to Indenture Trustee (until such time as the Lien of the Indenture is discharged) and to Owner Participant, at such address as Owner Participant and Indenture Trustee, respectively, may designate from time to time. All notices and instructions hereunder shall become effective when received. (d) Lessor's Right to Perform for Lessee. If Lessee fails to make any payment of Rent required to be made by it hereunder or fails to perform or comply with any covenant, agreement, or obligation contained herein, Lessor shall have the right but not the obligation to make such payment or conform or comply with such agreement, covenant, or obligation, and the amount of such payment and the amount of the reasonable expenses of Lessor incurred in connection with such payment or the performance thereof or compliance therewith, together with interest thereon at the Interest Rate, shall be payable by Lessee to Lessor (as Supplemental Rent) upon demand. The taking of any such action by Lessor pursuant to this Section 21(d) shall not constitute a waiver or release of any obligation of Lessee under this Lease, nor -106- 112 a waiver of any Event of Default which may arise out of Lessee's nonperformance of such obligation, nor an election or waiver by Lessor or any remedy or right available to Lessor under or in relation to this Lease. (e) Counterparts. To the extent, if any, 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 created through the transfer or possession of any counterpart other than the original counterpart, which shall be identified as the counterpart containing the receipt therefor executed by or on behalf of Indenture Trustee on the signature page thereof. Subject to the preceding sentence, this Lease may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (f) Quiet Enjoyment. Lessor covenants that, so long as no Event of Default shall have occurred and be continuing and this Lease has not been declared or deemed to be in default, Lessor shall not take or cause to be taken any action to interfere with the right of Lessee to the possession, use, operation and quiet enjoyment of and other rights with respect to the Aircraft hereunder, and all rents, revenues, profits and income therefrom, in accordance with the terms of this Lease without interference from Lessor or any Person lawfully claiming by or through it, provided that Lessor and Owner Participant shall not be liable for any such interference by Indenture Trustee, Pass Through Trustee, Note Holder or any other Person lawfully claiming by or through them, and provided further, that the foregoing shall not be deemed to have modified the obligations of Lessee pursuant to Section 4(d) hereof, which obligations remain absolute and unconditional. (g) Brokers. Lessee and Lessor agree that, except as provided in the Refunding Agreement, there has been no third party as agent involved in this Lease and each indemnifies the other from liability for fees, commissions, or other claims made upon the other due to any such claim. (h) Investment of Funds. Any monies which are held by Lessor or Indenture Trustee and are payable to Lessee shall, unless a Default or an Event of Default shall have occurred and be continuing, be invested as provided below until paid to Lessee or applied by Lessor or Indenture Trustee to the extent provided herein. Until paid to Lessee or applied as provided herein or in the Indenture such monies shall be invested by Lessor or Indenture Trustee from time to time at the expense of Lessee in Specified -107- 113 Investments, as directed by Lessee in accordance with the provisions of Section 3.07 of the Indenture if the Lien of the Indenture shall not have been discharged and thereafter as provided below. There shall be promptly (but not more frequently than monthly) remitted to Lessee any gain (including interest received) realized as the result of any such investment (net of any fees, commissions and other reasonable expenses, if any, incurred in connection with such investment) unless a Default or an Event of Default shall have occurred and be continuing. Lessee will promptly pay to Lessor or Indenture Trustee, as the case may be, and hold Lessor or Indenture Trustee harmless from, on demand, the amount of any loss realized as the result of any such investment (together with any Taxes, fees, commission and other reasonable expenses, if any, incurred in connection with such investment). (i) Entire Agreement; Amendment. This Lease (including the Exhibits hereto), any related letter agreements and the other Operative Documents, the Financing Documents and the Purchase Documents (including the Exhibits thereto) and all closing documents delivered in connection with any of the foregoing embody the entire agreement and understanding among the parties hereto with respect to the subject matter hereof. This Lease may be changed, waived, discharged, amended, revised or terminated only by an instrument in writing signed by the party against which enforcement is sought. (j) Expenses. Without limiting Section 13 or 18, Lessee agrees within fifteen (15) days after demand to pay or reimburse Lessor for all reasonable out-of-pocket costs and expenses (including, without limitation, legal and other professional fees and expenses) incurred or payable by Lessor in connection with or related to (i) the fees and expenses of Owner Trustee and Indenture Trustee, (ii) to the extent requested by or relating to acts or omissions of Lessee or as otherwise provided herein or to give effect to the provisions hereof, or the other Operative Documents, the Financing Documents or the Purchase Documents, any future amendments, supplements or other modifications hereof or thereof, or waivers or consents hereunder or thereunder, and (iii) any Default or Event of Default or the enforcement of any of Lessor's rights, remedies or privileges hereunder or at law or in equity, but not Lessor's legal fees and expenses in connection with the negotiation and execution of this Lease or the Financing Documents. (k) Federal Bankruptcy Code. In the event Section 1110 of Title 11 of the United States Code is amended, or if it is repealed and another statute is enacted in lieu thereof, Lessor and Lessee agree to amend this Lease -108- 114 and take such other action not inconsistent with this Lease as Lessor reasonably deems necessary so as to afford to Lessor the rights and benefits as such amended or substituted statute confers upon owners and lessors of aircraft similarly situated to Lessor. (l) U.S. Registration Number. At Lessee's request, Lessor shall use its best efforts to have the Aircraft registered under the United States Registration Number designated by Lessee. (m) Submission to Jurisdiction; Service of Process; Waiver of Forum Non Conveniens; Waiver of Jury Trial. Each of Lessee and Lessor hereby irrevocably agrees that any suit, action or proceeding related to this Lease or any of the other Operative Documents to which it is a party or the subject matter hereof or thereof or any of the transactions contemplated hereby and thereby may be instituted in, and submits for itself and its property to the non-exclusive jurisdiction of, (i) the courts of the State of New York in New York County and (ii) the United States District Court for the Southern District of New York. Each of Lessee and Lessor represents and warrants that it is not currently entitled to, and agrees that to the extent that Lessee or Lessor hereinafter may acquire, any immunity (including, without limitation, sovereign immunity) from jurisdiction of any court or from any legal process, it hereby, to the extent permitted by Law, waives such immunity, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of the above- named courts that it is immune from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper, or that this Lease or any of the other Operative Documents or the subject matter hereof or thereof or any of the transactions contemplated hereby and thereby may not be enforced in or by such courts. Each of Lessee and Lessor hereby generally consents to service of process by registered mail, return receipt requested, addressed to it at its address set forth in Exhibit C, or at such other office of Lessee or Lessor as from time to time may be designated by Lessee or Lessor (as applicable) in writing to Lessee or Lessor (as applicable), Owner Participant and Indenture Trustee. Each of Lessee and Lessor hereby agrees that its submission to jurisdiction and its designation of service of process by mail set forth above is made for the express benefit of Lessor, Lessee, Owner Participant, Indenture Trustee, each Note Holder and -109- 115 their successors and assigns (as applicable). Final (after all appeals) judgment (the enforcement of which has not been stayed) against either Lessee or Lessor obtained in any suit originally brought in the court of the State of New York in New York County or in the United States District of New York shall be conclusive, and, to the extent permitted by applicable Law, may be enforced in other jurisdictions by suit on the judgment, a certified or true copy of which shall be conclusive evidence of the fact and of the amount of any indebtedness or liability of Lessee therein described; provided that the plaintiff at its option may bring suit, or institute other judicial proceedings, against Lessee or Lessor, as the case may be, or any of their assets in the courts of any country or place where such Person or such assets may be found. EACH OF LESSEE AND LESSOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE OPERATIVE DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED THEREBY OR THE LESSOR/LESSEE RELATIONSHIP BEING ESTABLISHED, including, without limitation, contract claims, tort claims, breach of duty claims and other common law and statutory claims. Lessor and Lessee represent and warrant that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following consultation with such legal counsel. THIS WAIVER IS IRREVOCABLE, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THE OPERATIVE DOCUMENTS. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. (n) Limitation on Recourse. The parties hereto agree that all statements, representations, covenants and agreements made by Lessor (when made in its capacity as such and not in its individual capacity) contained in this Agreement, unless expressly otherwise stated, are made and intended only for the purpose of binding the Trust Estate and establishing the existence of rights and remedies that can be exercised and enforced against the Trust Estate. Therefore, no recourse shall be had with respect to anything contained in this Agreement (except for any express provisions that Lessor is responsible for in its individual capacity), against Lessor in its individual capacity or against any institution or person that becomes a successor trustee or co- trustee or any officer, director, trustee, servant or direct or indirect parent or controlling Person or Persons of any of them; provided that (i) this Section 21(n) shall not be construed to prohibit any action or proceeding against any party hereto for its own willful misconduct or grossly negligent conduct for which it would -110- 116 otherwise be liable and (ii) nothing contained in this Section 21(n) shall be construed to limit the exercise and enforcement in accordance with the terms of this Agreement or such other agreements of rights and remedies against the Trust Estate. The foregoing provisions of this Section 21(n) shall survive the termination of this Agreement and the other Operative Documents. (o) Successor Trustee. Lessee agrees that in the case of the appointment of any successor Owner Trustee pursuant to the terms of the Trust Agreement, such successor Owner Trustee shall, upon written notice by such successor Owner Trustee, succeed to all the rights, powers and title of Lessor hereunder and shall be deemed to be Lessor and the owner of the Aircraft for all purposes hereof without the necessity of any consent or approval by Lessee (subject to Section 14(d) of the Refunding Agreement) and without in any way altering the terms of this Lease or Lessee's obligations hereunder. One such appointment and designation of a successor Owner Trustee shall not exhaust the right to appoint and designate further successor Owner Trustees pursuant to the Trust Agreement, but such right may be exercised repeatedly as long as this Lease shall be in effect. (p) Article 2-A of the UCC. The parties hereto agree that the Original Head Lease, as amended and restated by this Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-11] (and as otherwise extended, amended, modified, renewed or supplemented), shall be governed by Article 2-A of the Uniform Commercial Code of New York. -111- 117 IN WITNESS WHEREOF, Lessor and Lessee, each pursuant to due authority, have each caused this Lease to be executed by its duly authorized officer as of the day and year first above written. Lessor: WILMINGTON TRUST COMPANY, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By: ------------------------------- Title: Lessee: AMERICA WEST AIRLINES, INC. By: ------------------------------- Title: -112- 118 ANNEX I to Amended and Restated Aircraft Lease Agreement DESCRIPTION OF ORIGINAL HEAD LEASE [To be provided by FAA Counsel] 119 EXHIBIT A to Amended and Restated Aircraft Lease Agreement STIPULATED LOSS VALUES The "Stipulated Loss Value" of the Aircraft leased hereunder during the Term shall be determined as of the date provided in the Lease and shall be an amount equal to the amount shown below as of the applicable "Stipulated Loss Value Date" set forth below. STIPULATED LOSS VALUES S/N 81 Stipulated Loss Value Date (1) (2) ____________________ (1) Thereafter, during any (i) Renewal Term or (ii) extension or deemed extension of the Term of the Lease due to the occurrence of an event described in clause (iii) to the definition of "Supplemental Rent" in the Lease, "Stipulated Loss Value Date" shall mean the __th day of each calendar month. (2) Thereafter, such amount as determined in accordance with Section 20(ii) of the Lease. A-1 120 EXHIBIT B to Amended and Restated Aircraft Lease Agreement AIRCRAFT RECORDS AND DOCUMENTS One original (or, if greater, the number delivered to Lessee) of each of the following: A. CERTIFICATES 1. Certificate of Airworthiness (FAA) 2. Lessee to supply Radio License 2a. Certificate of Sanitary Construction B. AIRCRAFT STATUS RECORDS 3. Log Book (currently on Aircraft) 4. Airframe Maintenance Status (with time-to-go or time since last) 5. Airworthiness Directive Compliance Report 6. Modification Status report 7. Weighing Report (most recent) 8. Accident and incident report 9. List of Life Limited Components (with time-to-go) C. AIRCRAFT MAINTENANCE RECORDS (last heavy maintenance visits) 10. Test Flight Reports 11. Job Cards and Work Accomplishment Documents (copies) 12. X-ray pictures (most recent) D. AIRCRAFT HISTORY RECORDS 13. Log Books 14. Aircraft Maintenance History Cards B-1 121 15. Mechanical Interruption Summary E. ENGINE RECORDS (for each engine) 16. Last overhaul and repair documents 17. Airworthiness Directive Compliance Report 18. List of Life Limited Components 19. Modification Status Report F. APU RECORDS 20. Last Overhaul and Repair Documents 21. Airworthiness Directive Compliance Report 22. List of Life Limited Components 23. Modification Status Report G. COMPONENT RECORDS 24. Component records maintained in accordance with a record keeping policy approved by and acceptable to the FAA to certify the status and maintenance histories of the components H. MANUALS 25. Approved Flight Manual 26. Flight Crew Operating Manual 27. Weight and Balance Manual 28. Wiring Diagram Manual 29. Illustrated Parts Catalog I. MISCELLANEOUS TECHNICAL DOCUMENTS 30. Operations Specification 31. Passenger Cabin Configuration Drawings J. Any other documents, manuals, reports or related information delivered with or related to the Aircraft, updated as may be required to reflect the current aircraft status. B-2 122 EXHIBIT C to Amended and Restated Aircraft Lease Agreement DEFINITIONS AND VALUES Basic Rent: During the Basic Term of the Lease, Basic Rent shall be payable in semi-annual installments, each of which shall be in an amount equal to the amount [and in ________], as set forth in Schedule I hereto. Basic Rent Payment Date: Each such date set forth as such on Schedule I hereto. Letter of Credit Face Amount: The amount set forth as such on Schedule I hereto Manufacturer: Airbus Industrie Maximum Foreign Use Percentage: The Permitted Percentages as defined in the Tax Indemnification Agreement. Payment Location: So long as the Lien of the Indenture shall remain in effect, Fleet National Bank, Account No. _____ and thereafter (and at all times with respect to Excepted Payments), to _____ for the account of ________ Account No. ______. Renewal Rent: During the Renewal Term of the Lease Renewal Rent shall be payable in installments, semi-annually in arrears. Renewal Rent Payment Date: The same day and month during each year of the Renewal Term on which Basic Rent was due during the Basic Term (the Basic Rent Payment Dates). If a Renewal Rent Payment Date shall fall on a day which is not a Business Day, any payment due on such Renewal Rent Payment Date shall be made on the next succeeding Business Day. Restricted Use Period: On and after the Delivery Date until and including the last day of the Owner Participant's seventh full fiscal year after the Delivery Date. C-1 123 Lease Identification: A fireproof metal plate bearing the following legend: "Title to this Aircraft is held by Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee, as Lessor, which is the registered owner thereof on the U.S. FAA Aircraft Registry, and which has leased this Aircraft to America West Airlines, Inc., as Lessee" and, for so long as the Lien of the Indenture shall not have been discharged, bearing the following additional legend: "Mortgaged to The Chase Manhattan Bank as Indenture Trustee." Lessee's Address: America West Airlines, Inc. 4000 East Sky Harbor Boulevard Phoenix, Arizona 85034 Telex: 755089 (Answerback: AMERWEST) Telecopier: (602) 693-5990 Attention: Senior Vice President - Legal Affairs Lessor's Address: Wilmington Trust Company Rodney Square North Wilmington, DE 19890 Telecopier: (302) 651-8882 Attention: Corporate Trust Administration C-2 124 EXHIBIT D-1 to Amended and Restated Aircraft Lease Agreement LEASE SUPPLEMENT NO. 3 LEASE SUPPLEMENT [GPA 1989 BN-11] NO. 3, dated June __, 1997, between WILMINGTON TRUST COMPANY, a Delaware corporation (not in its individual capacity but solely as Owner Trustee under a Trust Agreement [GPA 1989 BN-11] dated December 19, 1989, as amended, supplemented, or otherwise modified from time to time) (together with its successors and assigns, "Lessor"), and AMERICA WEST AIRLINES, INC., a Delaware corporation (together with its successors, "Lessee"). Lessor and Lessee have heretofore entered into that certain Aircraft Lease Agreement [GPA 1989 BN-11] dated as of December 19, 1989, as Amended and Restated as of June __, 1997 (as further amended, supplemented or otherwise modified from time to time, herein called the "Lease Agreement", and the defined terms therein being hereinafter used with the same meaning) and that certain Lease Supplement [GPA 1989 BN-11] No. 1 dated December 29, 1989 ("Lease Supplement No. 1") and that certain Lease Supplement [GPA 1989 BN-11] No. 2 dated January 5, 1995 ("Lease Supplement No. 2"). The Lease Agreement provides for the execution and delivery from time to time of a Lease Supplement substantially in the form hereof for the purpose of leasing the aircraft described below (or confirming the leasing of the aircraft described below) under the Lease Agreement as and when delivered by Lessor to Lessee in accordance with the terms thereof. The Lease Agreement relates to the aircraft, parts and engines described below, and a counterpart of the Lease Agreement is attached hereto and made a part hereof, and this Lease Supplement, together with such attachment, is being filed for recordation on the date hereof with the FAA as one document. NOW, THEREFORE, in consideration of the premises and other good and sufficient consideration, Lessor and Lessee hereby agree as follows: 1. Lessor hereby confirms that it has leased to Lessee and Lessee hereby confirms that it has leased from Lessor that certain Airbus Model A320-231 commercial jet aircraft airframe and two IAE V2500 engines (each of which Engines has 750 or more rated takeoff horsepower or the equivalent of such horsepower) described in Schedule 1 hereto (the "Delivered Aircraft"). 2. The Delivery Date of the Delivered Aircraft is December 29, 1989. D-1 125 3. The Basic Term for the Delivered Aircraft shall commence on the Delivery Date and shall end on the Expiration Date, which shall be July 5, 2013 unless the Lease Agreement is extended or deemed extended or terminated prior thereto in accordance with the terms thereof. 4. Lessee hereby agrees to and confirms its obligation to pay Rent (as defined in the Lease Agreement) in the amounts and at the times provided in the Lease Agreement. 5. Lessee hereby confirms to Lessor that (i) the Delivered Aircraft and each Engine installed thereon or belonging thereto have been duly marked in accordance with the terms of Section 6(e) of the Lease Agreement, and (ii) Lessee has accepted the Delivered Aircraft for all purposes of Lease Supplement No. 1, as further supplemented by Lease Supplement No. 2, hereof and of the Lease Agreement, and the Delivered Aircraft is (A) as far as Lessee reasonably ascertained from the acceptance procedures provided for in the Purchase Agreement, airworthy, in accordance with specifications, and in good working order and repair, it being understood that Lessee by this confirmation is not giving any warranty of any kind with respect to the Aircraft, and (B) free and clear of all Liens except Permitted Liens. 6. All of the terms and provisions of the Lease Agreement, including, without limitation, as to governing Law, are hereby incorporated by reference in this Lease Supplement No. 3 to the same extent as if fully set forth herein. 7. This Lease Supplement No. 3 may be executed in any number of counterparts; each of such counterparts, except as provided in Section 21(e) of the Lease Agreement, shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same Lease Supplement. To the extent, if any, that this Lease Supplement 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 Supplement may be created except by the transfer or possession of the counterpart containing the printed receipt therefor executed by Indenture Trustee on the signature page hereof. D-2 126 IN WITNESS WHEREOF, Lessor and Lessee have each caused this Lease Supplement No. 3 to be duly executed by its duly authorized officer on the day and year first above written. Lessor: WILMINGTON TRUST COMPANY, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By: --------------------------------- Title: Lessee: AMERICA WEST AIRLINES, INC. By: --------------------------------- Title: D-3 127 The undersigned acknowledges receipt of this original counterpart of the foregoing Lease Supplement on this _______ day of June ___, 1997 and consents to the terms hereof. THE CHASE MANHATTAN BANK, not in its individual capacity, but solely as Indenture Trustee By: --------------------------------- Title: D-4 128 SCHEDULE 1 to LEASE SUPPLEMENT NO. 3 Airbus Model A320-231 Airframe
U.S. Registration No. Manufacturers Serial No. N632AW 81
Installed IAE Engines
Model No. Serial No. V2500 V0084 V2500 V0091
D-5 129 EXHIBIT D-2 to Amended and Restated Aircraft Lease Agreement LETTER OF CREDIT D-6 130 EXHIBIT E to Amended and Restated Aircraft Lease Agreement RETURN CONDITION REQUIREMENTS In addition to the requirements set forth in Section 16 of the Lease, on any Return Occasion with respect to the Aircraft, Lessee, at its own cost and expense, shall return the Aircraft in compliance with the following: (1) The Aircraft shall have at all times theretofore been maintained and modified in accordance with Sections 6(d) and 9 hereof with the same care, maintenance status and consideration for the technical condition of the Aircraft as if such Aircraft were owned and were to have been kept in continued regular service by Lessee, without discrimination as to any other similar aircraft owned or leased by Lessee. (2) The Aircraft shall be clean by good commercial airline standards as on the Delivery Date with only such modifications to the Aircraft as are permitted under this Lease. (3) The Aircraft shall have installed the full complement of Engines (as used herein the term "Engines" includes engines for which title will be transferred to Lessor pursuant to Section 16(c)) and other equipment, parts, components, accessories, and loose equipment subleased hereunder or substituted therefor, each such item functioning in accordance with its intended use. (4) Lessee, at Lessor's request, shall activate any systems installed on the Aircraft previously deactivated by Lessee and shall assure each such system is properly functioning for its intended use. (5) Each Engine shall have just completed a hot and cold section baroscope and/or radiographic isotope inspection by Lessor (at Lessee's cost and expense) of the low and high pressure compressors and turbine area, and shall have just completed engine condition runs, and any discrepancies detected shall be corrected at Lessee's cost and expense in accordance with the Manufacturer's maintenance policies and procedures. (6) Lessee's name, logo, and all other exterior markings shall have been removed in a good and workmanlike manner from the Aircraft and the Aircraft shall have been repainted in a good and workmanlike manner in the livery specified by Lessor. (7) The Aircraft shall have simultaneously with such return completed a "block 'C' Check" or the equivalent level designated check or checks (inclusive of all phases of a E-1 131 "block 'C' Check" or equivalent level designated check if the Maintenance Program is a "phase" program), in accordance with Lessee's Maintenance Program such that all inspections and airworthiness directives having terminating actions due within the next "block 'C' Check" or equivalent level designated check(s), and all other actions as per the Manufacturer's minimum recommendations in its then current maintenance planning document for such check or checks, shall have been accomplished immediately prior to redelivery. (8) Neither the Aircraft nor any Engine shall have any scheduled or unscheduled open or deferred maintenance items or placards. (9) No Engine shall be on "Watch" and each Engine shall comply with Lessee's Maintenance Program without waiver, deviations or exceptions. (10) Each landing gear assembly shall have no less than 50% of allowable hours or cycles, whichever is the more limiting factor, under Lessee's Maintenance Program, remaining until the next scheduled overhaul or replacement. (11) Each Engine shall have not less than 5,000 hours or 5,000 cycles, whichever is the more limiting factor, remaining on any hour or cyclic limited part, and each Engine shall have not more than 5,000 hours or 5,000 cycles, whichever is the more limiting factor, since the last engine compressor refurbishment, and each Engine shall have not more than 2,500 hours or 2,500 cycles, whichever is the more limiting factor, since its last turbine restoration, based on Lessee's historical experience of engine on-wing service life or based on Lessee's hard time engine overhaul limit if in effect. The Engine hour and cycle limits described herein shall be in accordance with Lessee's Maintenance Program and the manufacturer's mandatory hour and cyclic life limits and presumes an hour-to-cycle ratio of two (2.0) hours to one (1) cycle. If the actual hour-to-cycle ratio is less than 2.0:1, then the cyclic limit amounts described herein shall be increased proportionately. (12) Each cycle, time or calendar controlled component in accordance with Lessee's Maintenance Program or the Manufacturer's mandatory life limits shall have no less than twelve months or 5,000 hours or 5,000 cycles, whichever is the more limiting factor, remaining until the next scheduled overhaul or replacement or 100% of the allowable time if less than twelve months. (13) The Airframe shall be returned to Lessor with not less than fifty percent (50%) of the total scheduled period between scheduled Major Structural Inspections of the most comprehensive type (currently referred to as an "eight E-2 132 year" heavy structural inspection" or "8C" inspection under the Manufacturer's maintenance planning document in effect on the Delivery Date) with respect to allowable hours, cycles or calendar months, whichever is the more limiting factor, remaining until the next scheduled Major Structural Inspection of the most comprehensive type, including, without limitation, the replacement of any safe-life limited parts, required in accordance with the Lessee's then current Maintenance Program or the Manufacturer's mandatory life limits and, therefore, at a minimum, having just completed a "four-year heavy structural inspection" or "4C" inspection as referred to in the Manufacturer's maintenance planning document in effect on the Delivery Date. (14) All software associated with or relating to any on-board avionic equipment must be delivered to Lessor and be in a condition complying with the Manufacturer's then recommended standards. (15) Each oil tank on the Aircraft shall be full and the fuel tanks shall contain as much fuel as such tanks contained at the time the Aircraft was accepted by Lessee, or, in the case of insufficient quantities, an appropriate payment will be made by Lessee at the then current market price of oil or fuel, as the case may be. E-3 133 EXHIBIT F-1 to Amended and Restated Aircraft Lease Agreement FOREIGN AIR CARRIERS Aer Lingus Air Canada Air France (Compagnie Nationale Air France) Air New Zealand, Ltd. All Nippon Airways Alitalia - Italy's World Airlines Ansett Airlines of Australia Australian Airlines Austrian Airlines (Oesterreichische Luftverkehrs AG) British Airways Canadian Airlines International Ltd. Deutsche Lufthansa Aktiengesellschaft (Lufthansa German Airlines) Finnair Oy Iberia Japan Air Lines, Co., Ltd (JAL) KLM - Royal Dutch Airlines (Koninklijke Luchtvaart Maatschappij) Korean Air Malaysian Airlines QANTAS Sabena Belgian World Airlines (Societe Anonyme Belge D'Exploitation De La Navigation Aerienne) Scandinavian Airlines Systems (SAS) Singapore Airlines Swissair (Swiss Air Transport Company Ltd.) TAP Air Portugal (Transportes Aeros Portugeses) Thai Airways International Ltd. Varig S.A. (Viacao Aerea Rio Grandense S.A.) (a) Lessor may at any time, by written notice to Lessee, propose the deletion of particular airlines from the above list of Foreign Air Carriers (as the same may be amended pursuant to this provision) based upon Lessor's reasonable judgment. Lessee may at any time, by written notice to Lessor, propose the addition of particular airlines to such list of Foreign Air Carriers based upon Lessee's reasonable judgment and which are comparable to the above airlines. (b) If Lessee has not objected in writing to the deletion of a particular airline proposed by Lessor as provided in paragraph (a) of this Exhibit, or if Lessor has not objected in writing to the addition of a particular airline proposed by Lessee as provided in paragraph (a), in each case within 30 days after receipt of notice of such proposal, the list of Foreign Air Carriers shall be deemed amended without further act to delete or add such airline. If Lessee or Lessor delivers a timely objection in writing to a proposal made by the other pursuant to paragraph (a), F-1 134 each party agrees to consult promptly at the request of the other in a good- faith effort to resolve the disagreement through negotiation; provided, however, that an airline which Lessor has proposed to delete shall be deleted from such list if there will be at least twenty (20) (or such lesser number as Lessor and Lessee shall reasonably determine, if the number of airlines of a type similar to the airlines listed above which may be included within the definition of Foreign Air Carriers is substantially reduced as a result of consolidation in the airline industry) other airlines remaining on such list after giving effect to such deletion and any other deletions then proposed by Lessor. (c) Notwithstanding any other provision hereof, no addition shall be made, and an airline shall be deleted from such list if, such airline would not be permitted to be a lessee under the provisions of the Lease, and no deletion of an airline from the list of Foreign Air Carriers pursuant to this Exhibit shall affect any existing sublease or other agreement providing for transfer of possession of the Aircraft, the Airframe or any Engine or Part which was permitted under the Lease at the time entered into, or preclude any subsequent renewal or extension of such sublease or other agreement. F-1 135 EXHIBIT F-2 to Amended and Restated Aircraft Lease Agreement PERMITTED FOREIGN SUBLESSEE DOMICILES Argentina Malta Australia Mexico Austria Morocco Bahamas Netherlands Belgium New Zealand Brazil Norway Canada Paraguay Chile People's Republic of China Denmark Philippines Egypt Portugal Finland Republic of China (Taiwan)* France Singapore Germany South Africa Greece South Korea Hong Kong Spain Hungary Sweden Iceland Switzerland India Thailand Indonesia Tobago Ireland Trinidad Italy United Kingdom Japan Uruguay Luxembourg Venezuela Malaysia - ----------------------- * So long as on the date of entering into the proposed sublease such country and the United States of America have diplomatic relations at least as good as those in effect on the Restatement Date. (a) Lessor may at any time, by written notice to Lessee, propose the deletion of a particular country from the above list of Permitted Foreign Sublessee Domiciles (as the same may be amended pursuant to this provision) based upon Lessor's reasonable judgment. Lessee may at any time, by written notice to Lessor, propose the addition of particular countries which are comparable to the above countries to such list of Permitted Foreign Sublessee Domiciles based upon Lessee's reasonable judgment. (b) If Lessee has not objected in writing to the deletion of a particular country proposed by Lessor as provided in paragraph (a) of this Exhibit, or if Lessor has not objected in writing to the addition of a particular F-2 136 country proposed by Lessee as provided in paragraph (a), in each case within 30 days after receipt of notice of such proposal, the list of Permitted Foreign Sublessee Domiciles shall be deemed amended without further act to delete or add such country. If Lessee or Lessor delivers a timely objection in writing to a proposal made by the other pursuant to paragraph (a), each party agrees to consult promptly at the request of the other in a good-faith effort to resolve the disagreement through negotiation. (c) Notwithstanding any other provision hereof, no deletion of a country from the list of Permitted Foreign Sublessee Domiciles pursuant to this Exhibit shall affect any existing sublease or other agreement providing for transfer of possession of the Aircraft, the Airframe or any Engine or Part which was permitted under the Lease at the time entered into, or preclude any subsequent renewal or extension of such sublease or other agreement. F-2 EX-4.18 16 1ST AMENDED & RESTATED TRUST INDENTURE & SECURITY 1 Exhibit 4.18 - -------------------------------------------------------------------------------- FIRST AMENDED AND RESTATED TRUST INDENTURE AND SECURITY AGREEMENT [GPA 1989 BN-8] Dated as of June __, 1997 between WILMINGTON TRUST COMPANY, not in its individual capacity except as expressly provided herein but solely as Owner Trustee and THE CHASE MANHATTAN BANK, not in its individual capacity except as expressly provided herein but solely as Indenture Trustee - -------------------------------------------------------------------------------- Secured Equipment Notes Covering One Airbus A320-231 Aircraft Manufacturer's Serial No. 66 Registration No. N627AW Leased by America West Airlines, Inc. - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ---- GRANTING CLAUSE . . . . . . . . . . . . . . . . . . . . . . . . . . 3 HABENDUM CLAUSE . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE I DEFINITIONS SECTION 1.01. Special Definitions . . . . . . . . . . . . . . . . 8 ARTICLE II THE EQUIPMENT NOTES SECTION 2.01. Form of Equipment Notes . . . . . . . . . . . . . . 22 SECTION 2.02. Issuance and Terms of Equipment Notes . . . . . . . 27 SECTION 2.03. Payments from Trust Indenture Estate Only . . . . . . . . . . . . . . . . . . . . . . . 30 SECTION 2.04. Method of Payment. . . . . . . . . . . . . . . . . . 31 SECTION 2.05. Application of Payments . . . . . . . . . . . . . . 34 SECTION 2.06. Termination of Interest in Trust Indenture Estate . . . . . . . . . . . . . . . . . 35 SECTION 2.07. Registration, Transfer and Exchange of Equipment Notes . . . . . . . . . . . . . . . . . 35 SECTION 2.08. Mutilated, Destroyed, Lost or Stolen Equipment Notes . . . . . . . . . . . . . . . . . 36 SECTION 2.09. Payment of Expenses on Transfer; Cancellation . . . . . . . . . . . . . . . . . . . 37 SECTION 2.10. Mandatory Redemptions of Equipment Notes . . . . . . . . . . . . . . . . . . . . . . 37 SECTION 2.11. Redemptions; Notice of Redemption. . . . . . . . . . 37 SECTION 2.12. Option to Purchase Equipment Notes . . . . . . . . . 38 SECTION 2.13. Subordination. . . . . . . . . . . . . . . . . . . . 39 ARTICLE III RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE SECTION 3.01. Certain Rent Distributions . . . . . . . . . . . . . 40 SECTION 3.02. Event of Loss and Replacement . . . . . . . . . . . 42 SECTION 3.03. Payment After Indenture Event of Default, etc . . . . . . . . . . . . . . . . . . . 43 SECTION 3.04. Certain Payments . . . . . . . . . . . . . . . . . . 45 SECTION 3.05. Other Payments . . . . . . . . . . . . . . . . . . . 46 SECTION 3.06. Payments to Owner Trustee . . . . . . . . . . . . . 46 SECTION 3.07. Investment of Amounts Held by Indenture Trustee . . . . . . . . . . . . . . . . . . . . . 47
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Page ---- ARTICLE IV COVENANTS OF TRUST COMPANY AND OWNER TRUSTEE; INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE . . . . . . . . . . 48 SECTION 4.01. Covenants of Trust Company and Owner Trustee . . . . . . . . . . . . . . . . . . . . . 48 SECTION 4.02. Indenture Events of Default . . . . . . . . . . . . 49 SECTION 4.03. Certain Rights . . . . . . . . . . . . . . . . . . . 52 SECTION 4.04. Remedies . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 4.05. Return of the Aircraft, etc . . . . . . . . . . . . 57 SECTION 4.06. Remedies Cumulative . . . . . . . . . . . . . . . . 58 SECTION 4.07. Discontinuance of Proceedings . . . . . . . . . . . 59 SECTION 4.08. Waiver of Past Indenture Defaults . . . . . . . . . 59 SECTION 4.09. Exercise of Remedies by Foreign Note Holders . . . . . . . . . . . . . . . . . . 59 ARTICLE V DUTIES OF THE INDENTURE TRUSTEE SECTION 5.01. Notice of Indenture Event of Default . . . . . . . . 60 SECTION 5.02. Action Upon Instructions . . . . . . . . . . . . . . 61 SECTION 5.03. Indemnification . . . . . . . . . . . . . . . . . . 61 SECTION 5.04. No Duties Except as Specified in Indenture or Instructions . . . . . . . . . . . . 62 SECTION 5.05. No Action Except Under Lease, Refunding Agreement, Indenture or Instructions . . . . . . . 62 SECTION 5.06. Replacement Airframes, Replacement Engines and Replacement Parts . . . . . . . . . . 63 SECTION 5.07. Indenture Supplements for Replacements . . . . . . . 66 SECTION 5.08. Effect of Replacement . . . . . . . . . . . . . . . 66 SECTION 5.09. Notices, etc. . . . . . . . . . . . . . . . . . . . 67 SECTION 5.10. Certain Rights of Owner Trustee and Owner Participant . . . . . . . . . . . . . . . . 67 SECTION 5.11. Evidence of Action Taken by Note Holder . . . . . . 69 SECTION 5.12. Right of Revocation of Action Taken . . . . . . . . 70 ARTICLE VI THE OWNER TRUSTEE AND THE INDENTURE TRUSTEE SECTION 6.01. Acceptance of Trusts and Duties . . . . . . . . . . 70 SECTION 6.02. Absence of Duties . . . . . . . . . . . . . . . . . 71 SECTION 6.03. No Representations or Warranties as to Aircraft or Documents . . . . . . . . . . . . . . 71 SECTION 6.04. No Segregation of Moneys; No Interest . . . . . . . 72 SECTION 6.05. Reliance; Agents; Advice of Counsel . . . . . . . . 72 SECTION 6.06. Capacity in Which Acting . . . . . . . . . . . . . . 73 SECTION 6.07. Compensation . . . . . . . . . . . . . . . . . . . . 73 SECTION 6.08. May Become Note Holder . . . . . . . . . . . . . . . 73
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Page ---- SECTION 6.09. Further Assurances; Financing Statements . . . . . . . . . . . . . . . . . . . . 73 ARTICLE VII INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE SECTION 7.01. Scope of Indemnification . . . . . . . . . . . . . . 74 SECTION 7.02. Exculpation and Release of Liability . . . . . . . . 75 ARTICLE VIII SUCCESSOR TRUSTEES AND SEPARATE TRUSTEES SECTION 8.01. Notice of Successor Owner Trustee . . . . . . . . . 75 SECTION 8.02. Resignation and Removal of Indenture Trustee; Appointment of Successor . . . . . . . . 75 SECTION 8.03. Appointment of Separate Trustees . . . . . . . . . . 77 ARTICLE IX SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER DOCUMENTS SECTION 9.01. Lease Amendments and Supplemental Indentures . . . . . . . . . . . . . . . . . . . . 79 SECTION 9.02. Effect of Supplemental Indenture . . . . . . . . . . 82 SECTION 9.03. Documents to Be Given to Trustee . . . . . . . . . . 82 SECTION 9.04. Notation on Notes in Respect of Supplemental Indentures . . . . . . . . . . . . . 82 SECTION 9.05. Trustees Protected . . . . . . . . . . . . . . . . . 82 SECTION 9.06. Documents Mailed to Note Holders . . . . . . . . . . 82 SECTION 9.07. No Request Necessary for Lease Supplement or Indenture Supplement . . . . . . . . 83 SECTION 9.08. Notices to Liquidity Provider . . . . . . . . . . . 83 ARTICLE X MISCELLANEOUS SECTION 10.01. Termination of Indenture . . . . . . . . . . . . . 83 SECTION 10.02. No Legal Title to Trust Indenture Estate in Note Holders . . . . . . . . . . . . . . 84 SECTION 10.03. Sale of Aircraft by Indenture Trustee is Binding . . . . . . . . . . . . . . . . . . . 84 SECTION 10.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Lessee and Note Holders . . . . . . . . . . . . . 84 SECTION 10.05. No Action Contrary to Lessee's Rights Under the Lease . . . . . . . . . . . . . . . . . 84 SECTION 10.06. Notices . . . . . . . . . . . . . . . . . . . . . . 85 SECTION 10.07. Severability . . . . . . . . . . . . . . . . . . . 85
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Page ---- SECTION 10.08. No Oral Modifications or Continuing Waivers . . . . . . . . . . . . . . . . . . . . . 85 SECTION 10.09. Successors and Assigns . . . . . . . . . . . . . . 85 SECTION 10.10. Headings . . . . . . . . . . . . . . . . . . . . . 86 SECTION 10.11. Normal Commercial Relations . . . . . . . . . . . . 86 SECTION 10.12. Governing Law; Counterpart Form . . . . . . . . . . 86 SECTION 10.13. Section 1110 . . . . . . . . . . . . . . . . . . . 86
EXHIBIT A - Form of Trust Indenture Supplement SCHEDULE I - Equipment Notes Amortization SCHEDULE II - Pass Through Trust Agreements iv 6 FIRST AMENDED AND RESTATED TRUST INDENTURE AND SECURITY AGREEMENT [GPA 1989 BN-8] FIRST AMENDED AND RESTATED TRUST INDENTURE AND SECURITY AGREEMENT [GPA 1989 BN-8] (this "First Amended and Restated Indenture" or this "Indenture") dated as of June __, 1997, 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 referred to below (in such capacity, together with its successors, the "Owner Trustee"), and THE CHASE MANHATTAN BANK (formerly known as Chemical Bank, successor by merger to Manufacturers Hanover Trust Company), a New York corporation, not in its individual capacity except as otherwise specifically set forth herein, but solely as indenture trustee hereunder (in such capacity, together with its successors, the "Indenture Trustee"). W I T N E S S E T H: WHEREAS, all capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, the Owner Participant and Wilmington Trust Company entered into the Trust Agreement [GPA 1989 BN-8] dated as of December 19, 1989, as supplemented by Trust Agreement Supplement [GPA 1989 BN-8] No. 1 dated December 29, 1989, and as further supplemented by Trust Agreement Supplement [GPA 1989 BN-8] No. 2 dated the date hereof (as amended, assigned, supplemented or otherwise modified from time to time in accordance with the terms thereof, hereof and of the Refunding Agreement, the "Trust Agreement"), whereby, among other things, Wilmington Trust Company has declared a certain trust for the use and benefit of the Owner Participant, subject, however, to the Trust Indenture Estate created pursuant hereto for the use and benefit of (to the extent set forth herein), and with the priority of certain payments to, the Holders of Equipment Notes issued hereunder, and the Owner Trustee is authorized and directed to execute and deliver this Indenture; WHEREAS, (i) the Owner Trustee and the Indenture Trustee entered into the Trust Indenture and Security Agreement [GPA 1989 BN-8] dated as of December 19, 1989, as supplemented by Trust Indenture Supplement No. 1 dated December 29, 1989, which were recorded by the Federal Aviation Administration on January 19, 1990 as one instrument and assigned Conveyance No. H68557 (as so supplemented, the "Original Indenture"), (ii) the Owner Trustee and the Original Head Lessee entered into the Aircraft Lease Agreement [GPA 1989 BN-8] dated as of December 19, 1989, as supplemented by Lease Supplement [GPA 1989 BN-8] No. 1 dated December 29, 1989, which were recorded by the Federal Aviation Administration on January 19, 1990 as one instrument and assigned Conveyance No. H68558 and as further 7 supplemented by Lease Supplement [GPA 1989 BN-8] No. 2 dated December, 1994, which was recorded by the Federal Aviation Administration on February 27, 1995 and assigned Conveyance No. JJ13285 (collectively, as so supplemented, the "Original Lease") and (iii) pursuant to the Original Indenture, the Owner Trustee issued and sold to the Lenders (as defined in the Original Indenture) the Original Loan Certificates; WHEREAS, the parties have agreed to (i) assign, amend and restate the Original Lease pursuant to Assignment and Amendment No. 1 and Sublease Termination Agreement [GPA 1989 BN-8] dated as of the date hereof among the Original Head Lessee, as assignor, and the Original Sublessee, as assignee, the Owner Trustee and the Indenture Trustee and the Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-8] dated as of the date hereof between the Owner Trustee and the Lessee (as so assigned, amended and restated, the "Amended and Restated Lease" or the "Lease") and to enter into Lease Supplement No. 3 and (ii) cause the implementation of the Refinancing Transaction pursuant to which, among other things, the Original Loan Certificates issued pursuant to the Original Indenture shall be prepaid and new Equipment Notes shall be issued to the Pass Through Trustees (or their designee); WHEREAS, in light of the foregoing and in anticipation of the Refinancing Transaction, the parties desire by this First Amended and Restated Indenture, among other things, (i) to amend and restate in its entirety the Original Indenture, (ii) to provide for the issuance by the Owner Trustee of the Equipment Notes and (iii) to provide for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder, among other things, of certain of the Owner Trustee's estate, right, title and interest in and to the Aircraft and, except as hereinafter expressly provided, all of the Owner Trustee's right, title and interest in, to and under the Lease (as amended and restated to date and as the same may at any time and from time to time be further amended, restated or otherwise modified in accordance with the terms thereof and hereof) and all payments and other amounts received hereunder or thereunder in accordance with the terms hereof or thereof, as security for, among other things, the Owner Trustee's obligations to the Indenture Trustee, for the ratable benefit and security of the Note Holders, subject to Section 2.13 and Article III hereof; WHEREAS, all things have been done to make the Equipment Notes, when executed by the Owner Trustee and authenticated, issued and delivered by the Indenture Trustee hereunder, the legal, valid and binding obligations of the Owner Trustee; and WHEREAS, all things necessary to make this First Amended and Restated Indenture the legal, valid and binding obligation of the Owner Trustee, for the uses and purposes herein 2 8 set forth, in accordance with its terms, have been done and performed and have happened; GRANTING CLAUSE NOW, THEREFORE, THIS FIRST AMENDED AND RESTATED TRUST INDENTURE AND SECURITY AGREEMENT WITNESSETH, that, to secure the prompt payment of the Principal Amount of, interest on, Make-Whole Amount, if any, and all other amounts due with respect to, all Equipment Notes from time to time outstanding hereunder and the performance and observance by the Owner Trustee of all the agreements, covenants and provisions contained herein and in the Refunding Agreement and the Equipment Notes, for the benefit of the Note Holders, and the prompt payment of any and all amounts from time to time owing hereunder and under the Refunding Agreement by the Owner Trustee, the Owner Participant and the Lessee to the Note Holders 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 Equipment Notes 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 Note Holders from time to time, a security interest in and mortgage Lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property, rights, interests and privileges, whether now or hereafter acquired, other than Excepted Payments and Excepted Rights (which collectively, excluding Excepted Payments and Excepted Rights but including all property hereafter specifically subjected to the Lien of this Indenture by any Indenture Supplement or any indenture supplemental hereto, are included within the Trust Indenture Estate), 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 an interest whether under any of the Lease, the Hire Purchase Agreement, the Foreign Hire Purchase Consent, the Foreign Lease Agreement, the Lease Acceptance Certificate, the Hire Purchase Acceptance Certificate, the Foreign Lease Assignment, the Foreign Lease Consents, the Foreign Lease Charge, the General Assumption Agreement, the Foreign Power of Attorney, the Hire Purchase Assignment, the Escrow Agreement or other Foreign Financing Document or otherwise, all as more particularly described in the Indenture Supplement executed and delivered with respect to the Aircraft or any such replacements or substitutions therefor, as provided in this Indenture, and all records, logs and other documents to which the Owner Trustee shall from time 3 9 to time acquire an interest at any time maintained by the Lessee with respect to the foregoing property; (2) the Lease (including each Lease Supplement) and all Rent thereunder, including, without limitation, all amounts of Basic Rent, Supplemental Rent and payments of any kind thereunder; the Refunding Agreement; the Purchase Agreement (to the extent assigned to or for the benefit of the Owner Trustee); the Purchase Agreement Warranty Assignment; the Foreign Lease Agreement; the Lease Acceptance Certificate; the Foreign Lease Consents; the Hire Purchase Agreement; the Hire Purchase Acceptance Certificate; the Foreign Hire Purchase Consent; the Foreign Power of Attorney; the Escrow Agreement; the General Assumption Agreement; the Foreign Lease Charge; the Foreign Lease Assignment; the Hire Purchase Assignment and each other Foreign Financing Document; the Second Aircraft Warranty Bill of Sale; the BFE Bill of Sale; each notice, letter agreement or other document related to any of the foregoing entered into by or for the benefit of the Owner Trustee (or assigned to the Owner Trustee); in each case including, without limitation, (x) all rights of the Owner Trustee to exercise any election or option or to make any decision or determination or to give any notice, consent, waiver or approval or to take any other action under or in respect of any such document or to accept surrender or redelivery of the Aircraft or any part thereof, as well as all the rights, powers and remedies on the part of the Owner Trustee, whether arising under any such document or by statute or at law or in equity, or otherwise, arising out of any Lease Event of Default or any event described in the Foreign Lease Agreement or the Hire Purchase Agreement or other Foreign Financing Document which could give rise to a right to terminate either the Foreign Lease Agreement or the Hire Purchase Agreement, and (y) any right to restitution from the Lessee, the Manufacturer or any other Person in respect of any determination of invalidity of any such document; (3) each Sublease Assignment and each Assigned Sublease (to the extent assigned under such Sublease Assignment), and including, without limitation, all rents or other payments of any kind made under such Assigned Sublease (to the extent assigned under such Sublease Assignment), all collateral security or credit support (in the nature of a guarantee, letter of credit, credit insurance, Lien on or security interest in any property or otherwise) for the obligations of the Permitted Sublessee thereunder (to the extent assigned under such Sublease Assignment) and all rights of the Owner Trustee to exercise any election or option or to give any notice, consent, waiver, or approval under or with respect of any thereof 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 (in each case to the extent assigned to the Owner Trustee), 4 10 whether arising under any Assigned Sublease or any Sublease Assignment or by statute or at law or in equity, or otherwise, arising out of any default under any Assigned Sublease; (4) all tolls, rents, issues, profits, revenues and other income of the property subjected or required to be subjected to the Lien of this Indenture, including, without limitation, all payments or proceeds payable to the Owner Trustee after termination of the Lease with respect to the Aircraft as the result of the sale, lease or other disposition thereof, and all estate, right, title and interest of every nature whatsoever of the Owner Trustee in and to the same and every part thereof; (5) all requisition proceeds with respect to the Aircraft or any part thereof (to the extent of the Owner Trustee's interest therein pursuant to the Lease and/or the Foreign Lease Agreement and/or the Hire Purchase Agreement and/or other Foreign Financing Document), and all insurance proceeds with respect to the Aircraft or any part thereof, including but not limited to the insurance required under Section 12 of the Lease or under any comparable provision of any Assigned Sublease (but excluding any excess insurance maintained by the Lessee and not required under Section 12 of the Lease or any Assigned Sublease); (6) all moneys and securities now or hereafter paid or deposited or required to be paid or deposited to or with the Indenture Trustee by or for the account of the Owner Trustee pursuant to any term of any Operative Document and held or required to be held by the Indenture Trustee hereunder; (7) all rights of the Owner Trustee to amounts paid or payable by the Lessee to the Owner Trustee under the Refunding Agreement and all rights of the Owner Trustee to enforce payments of any such amounts thereunder; and (8) all proceeds of the foregoing. PROVIDED, HOWEVER, that the foregoing Granting Clause shall not subject to the Lien of this Indenture any (i) Excepted Payments, (ii) Excepted Rights or (iii) payment in amounts which have been distributed to the Owner Trustee or any other Person in accordance with the provisions of this Agreement, AND SUBJECT TO Sections 2.03, 5.10 and 9.01 hereof. Concurrently with the delivery of the Original Indenture, the Owner Trustee delivered to the Indenture Trustee the chattel paper original executed counterparts of the Original Lease and Lease Supplement No. 1, certified copies of the Purchase Agreement Warranty Assignment; execution copies of the Foreign Lease Agreement; the Lease Acceptance Certificate; the Hire Purchase Acceptance Certificate; the Foreign Lease Assignment; 5 11 the Foreign Lease Consent; the Hire Purchase Agreement; the Hire Purchase Assignment; the Foreign Hire Purchase Consent; the Foreign Power of Attorney; the Foreign Lease Charge; the Escrow Agreement; the General Assumption Agreement; and the original Second Aircraft Warranty Bill of Sale and the BFE Bill of Sale. After the delivery of the Original Indenture but prior to the delivery of this Indenture, the Owner Trustee delivered to the Indenture Trustee the chattel paper original executed counterpart of Lease Supplement No. 2. Concurrently with the delivery of this Indenture, the Owner Trustee is delivering to the Indenture Trustee the chattel paper original executed counterparts of the Amended and Restated Lease and Lease Supplement No. 3. All property referred to in this Granting Clause, whenever acquired by the Owner Trustee, shall secure all obligations under and with respect to the Equipment Notes at any time outstanding. Any and all properties referred to in this Granting Clause which are hereafter acquired by the Owner Trustee, shall, without further conveyance, assignment or act by the Owner Trustee or the Indenture Trustee thereby become and be subject to the security interest hereby granted as fully and completely as though specifically described herein. 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 Note Holders from time to time, except as set forth in Section 2.13 and Article III hereof without any preference, distinction or priority of any one Equipment Note over any other regardless of when issued, 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 Note 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 the Note 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. The Owner Trustee does hereby 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 6 12 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 but excluding Excepted Payments and Excepted Rights) due and to become due to the Owner Trustee under or arising out of the Indenture Documents and all other property which now or hereafter constitutes part of the Trust 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 this Indenture. Pursuant to each Sublease Assignment, each Permitted Sublessee will be directed from and after (i) notice of the occurrence of a Lease Event of Default and (ii) notice that the Lease is declared or deemed in default, to make all payments of rent and all other amounts which are required to be paid to or deposited with the Lessee pursuant to the related Assigned Sublease and which are assigned thereunder directly to the Indenture Trustee at such address or addresses as the Indenture Trustee shall specify, for application or to be held as provided in this Indenture. 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 Trust Indenture Estate, for distribution by the Indenture Trustee pursuant to this Indenture, except (a) to the extent the Owner Trustee is entitled to distribution of such moneys pursuant to this Indenture and (b) 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 herein granted. 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 or otherwise dispose of, so long as this Indenture shall remain in effect and the Lien hereof shall not have been released pursuant to Section 10.01 hereof, any of its estate, right, title or interest hereby assigned, to anyone other than the Indenture Trustee, and that, with respect to such estate, right, title and interest hereby assigned, subject to its rights pursuant to Section 5.10 hereof, it will not, except as provided in this Indenture (including, without limitation, 7 13 Section 9.01) and except as to Excepted Payments and Excepted Rights, (i) accept any payment from the Foreign Lessor, the Lessee or any Permitted Sublessee under any of the Indenture Documents, enter into any agreement amending, modifying 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, (iii) give any notice or exercise any right or take any action under any of the Indenture Documents, or (iv) 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 4.02(e) hereof, this is the fourth paragraph following the Habendum Clause. The Owner Trustee hereby ratifies and confirms its obligations under the Indenture Documents and does hereby agree that (except as permitted herein) it will not take, or omit to take, any action, the taking or omission of which might result in an alteration or impairment of any of the Indenture Documents or of any of the rights created by any thereof or the assignment hereunder. Notwithstanding the Granting Clause or any of the preceding paragraphs, there is hereby excluded from the foregoing sale, transfer, assignment, grant, pledge and security interest all Excepted Payments and Excepted Rights. Further, nothing in the Granting Clause or the preceding paragraphs shall impair any of the rights of the Owner Trustee or the Owner Participant under Section 5.10 hereof. IT IS HEREBY COVENANTED AND AGREED by and between the parties hereto as follows: ARTICLE I DEFINITIONS SECTION 1.01. Special Definitions. The definitions contained in the Lease shall apply for all purposes of this Indenture except that the following terms shall have the following meanings (such definitions to be equally applicable to both the singular and plural forms of the terms defined) for all purposes of this Indenture. Except as otherwise indicated, all the agreements or instruments defined herein or in the Lease shall mean such agreements or instruments (including all annexes, appendices, exhibits, schedules and supplements thereto) as the same 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, the terms thereof and of the other Operative Documents and references to various Persons shall be deemed to be references to and include their respective permitted successors and assigns. 8 14 "Amortization Amount" means, with respect to any Principal Amount Repayment Date, the amount set forth opposite such Principal Amount Repayment Date on the Amortization Schedule. "Amortization Schedule" means the amortization schedule for the Equipment Notes delivered pursuant to Section 2.02 hereof. "Assigned Sublease" means a Permitted Sublease required to be assigned to the Owner Trustee pursuant to Section 6(a) of the Lease. "AT Offshore" means Air Tara Hong Kong, Limited, a Cayman Islands corporation, and its successors and permitted assigns under the Foreign Financing Documents. "Average Life Date" for each Equipment Note to be redeemed shall be the date which follows the redemption date by a period equal to the Remaining Weighted Average Life at the redemption date of such Equipment Note. "Remaining Weighted Average Life" of such Equipment Note, at the redemption date of such Equipment Note, shall be the number of days equal to the quotient obtained by dividing (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment of principal, including the payment due on the maturity date of such Equipment Note, by (ii) the number of days from and including the redemption date to but excluding the scheduled payment date of such principal installment; by (b) the then unpaid Principal Amount of such Equipment Note. "Bankruptcy Code" means Chapter 11 of Title 11 of the United States Code, 11 U.S.C. Sections 101 et seq., as amended. "BFE Bill of Sale" means the full warranty (as to title) bill of sale covering the Buyer Furnished Equipment, transferring all right, title and interest therein to the Owner Trustee. "Business Day" means a day other than a Saturday, Sunday or a day on which banks are required or authorized to close in either The City of New York, New York or Hartford, Connecticut. "Cash Collateral Account" means one or more Eligible Deposit Accounts in the name of the Subordination Agent each maintained at the Subordination Agent, into which all amounts drawn under one or more Liquidity Facilities pursuant to Section 3.6(c) or 3.6(i) of the Intercreditor Agreement shall be deposited. "Code" means the Internal Revenue Code of 1986, as amended. 9 15 "Continuous Stay Period" has the meaning specified in Section 4.04(a). "Corporate Trust Office" means the principal corporate trust office of the Indenture Trustee located at 450 West 33rd Street, New York, New York 10001, Attention: Corporate Trust Department, or such other office 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 and the Note Holders. "Debt" means any liability for borrowed money, or any liability for the payment of money in connection with any letter of credit transaction, or other liabilities evidenced or to be evidenced by bonds, debentures, notes or other similar instruments. "Debt Rate" means, with respect to Series A, Series B, Series C and Series D, the rate per annum specified for such Series under the heading "Debt Rate" in Schedule I to this Indenture. "Delivery Date" means December 29, 1989. "Dollars", "U.S. $" and "$" mean the lawful currency of the United States of America. "Downgrade Drawing" has the meaning assigned to such term in Section 3.6(c) of the Intercreditor Agreement. "Eligible Deposit Account" means either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any U.S. branch of a foreign bank), having corporate trust powers and acting as trustee for funds deposited in such account, so long as any of the securities of such depository institution has a long-term unsecured debt rating from each Rating Agency of at least A-3 or its equivalent. "Eligible Institution" means (a) the corporate trust department of the Subordination Agent or any Pass Through Trustee, as applicable, or (b) a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any U.S. branch of a foreign bank), which has a long-term unsecured debt rating from each Rating Agency of at least A-3 or its equivalent. "Equipment Notes" means the Equipment Notes, in substantially the form set out in Section 2.01 hereof, 10 16 issued by the Owner Trustee and authenticated by the Indenture Trustee pursuant to the terms of this Indenture. "Equity Collateral" has the meaning assigned to such term in the definition of "Excepted Payments." "Escrow Agreement" means the Escrow Agreement dated as of December 19, 1989 relating to the Aircraft among GPA Offshore, Foreign Lessor, AT Offshore, the Owner Trustee and the Indenture Trustee, as Escrow Agent, including the "Sales Documents" delivered thereunder pursuant to the Deed of Consent of the Foreign Lessor dated December 20, 1994. "Excepted Payments" means (i) any and all indemnity payments and interest in respect thereof paid or payable in respect of the Owner Participant, the partners of the Owner Participant, the Trust Company, the Owner Trustee (and not in support of any payment obligation of the Owner Trustee under any Indenture Document) or any of their respective successors, permitted assigns (and, in the case of a permitted assign of the Owner Participant that is a partnership, the partners of such partnership), directors, officers, employees, servants, agents, subsidiaries, affiliates or shareholders by the Lessee pursuant to the Lease (including, without limitation, Section 13 thereof and any corresponding payment of Supplemental Rent under the Lease), (ii) any proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid respecting, or losses suffered by, the Trust Company or the Indenture Trustee in its individual capacity or the Owner Participant, or any partner of the Owner Participant, (iii) any proceeds of insurance maintained with respect to the Aircraft by or for the benefit of the Owner Participant (whether directly or through the Owner Trustee) and not required under Section 12 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable to the Owner Participant, any partner of the Owner Participant, the Trust Company, the Owner Trustee (and not in support of any payment obligation of the Owner Trustee under any Indenture Document), or any of their respective successors, permitted assigns (and, in the case of a permitted assign of the Owner Participant that is a partnership, the partners of such partnership), directors, officers, employees, servants, agents, subsidiaries, affiliates or shareholders under Section 10 of the Lease or by the Lessee or the Parent Guarantor under the Tax Indemnification Agreement or the Amended and Restated Head Lease TIA (as defined in the Refunding Agreement), as the case may be, (v) Transaction Expenses paid or payable by the Lessee or the Parent Guarantor to the Trust Company, the Owner Trustee, the Indenture Trustee or the Owner Participant pursuant to Section 21 of the Refunding Agreement or the Lease, (vi) any letter of credit contemplated by Section 11 17 8(l) of the Lease (including, without limitation, any replacement letter of credit (the "Equity Collateral")) and any payment or proceeds of any such Equity Collateral to the extent retained or applied as provided in Section 8(l) of the Lease, (vii) any amount payable to the Owner Participant by any transferee as the purchase price of the Owner Participant's interest in the Trust Estate (or a portion thereof), (viii) any amount payable to the Owner Trustee, the Trust Company, the Owner Participant or any of their respective successors, permitted assigns (and, in the case of a permitted assign of the Owner Participant or any partner of the Owner Participant that is a partnership, the partners of such partnership), directors, officers, employees, servants, agents, subsidiaries, affiliates or shareholders attributable to the period prior to or on the Restatement Date or under the Original Participation Agreement, the Original Lease, the Parent Head Lease Guaranty, the Sublease, the Amended and Restated Head Lease TIA or the Amended and Restated Sublease TIA (as such terms are defined in the Refunding Agreement) or Retained Head Lease Rights and Obligations (as such term is defined in the Refunding Agreement), and (ix) subject to the last sentence of Section 5.10 hereof, any and all rights of the Owner Trustee, the Owner Participant or the Trust Company under the Operative Documents, whether or not a Lease Event of Default, a Lease Default, an Indenture Default or an Indenture Trustee Event has occurred and is continuing, to demand, collect, sue for, give notices, make determinations, enforce or exercise all rights with respect to and otherwise obtain all amounts described in clauses (i) through (viii) above and the proceeds thereof. "Excepted Rights" means (i) those rights of the Owner Participant and the Owner Trustee under Section 5.10 of this Indenture, (ii) all rights under the Equity Collateral to make a claim for, collect and retain all amounts payable with respect to any Equity Collateral, (iii) all rights of the Owner Participant, the Trust Company or the Owner Trustee to compromise or waive any such right or modify, amend or waive any provision of any Operative Document conferring such rights with respect to Excepted Payments, and (iv) all rights of the Owner Trustee to exercise any election or option, or to make any decision or determination, or to give or receive any notice, consent, waiver or approval with respect to Excepted Payments. "Excess Amount" has the meaning specified in Section 2.03(b) hereof. "FAA" means the Federal Aviation Administration of the United States Department of Transportation or any successor agency. 12 18 "First CSA Assignment" means the First Conditional Sale Agreement Assignment dated as of December 19, 1989 between the Original Lessee and the Owner Trustee. "Final Drawing" means, in respect of a Liquidity Facility, a borrowing or drawing of all available and undrawn amounts under such Liquidity Facility in accordance with the provisions thereof other than a Downgrade Drawing. "Foreign Financing Documents" mean, collectively, the Hire Purchase Agreement, the Hire Purchase Acceptance Certificate, the Foreign Loan Agreement, the Foreign Security Agreement, the Foreign Lease Agreement, the Lease Acceptance Certificate, the Foreign Hire Purchase Consent, the Foreign Lease Consents, the Foreign Lease Charge, the General Assumption Agreement, the Payment Assumption Agreement, the Hire Purchase Assignment, the Foreign Lease Assignment, the Escrow Agreement and the Foreign Power of Attorney. "Foreign Hire Purchase Consent" means the Consent (1989 B) of the Foreign Lessor, dated as of December 19, 1989, with respect to certain matters contained in the Hire Purchase Assignment. "Foreign Lease Agreement" means the Aircraft Lease Agreement (1989 B) dated as of December 19, 1989 relating to the Aircraft between the Foreign Lessor and GPA Offshore. "Foreign Lease Assignment" means the Assignment of Lease Agreement, of General Assumption Agreement and of Charge (1989 B), dated as of December 19, 1989 relating to the Aircraft between GPA Offshore and the Owner Trustee. "Foreign Lease Charge" means the Charge (1989 B), dated as of December 19, 1989 relating to the Aircraft between GPA Offshore and Foreign Lessor which grants to GPA Offshore a security interest in the proceeds of a sale of the Aircraft. "Foreign Lease Consents" means (i) the Consent of the Foreign Lessor, dated as of December 19, 1989, and (ii) the Deed of Consent dated December 20, 1994 of the Foreign Lessor and its "Partners" referred to therein, in each instance, relating to the Aircraft with respect to certain matters contained in the Foreign Lease Assignment. "Foreign Lender" means the Hong Kong branch of Algemene Bank Nederland N.V., a banking institution organized and existing under the laws of The Netherlands, and its successors and permitted assigns under the Foreign Financing Documents. "Foreign Lessor" means The Shamrock II Leasing Limited Partnership, a limited partnership formed under the laws of 13 19 Hong Kong, and its successors and permitted assigns under the Foreign Financing Documents. "Foreign Loan Agreement" means the B Loan Agreement (1989), dated as of December 19, 1989 relating to the Aircraft between Foreign Lessor and Foreign Lender. "Foreign Power of Attorney" means the irrevocable Power of Attorney, dated as of December 20, 1994 relating to the Aircraft executed and delivered by Foreign Lessor and naming each of GPA Offshore and the Owner Trustee as its attorney-in-fact to sell the Aircraft upon termination of the Foreign Lease Agreement. "Foreign Security Agreement" means the B Security Agreement, dated as of December 19, 1989 between Foreign Lessor and Foreign Lender. "General Assumption Agreement" means the General Assumption Agreement (1989 B) dated as of December 19, 1989 relating to the Aircraft between Foreign Lessor, GPA Offshore and GPA Caymans. "Government Obligations" means direct obligations of the United States of America that are not callable, redeemable or payable prior to maturity, in whole or in part, directly or indirectly, by any Person. "GPA Caymans" means GPAG Caymans, Limited, a Cayman Islands corporation, and its successors and permitted assigns under the Foreign Financing Documents. "GPA Offshore" means GPA HK-320-B, Limited, a Cayman Islands corporation, and its successors and permitted assigns under the Foreign Financing Documents. "Hire Purchase Acceptance Certificate" means the Acceptance Certificate dated December 29, 1989 executed and delivered by the Foreign Lessor pursuant to the Hire Purchase Agreement. "Hire Purchase Agreement" means the Hire Purchase Agreement (1989 B) dated as of December 19, 1989 relating to the Aircraft between the Foreign Lessor and AT Offshore. "Hire Purchase Assignment" means the Bill of Sale and HPA Assignment [GPA 1989 BN-8], dated as of December 19, 1989 between AT Offshore and the Owner Trustee. "Indenture," "this Indenture," and "the Indenture" mean this First Amended and Restated Indenture, as it may from time to time be supplemented or amended as herein provided, including as supplemented by any Indenture Supplement pursuant hereto. 14 20 "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 Refunding Agreement; the Trust Agreement (including any Trust Supplements); the Lease (including any Lease Supplements); the Equipment Notes; this Indenture (including any Indenture Supplements); any Sublease Assignment; any Assigned Sublease; the Purchase Agreement (to the extent assigned to or for the benefit of the Owner Trustee); the Purchase Agreement Warranty Assignment; the Second Aircraft Warranty Bill of Sale; the BFE Bill of Sale; the Foreign Lease Agreement; the Hire Purchase Agreement; the Hire Purchase Acceptance Certificate; the Lease Acceptance Certificate; the Foreign Hire Purchase Consent; the Foreign Lease Consents; the Foreign Power of Attorney; the Escrow Agreement; the General Assumption Agreement; the Foreign Lease Charge; the Foreign Lease Assignment; the First CSA Assignment; the Second CSA Assignment; and the Hire Purchase Assignment. "Indenture Event of Default" has the meaning set forth in Section 4.02 hereof. "Indentures" means, collectively, each Trust Indenture and Security Agreement listed on Schedule 1 to the Intercreditor Agreement, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Indenture Supplement" or "Trust Indenture Supplement" means a supplement to this Indenture, in substantially the form of Exhibit A to this Indenture, which shall particularly describe the Aircraft and any Replacement Airframe and Replacement Engine included in the property of the Owner Trustee covered by this Indenture, including, without limitation, Trust Indenture Supplement No. 1 dated December 29, 1989, which was recorded as one instrument by the FAA with the Original Indenture, and Trust Indenture Supplement No. 2 dated the date hereof, which is being filed for recordation as one instrument by the FAA with this First Amended and Restated Indenture. "Indenture Trustee Event" means either (i) the Equipment Notes shall have become due and payable pursuant to Section 4.04(b) or (c) of this Indenture or (ii) the Indenture Trustee has taken action or notified the Owner Trustee that it intends to take action to foreclose the Lien of this Indenture or otherwise commence the exercise of any significant remedy under this Indenture or the Lease. "Interest Drawing" has the meaning assigned to such term in Section 3.6(a) of the Intercreditor Agreement. 15 21 "Investment Earnings" means investment earnings on funds on deposit in the Trust Accounts net of losses and investment expenses of the Subordination Agent in making such investments. "Lease" means the Original Lease, as the same may be modified, supplemented or amended from time to time in accordance with the provisions thereof and hereof and of the Refunding Agreement including, without limitation, as supplemented by Lease Supplement No. 1 dated the Delivery Date and Lease Supplement No. 2 dated December, 1994, and as further assigned, amended, restated and supplemented by Assignment and Amendment No. 1 and Sublease Termination Agreement [GPA 1989 BN-8] dated as of the date hereof and Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-8] dated as of the date hereof and supplemented by Lease Supplement [GPA 1989 BN-8] No. 3 dated the date hereof, which are being filed for recordation with the FAA contemporaneously herewith. "Lease Acceptance Certificate" means the Acceptance Certificate dated December 29, 1989 executed by GPA Offshore pursuant to the Foreign Lease Agreement. "Lease Default" means an event or condition that, with the giving of notice or the lapse of time or both, would become a Lease Event of Default. "Lease Event of Default" means any event or condition defined as an "Event of Default" in Section 17 of the Lease. "Lessee" means America West Airlines, Inc., a Delaware corporation, in its capacity as lessee under the Amended and Restated Lease, and its successors and, to the extent permitted by the Refunding Agreement, its assigns thereunder. "Lien" means any mortgage, chattel mortgage, pledge, lien, charge, encumbrance, lease, exercise of rights, security interest, lease in the nature of a security interest, statutory right in rem, or claim of any kind, including any thereof arising under any conditional sale agreement, equipment trust agreement or title retention agreement. "Majority in Interest of Note Holders" means, as of a particular date of determination and subject to Section 2.6 of the Intercreditor Agreement, the Holders of more than 50% in aggregate unpaid Principal Amount of all Equipment Notes outstanding as of such date. For purposes of this definition, there shall be excluded any Equipment Notes held by the Owner Trustee or the Owner Participant or any interests of the Owner Participant therein by reason of subrogation pursuant to Section 4.03 of the Indenture (unless all 16 22 Equipment Notes then outstanding shall be held by the Owner Trustee and/or the Owner Participant) or any Equipment Notes held by the Lessee or any Affiliate of any thereof. "Make-Whole Amount" means, with respect to any Equipment Note, the amount (as determined by an independent investment banker selected by Lessee and reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (a) the present value of the remaining scheduled payments of principal and interest from the redemption date to maturity of such Equipment Note computed by discounting each such payment on a semiannual basis from its respective Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to (i) in the case of Series A Equipment Notes and Series B Equipment Notes, the Treasury Yield and (ii) in the case of Series C Equipment Notes and Series D Equipment Notes, the Treasury Yield plus 0.75% exceeds (b) the outstanding principal amount of such Equipment Note plus accrued interest. For purposes of determining the Make-Whole Amount, "Treasury Yield" at the time of determination with respect to any Equipment Note means the interest rate (expressed as a semiannual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semiannual yield to maturity for United States Treasury securities maturing on the Average Life Date of such Equipment Note and trading in the public securities market either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in the public securities markets, (A) one maturing as close as possible to, but earlier than, the Average Life Date of such Equipment Note and (B) the other maturing as close as possible to, but later than, the Average Life Date of such Equipment Note, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Equipment Note is reported on the most recent H.15(519), such weekly average yield to maturity as published in such H.15(519). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Amount shall be the third Business Day prior to the applicable redemption date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable redemption date. "Non-U.S. Holder" or "Non-U.S. Person" means any Person other than a U.S. Person or a U.S. Holder. 17 23 "Note Holder" or "Holder" means any registered holder from time to time of one or more Equipment Notes as reflected in the Register maintained by the Registrar. "Officers' Certificate" means a certificate (i) signed by a Responsible Officer of the Owner Trustee or the Lessee, as the case may be, and (ii) signed by another officer of the Owner Trustee or the Lessee, as the case may be, certifying as to the authority and signature of such Responsible Officer, that is delivered to the Indenture Trustee. "Opinion of Counsel" means a written opinion of legal counsel, who in the case of legal counsel for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions or (ii) Latham & Watkins or other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee or, in the case of legal counsel for the Owner Trustee, may be Morris, James, Hitchens & Williams or other counsel designated by the Owner Trustee and reasonably satisfactory to the Indenture Trustee. "Original Head Lessee" means GPA Leasing USA Sub I, Inc., a Connecticut corporation, in its capacity as lessee under the Original Lease. "Original Indenture" means the Trust Indenture and Security Agreement [GPA 1989 BN-8] dated as of December 19, 1989, as supplemented by Trust Indenture Supplement No. 1 dated December 29, 1989, which were recorded as one instrument by the FAA on January 19, 1990 and assigned Conveyance No. H68557. "Original Loan Certificates" means the Loan Certificates issued under and as defined in the Original Indenture. "Original Sublessee" means America West Airlines, Inc. ("AWA"), a Delaware corporation, in its capacity as sublessee under the Aircraft Sublease Agreement [GPA 1989 BN-8] dated as of September 21, 1990, as supplemented and amended to the date hereof, between the Original Head Lessee in its capacity as sublessor thereunder and AWA in its capacity as sublessee. "Owner Participant" means ____________________, as Owner Participant under the Trust Agreement, and its successors and permitted assigns. "Parent Guarantor" means GPA Group plc, a public limited company organized and existing under the laws of Ireland. 18 24 "Pass Through Trust" means each of the four Pass Through Trusts established under the relevant Pass Through Trust Agreement. "Pass Through Trust Agreement" means the Pass Through Trust Agreements set forth on Schedule II hereto. "Pass Through Trustee" means Fleet National Bank, a national banking association, not in its individual capacity but solely as pass through trustee under each of the four separate Pass Through Trust Agreements. "Past Due Rate" means, with respect to any amount not paid when due (whether at stated maturity, by acceleration or otherwise) under or in respect of any Equipment Note, a rate of interest per annum (computed on the basis of a year of 360 days comprised of twelve 30-day months) equal to 1% in excess of the Debt Rate for such Equipment Note. "Payment Assumption Agreement" means the Payment Assumption Agreement, dated as of December 19, 1989 between the Foreign Lessor, GPA Caymans and Hollandsche Bank-Unie N.V., a banking institution organized and existing under the laws of The Netherlands, and its successors and assigns under the Foreign Financing Documents. "Payment Date" means each January 2 and July 2, commencing on July 2, 1997 (or, if any such day is not a Business Day, the immediately succeeding Business Day) until the Equipment Notes have been paid in full. "Principal Amount" with respect to an Equipment Note means the stated original principal amount of such Equipment Note and, with respect to all Equipment Notes, means the aggregate stated original principal amounts of all Equipment Notes. "Principal Amount Repayment Date" means each Payment Date on which any portion of the Principal Amount is due and payable in accordance with the Amortization Schedule. "Purchase Agreement Warranty Assignment" means the Purchase Agreement Warranty Assignment [GPA 1989 BN-8], dated the Delivery Date, between AT Offshore and the Owner Trustee. "Rating Agencies" means, collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Certificates issued pursuant to the Pass Through Trust Agreements and which shall then be rating the Certificates. Initially, the Rating Agencies shall consist of Moody's Investors Service, Inc. and Standard & Poor's Ratings Group, a division of McGraw-Hill Inc. 19 25 "Refinancing Transaction" means the transactions contemplated by the Refunding Agreement and the other documents entered into on and in connection with the Refunding Agreement on the Restatement Date. "Refunding Agreement" means the Refunding Agreement [GPA 1989 BN- 8] dated as of June __, 1997, among the Lessee, the Original Head Lessee, the Parent Guarantor, the Owner Trustee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Indenture Trustee. "Register" has the meaning set forth in Section 2.07 hereof. "Registrar" has the meaning set forth in Section 2.07 hereof. "Responsible Officer" means, in the case of the Lessee, the president or any other officer with authority of at least a vice president or, in the case of the Owner Trustee, an officer of the Owner Trustee in its Corporate Trust Administration Department. "Restatement Date" means June __, 1997 or such other date agreed to by the parties to the Refunding Agreement as the date for the consummation of the Refinancing Transaction, as evidenced by the date of the filing with the FAA of Trust Indenture Supplement No. 2. "Second Aircraft Warranty Bill of Sale" means the full warranty (as to title) bill of sale covering the Aircraft (excluding all of the Buyer Furnished Equipment to be covered by the BFE Bill of Sale) executed by AT Offshore in favor of the Owner Trustee, dated the Delivery Date. "Second CSA Assignment" means the Second Conditional Sale Agreement Assignment dated as of December 19, 1989 between the Owner Trustee and AT Offshore. "Secured Obligations" has the meaning set forth in Section 2.06 hereof. "Securities Act" means the Securities Act of 1933, as amended. "Series A" or "Series A Equipment Notes" means Equipment Notes issued and designated as "Series A" hereunder, in the Principal Amount and maturities and bearing interest as specified in Section 2.02 and Schedule I hereto under the heading "Series A." "Series B" or "Series B Equipment Notes" means Equipment Notes issued and designated as "Series B" hereunder, in the Principal Amount and maturities and 20 26 bearing interest as specified in Section 2.02 and Schedule I hereto under the heading "Series B." "Series C" or "Series C Equipment Notes" means Equipment Notes issued and designated as "Series C" hereunder, in the Principal Amount and maturities and bearing interest as specified in Section 2.02 and Schedule I hereto under the heading "Series C." "Series D" or "Series D Equipment Notes" means Equipment Notes issued and designated as "Series D" hereunder, in the Principal Amount and maturities and bearing interest as specified in Section 2.02 and Schedule I hereto under the heading "Series D." "Sublease Assignment" means a sublease assignment by the Lessee in favor of the Owner Trustee (including the consent thereto given by the sublessee thereunder) with respect to the assignment of a Permitted Sublease pursuant to Section 6(a) of the Lease. "Transaction Expenses" means the costs, fees, expenses and disbursements set forth in Section 21 of the Refunding Agreement. "Trust Accounts" has the meaning assigned to such term in Section 2.2(a) of the Intercreditor Agreement. "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 Trustee. "Trust Indenture Estate" or "Indenture Estate" means all estate, right, title and interest of the Owner Trustee in and to the properties, rights and interests covered by the Granting Clause of the Indenture, excluding, however, in each case, Excepted Payments and Excepted Rights. "U.S. Holder" or "U.S. Person" means any Person that is a "United States Person" as that term is defined in Section 7701(a)(30) of the Code. 21 27 ARTICLE II THE EQUIPMENT NOTES SECTION 2.01. Form of Equipment Notes. The Equipment Notes shall be substantially in the form set forth below: THIS EQUIPMENT NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS EQUIPMENT NOTE MAY NOT BE SOLD UNLESS EITHER REGISTERED UNDER THE ACT AND SUCH APPLICABLE STATE LAWS OR AN EXEMPTION FROM SUCH REGISTRATIONS IS AVAILABLE. WILMINGTON TRUST COMPANY, AS OWNER TRUSTEE UNDER TRUST AGREEMENT [GPA 1989 BN-8] DATED AS OF DECEMBER 19, 1989, AS AMENDED. SERIES [A/B/C/D] NON-RECOURSE EQUIPMENT NOTE DUE [ ] ISSUED IN CONNECTION WITH ONE AIRBUS 320-231 AIRCRAFT BEARING UNITED STATES REGISTRATION NUMBER N627AW No.____________ Date: [________, 1997] $___________________ DEBT RATE MATURITY DATE [_________] [_______,___] 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 [GPA 1989 BN-8], dated as of December 19, 1989, as amended, between the Owner Participant named therein and Wilmington Trust Company (herein as such Trust Agreement may be supplemented or amended from time to time called the "Trust Agreement"), hereby promises to pay to Fleet National Bank, as Subordination Agent under the Intercreditor Agreement, or the registered assignee thereof, the principal sum of $_______ (the "Principal Amount"), together with interest on the Principal Amount remaining unpaid from time to time (calculated on the basis of a year of 360 days comprised of twelve 30-day months) from the date hereof until paid in full at a rate per annum equal to the Debt Rate indicated above. The Principal Amount of this Equipment Note shall be payable in installments on the dates set forth in Schedule I hereto equal to the corresponding percentage of the Principal Amount of this Equipment Note set forth in Schedule I hereto. Accrued but unpaid interest shall be due and payable in semiannual installments commencing on July 2, 1997, and thereafter on July 2 and January 2 of each year, to and including ___________, ____. 22 28 Notwithstanding the foregoing or anything to the contrary contained herein, (i) the final payment made on this Equipment Note shall be in an amount sufficient to discharge in full the unpaid Principal Amount and all accrued and unpaid interest on, and any other amounts due under, this Equipment Note; and (ii) if any date on which a payment under this Equipment Note becomes due and payable is not a Business Day, then such payment shall not be made on such scheduled date but shall be made on the next succeeding Business Day and if such payment is made on such next succeeding Business Day, no interest shall accrue on the amount of such payment during such extension. For purposes hereof, the term "Indenture" means the First Amended and Restated Trust Indenture and Security Agreement [GPA 1989 BN-8], dated as of June __, 1997, between the Owner Trustee and The Chase Manhattan Bank (formerly known as Chemical Bank, successor by merger to Manufacturers Hanover Trust Company) (the "Indenture Trustee"), as the same may be amended or supplemented from time to time. All other capitalized terms used in this Equipment Note and not defined herein shall have the respective meanings assigned in the Indenture. This Equipment Note shall bear interest, payable on demand, at the Past Due Rate (calculated on the basis of a year of 360 days comprised of twelve 30-day months) on any overdue Principal Amount, any overdue Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest and any other amounts payable hereunder which are overdue, in each case for the period the same is overdue. Amounts shall be overdue if not paid when due (whether at stated maturity, by acceleration or otherwise). All payments of all or any portion of the Principal Amount, interest, Make-Whole Amount, if any, and other amounts, if any, to be made by the Owner Trustee hereunder and under the Indenture or the Refunding Agreement shall be payable only from the income and proceeds from the Trust Estate to the extent included in the Trust 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 Trust Indenture Estate to enable the Indenture Trustee to make such payments in accordance with the terms of Section 2.03 and Article III of the Indenture, and each Holder hereof, by its acceptance of this Equipment Note, agrees that it will look solely to the income and proceeds from the Trust Indenture Estate to the extent available for distribution to the Holder hereof as above provided and that none of the Owner Participant, the Owner Trustee and the Indenture Trustee is personally liable or liable in any manner, including, without limitation, extending to any assets other than the Trust Indenture Estate to the Holder hereof for any amounts payable or any liability under this Equipment Note or, except as provided in the Indenture or in the Refunding Agreement, for any liability under the Indenture or the Refunding Agreement; provided, however, that nothing herein contained shall limit, 23 29 restrict or impair any and all rights or remedies of the Indenture Trustee hereunder, subject always to the terms and provisions of the Indenture. There shall be maintained a Register for the purpose of registering transfers and exchanges of Equipment Notes at the Corporate Trust Office of the Indenture Trustee or at the office of any successor in the manner provided in Section 2.07 of the Indenture. Any payment of any portion of the Principal Amount and interest and other amounts due hereunder shall be payable in Dollars in immediately available funds at the Corporate Trust Office of the Indenture Trustee, or as otherwise provided in the Indenture. Each such payment shall be made on the date such payment is due and without any presentment or surrender of this Equipment Note, except that in the case of any final payment with respect to this Equipment Note, the Equipment Note shall be surrendered promptly thereafter to the Indenture Trustee for cancellation. The Holder hereof, by its acceptance of this Equipment Note, agrees that, except as provided in the Indenture, each payment received by it hereunder shall be applied, first, to the payment of accrued interest on this Equipment Note (as well as any interest on any overdue Principal Amount, any overdue Make-Whole Amount, if any, and, to the extent permitted by law, any overdue interest and any other overdue amounts hereunder) to the date of such payment, second, to the payment of the portion of the Principal Amount of this Equipment Note then due, third, to the payment of Make-Whole Amount, if any, and any other amount due hereunder or under the Indenture, and fourth, the balance, if any, remaining thereafter, to the payment of the portion of the Principal Amount of this Equipment Note remaining unpaid in the inverse order of its normal maturity. This Equipment Note is one of the Equipment Notes referred to in the Indenture which have been or are to be issued by the Owner Trustee pursuant to the terms of the Indenture. The Trust Indenture Estate is held by the Indenture Trustee as security, in part, for the Equipment Notes. The provisions of this Equipment Note are subject to the Indenture. Reference is hereby made to the Indenture and the Refunding Agreement for a complete statement of the rights and obligations of the Holder of, and the nature and extent of the security for, this Equipment Note and the rights and obligations of the Holders of, and the nature and extent of the security for, any other Equipment Notes executed and delivered under the Indenture, as well as for a statement of the terms and conditions of the trusts created by the Indenture, to all of which terms and conditions in the Indenture and the Refunding Agreement each Holder hereof agrees by its acceptance of this Equipment Note. 24 30 As provided in the Indenture and subject to certain limitations therein set forth, this Equipment Note is exchangeable for a like aggregate unpaid portion of the Principal Amount of Equipment Notes of different authorized denominations, as requested by the Holder surrendering the same. Prior to due presentment for registration of transfer of this Equipment Note, the Owner Trustee and the Indenture Trustee shall treat the Person in whose name this Equipment Note is registered as the owner hereof for all purposes whether or not this Equipment Note be overdue, and neither of the Owner Trustee nor the Indenture Trustee shall be affected by notice to the contrary. This Equipment Note is subject to redemption as provided in Sections 2.10 and 2.11 of the Indenture, to purchase by the Owner Participant or the Owner Trustee as provided in Section 2.12 of the Indenture and to acceleration by the Indenture Trustee as provided in Section 4.04 of the Indenture. [The indebtedness evidenced by this Equipment Note is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of the Secured Obligations (as defined in the Indenture) in respect of [Series A Equipment Notes](1) [Series B Equipment Notes](2) [Series C Equipment Notes](3), and this Equipment Note is issued subject to such provisions. The Note Holder of this Equipment Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Indenture Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Indenture Trustee his attorney-in-fact for such purpose.](4) Unless the certificate of authentication hereon has been executed by or on behalf of the Indenture Trustee by manual signature, this Equipment Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. THIS EQUIPMENT NOTE 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. - -------------------- (1) To be inserted in the case of Series B Equipment Notes. (2) To be inserted in the case of Series C Equipment Notes. (3) To be inserted in the case of Series D Equipment Notes. (4) To be inserted in the case of a Series B, Series C or Series D Equipment Note. 25 31 * * * IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Note to be executed in its corporate name by its officer thereunto duly authorized on the date hereof. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee By: ------------------------------- Name: Title: INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Equipment Notes referred to in the within- mentioned Indenture. THE CHASE MANHATTAN BANK, as Indenture Trustee By: ------------------------------- Name: Title: 26 32 SCHEDULE I EQUIPMENT NOTES AMORTIZATION Percentage of Principal Amount Principal Amount Repayment Date to be Paid [SEE SCHEDULE I TO TRUST INDENTURE WHICH IS INSERTED UPON ISSUANCE] * * * SECTION 2.02. Issuance and Terms of Equipment Notes. The Equipment Notes shall be dated the date of issuance thereof, shall be issued in four separate series consisting of Series A, Series B, Series C and Series D and in the maturities and principal amounts and shall bear interest as specified in Schedule I hereto. On the date of the consummation of the Refinancing Transaction, (i) each Equipment Note shall be issued to the Pass Through Trustees (or their designee) under the Pass Through Trust Agreements set forth in Schedule II to be attached hereto in connection therewith and (ii) the Original Loan Certificates issued under the Original Indenture shall be concurrently prepaid. The Equipment Notes shall be issued in registered form only. The Equipment Notes shall be issued in denominations of $1,000 and integral multiples thereof, except that one Equipment Note of each Series may be in an amount that is not an integral multiple of $1,000. Each Equipment Note shall bear interest at the Debt Rate (calculated on the basis of a year of 360 days comprised of twelve 30-day months) on the unpaid Principal Amount thereof from time to time outstanding, payable in arrears on July 2, 1997, and on each July 2 and January 2 thereafter until maturity. The Principal Amount of each Equipment Note shall be payable on the dates and in the installments equal to the corresponding percentage of the Principal Amount as set forth in Schedule I hereto which shall be attached as Schedule I to the Equipment Notes. Notwithstanding the foregoing, the final payment made under each Equipment Note shall be in an amount sufficient to discharge in full the unpaid portion of the Principal Amount and all accrued and unpaid interest on, and any other amounts due under, such Equipment Note. Each Equipment Note shall bear interest at the Past Due Rate (calculated on the basis of a year of 360 days comprised of twelve 30-day months) on any part of the Principal Amount, Make-Whole Amount, if any, and, to the extent permitted by applicable law, interest and any other amounts payable thereunder not paid when due for any period 27 33 during which the same shall be overdue, in each case for the period the same is overdue. Amounts shall be overdue if not paid when due (whether at stated maturity, by acceleration or otherwise). Notwithstanding anything to the contrary contained herein, if any date on which a payment under any Equipment Note becomes due and payable is not a Business Day then such payment shall not be made on such scheduled date but shall be made on the next succeeding Business Day and if such payment is made on such next succeeding Business Day, no interest shall accrue on the amount of such payment during such extension. The Owner Trustee agrees to pay to the Indenture Trustee for distribution in accordance with Section 3.04 hereof (a) any and all indemnity amounts received by the Owner Trustee which are payable by Lessee to (i) the Indenture Trustee in its individual capacity, (ii) the Pass Through Trusts, (iii) the Subordination Agent, (iv) the Liquidity Providers, or (v) the Pass Through Trustees, in each case pursuant to Sections 10 and 13 of the Lease or Section 21 of the Refunding Agreement, (b) any and all amounts received by the Owner Trustee which are payable by Lessee in respect of and equal to the Owner Trustee's pro rata share (as defined below) of all amounts owed to the Liquidity Providers by the Subordination Agent under each Liquidity Facility (as determined by the Subordination Agent in consultation with the Liquidity Providers and notified to the Indenture Trustee) other than amounts due as (i) repayments of the principal of advances thereunder, and (ii) interest on Interest Drawings, Final Drawings and Applied Downgrade Drawings under any Liquidity Facility except to the extent included in Net Interest and Related Charges (as defined below), and (c) any and all amounts received by the Owner Trustee which are payable by Lessee under clause (vii) or (viii) of the definition of Supplemental Rent. The Indenture Trustee shall have no duty or obligation to (i) verify or confirm the accuracy of any of the amounts (other than the portion of the Principal Amount of, and interest on, the Equipment Notes issued hereunder) paid to it by the Owner Trustee or (ii) determine whether any amounts are owed by the Owner Trustee under this Section 2.02. As used in this Section 2.02, "Owner Trustee's pro rata share" means as of any time: (A) with respect to all amounts other than Net Interest and Related Charges, a fraction the numerator of which is the aggregate principal balance then outstanding of the Equipment Notes issued hereunder and the denominator of which is the aggregate principal balance then outstanding of all "Equipment Notes" issued under the Indentures, and (B) with respect to all Net Interest and Related Charges (x) if there exists a Payment Default (as defined below) under any Equipment Note a fraction, the numerator of which is the aggregate principal balance then outstanding of the Equipment Notes issued hereunder and the denominator of which is the aggregate principal balance then outstanding of 28 34 all "Equipment Notes" issued under the Indentures under which there exists a Payment Default or (y) at all other times, zero; provided, however, neither the numerator nor the denominator of the fractions in paragraphs (A) or (B) shall include any "Series D Equipment Notes" issued under the Indentures. As used in this Section 2.02, "Net Interest and Related Charges" means (as determined by the Subordination Agent in consultation with the Liquidity Providers and notified to the Indenture Trustee except that the Past Due Rate shall be determined by the Indenture Trustee and notified to the Subordination Agent) the sum of (i) the amount, if any, by which interest payable to any Liquidity Provider on any Interest Drawing, Final Drawing and/or Downgrade Drawing (other than a Downgrade Drawing that is not an Applied Downgrade Drawing (as defined in the Liquidity Facilities)) exceeds the amount which would be payable if such advances bore interest at the Designated Interest Rate (as defined below) plus (ii) any amounts payable under Section 3.1, Section 3.2, Section 3.3, Section 3.9 or Section 7.7 of each Liquidity Facility (or similar provisions of any succeeding liquidity facility) which result from any Interest Drawing, Final Drawing or Downgrade Drawing. As used in this Section 2.02, "Designated Interest Rate" means the weighted average Past Due Rate (as defined in the applicable Indentures) in respect of "Series A Equipment Notes," "Series B Equipment Notes" and "Series C Equipment Notes" issued under the Indentures, except with respect to that portion of any Final Drawing (or Downgrade Drawing which becomes a Final Drawing) which remains in a Cash Collateral Account, Designated Interest Rate means the weighted average Investment Earnings of funds in the Cash Collateral Accounts. As used in this Section 2.02, a "Payment Default" when used in connection with an "Equipment Note" issued under an Indenture means a default in the payment of principal thereof or interest thereon, other than a default in the payment of principal or interest on a "Series D Equipment Note" issued under the Indentures which has not been cured other than solely because of acceleration. For purposes of Section 3.04(b) hereof, this is the fourth paragraph of Section 2.02. The Equipment Notes shall be executed on behalf of the Owner Trustee by its President or one of its Vice Presidents, Assistant Vice Presidents or Assistant Secretaries or other authorized officer. Equipment Notes bearing the signatures of individuals who were at any time the proper officers of the Owner Trustee shall bind the Owner Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Equipment Notes or did not hold such offices at the respective dates of such Equipment Notes. The Owner Trustee may from time to time execute and deliver Equipment Notes with respect to the Aircraft to the Indenture Trustee for authentication upon original issue and such Equipment Notes shall thereupon be authenticated and delivered by the Indenture Trustee upon the written request of the Owner 29 35 Trustee signed by a Vice President or Assistant Vice President or other authorized officer of the Owner Trustee; provided, however, that each such request shall specify the aggregate Principal Amount of all Equipment Notes to be authenticated hereunder on original issue with respect to the Aircraft. No Equipment Note shall be secured by or be entitled to any benefit under this Indenture or be valid or obligatory for any purposes, unless there appears on such Equipment Note a certificate of authentication in the form provided for herein executed by the Indenture Trustee by the manual signature of one of its authorized officers and such certificate upon any Equipment Notes shall be conclusive evidence, and the only evidence, that such Equipment Note has been duly authenticated and delivered hereunder. SECTION 2.03. Payments from Trust Indenture Estate Only. (a) Without impairing any of the other rights, powers, remedies, privileges or Liens of the Note Holders under this Indenture, each Note Holder, by its acceptance of an Equipment Note, agrees that, except as expressly provided in this Indenture, the Refunding Agreement or any other Operative Document, (i) the obligation to make all payments of all or any portion of the Principal Amount of, interest on, Make-Whole Amount, if any, and all other amounts due with respect to the Equipment Notes, and the performance by the Owner Trustee of every obligation or covenant contained in this Indenture and in the Refunding Agreement or any of the other Operative Documents, shall be payable only from the income and proceeds from the Trust Estate to the extent included in the Trust 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 Trust Indenture Estate to enable the Indenture Trustee to make such payments in accordance with the terms of Article III hereof, and all of the statements, representations, covenants and agreements made by the Owner Trustee (when made in such capacity) contained in this Indenture and any other Operative Document other than the Trust Agreement, unless expressly otherwise stated, are made and intended only for the purpose of binding the Trust Estate and establishing the existence of rights and remedies which can be exercised and enforced against the Trust Estate; therefore, anything contained in this Indenture or such other agreements to the contrary notwithstanding (except for any express provisions or representations that the Trust Company is responsible for, or is making, for which there would be personal liability of the Trust Company), no recourse shall be had with respect to this Indenture or such other agreements against the Trust Company or against any institution or Person which becomes a successor trustee or co-trustee or any officer, director, trustee, servant or direct or indirect parent or controlling Person or Persons of any of them, and (ii) none of the Trust Company, the Owner Participant, any partner of the Owner Participant, the Indenture Trustee and any officer, director, trustee, servant, employee, agent or direct or indirect parent or controlling Person or Persons of any of them shall have any 30 36 personal liability for any amounts payable, or other obligation owed, hereunder, under the Refunding Agreement or any of the other Operative Documents or under the Equipment Notes except as expressly provided herein (in the case of the Owner Trustee and the Indenture Trustee) or therein; provided, however, nothing contained in this Section 2.03(a) shall be construed to limit the exercise and enforcement in accordance with the terms of this Indenture or such other agreements of rights and remedies against the Trust Indenture Estate. (b) If (i) all or any part of the Trust Estate becomes the property of, or the Owner Trustee or Owner Participant becomes, 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 Trust Company, the Owner Trustee or the Owner Participant is required, by reason of the Trust Company, the Owner Trustee or the Owner Participant being held to have recourse liability to any Note Holder or the Indenture Trustee, directly or indirectly (other than the recourse liability of the Trust Company, the Owner Trustee or the Owner Participant under the Operative Documents), to make payment on account of any amount payable as Principal Amount, Make-Whole Amount, if any, interest or other amounts on the Equipment Notes or under this Indenture and (iii) any Note Holder or the Indenture Trustee actually receives any Excess Amount (as hereinafter defined) which reflects any payment by the Trust Company, the Owner Trustee or the Owner Participant on account of clause (ii) above (other than aforesaid), then such Note Holder or the Indenture Trustee, as the case may be, shall promptly refund to the Trust Company, the Owner Trustee or the Owner Participant (whichever shall have made such payment) such Excess Amount. For purposes of this Section 2.03(b), "Excess Amount" means the amount by which such payment exceeds the amount that would have been received by a Note Holder or the Indenture Trustee if the Trust Company, the Owner Trustee or the Owner Participant had not become subject to the recourse liability referred to in clause (ii) above. Nothing contained in this Section 2.03(b) shall prevent a Note Holder or the Indenture Trustee from enforcing any personal recourse obligation (and retaining the proceeds thereof) of the Trust Company, the Owner Trustee or the Owner Participant under the Refunding Agreement, this Indenture (and any exhibits or annexes hereto or thereto) or any other Operative Document. SECTION 2.04. Method of Payment. (a) The Principal Amount of, interest on, Make-Whole Amount, if any, and other amounts due under each Equipment Note or hereunder will be payable in Dollars by wire transfer of immediately available funds not later than 12:00 noon, New York City time, on the due date of payment to the Indenture Trustee at the Corporate Trust Office for distribution among the Note Holders in the manner provided herein. After transferring (or causing the transfer of) 31 37 the above amounts to the Indenture Trustee, the Owner Trustee shall not have any responsibility for the distribution of such payment to any Note Holder. Notwithstanding the foregoing or any provision in any Equipment Note to the contrary, the Indenture Trustee will use reasonable efforts to pay or cause to be paid, if so directed in writing by any Note Holder (with a copy to the Owner Trustee), all amounts paid by the Owner Trustee hereunder and under such Holder's Equipment Note or Equipment Notes to such Holder or a nominee therefor (including all amounts distributed pursuant to Article III of this Indenture) by transferring, or causing to be transferred, by wire transfer of immediately available funds in Dollars, prior to 2:00 p.m., New York City time, on the due date of payment, to an account maintained by such Holder with a bank located in the continental United States the amount to be distributed to such Holder, for credit to the account of such Holder maintained at such bank. If the Indenture Trustee shall fail to make any such payment as provided in the immediately preceding sentence after its receipt of funds at the place and prior to the time specified above, the Indenture Trustee, in its individual capacity and not as trustee and without indemnification or right of reimbursement under any Operative Document, agrees to compensate such Holders for loss of use of funds in accordance with industry standards for this type of transaction until such payment is made and the Indenture Trustee shall be entitled to any interest earned on such funds until such payment is made. Any payment made hereunder shall be made free and clear of and without reduction for or on account of all wire and like charges and without any presentment or surrender of any Equipment Note, except that, in the case of the final payment in respect of any Equipment Note, such Equipment Note shall be surrendered to the Indenture Trustee for cancellation promptly after such payment. Notwithstanding any other provision of this Indenture to the contrary, the Indenture Trustee shall not be required to make, or cause to be made, wire transfers as aforesaid prior to the first Business Day on which it is practicable for the Indenture Trustee to do so if such funds were received after 12:00 noon, New York City time, at the place of payment. Prior to the due presentment for registration of transfer of any Equipment Note, the Owner Trustee and the Indenture Trustee shall deem and treat the Person in whose name any Equipment Note is registered on the Register as the absolute owner and Holder of such Equipment Note for the purpose of receiving payment of all amounts payable with respect to such Equipment Note and for all other purposes, and neither the Owner Trustee nor the Indenture Trustee shall be affected by any notice to the contrary, unless and until such change is reflected in the Register. So long as any signatory to the Refunding Agreement or nominee thereof shall be a registered Note Holder, all payments to it shall be made to the account of such Note Holder specified in Schedule III thereto and otherwise in the manner provided in or pursuant to the Refunding Agreement unless it shall have specified some other account or manner of payment by notice to the Indenture Trustee consistent with this Section 2.04. 32 38 (b) The Indenture Trustee, as agent for the Owner Trustee, shall exclude and withhold at the appropriate rate from each payment of Principal Amount of, interest on, Make-Whole Amount, if any, and other amounts due hereunder or under each Equipment Note (and such exclusion and withholding shall constitute payment in respect of such Equipment Note) any and all United States withholding taxes applicable thereto as required by law. The Indenture Trustee agrees to act as such withholding agent and, in connection therewith, whenever any present or future United States taxes or similar charges are required to be withheld with respect to any amounts payable hereunder or in respect of the Equipment Notes, to withhold such amounts (and such withholding shall constitute payment in respect of such Equipment Note) and timely pay the same to the appropriate authority in the name of and on behalf of the Note Holders, that it will file any necessary United States withholding tax returns or statements when due, and that as promptly as possible after the payment thereof it will deliver to each Note Holder (with a copy to the Owner Trustee and the Lessee) appropriate receipts showing the payment thereof, together with such additional documentary evidence as any such Note Holder, the Owner Participant and the Owner Trustee may reasonably request from time to time. If a Note Holder which is a Non-U.S. Person has furnished to the Indenture Trustee a properly completed and currently effective U.S. Internal Revenue Service Form 1001 or W-8 (or such successor form or forms as may be required by the United States Treasury Department) during the calendar year in which the payment hereunder or under the Equipment Note(s) held by such Holder is made (but prior to the making of such payment) or in either of the two preceding calendar years, and has not notified the Indenture Trustee of the withdrawal or inaccuracy of such form prior to the date of such payment (and the Indenture Trustee has no reason to know that any information set forth in such form is inaccurate), the Indenture Trustee shall withhold only the amount, if any, required by law (after taking into account any applicable exemptions claimed by the Note Holder) to be withheld from payments hereunder or under the Equipment Notes held by such Holder in respect of United States federal income tax (and such withholding shall constitute payment in respect of such Equipment Note). If a Note Holder (x) which is a Non-U.S. Person has furnished to the Indenture Trustee a properly completed and currently effective U.S. Internal Revenue Service Form 4224 in duplicate (or such successor certificate, form or forms as may be required by the United States Treasury Department as necessary in order to avoid withholding of United States federal income tax), during the calendar year in which the payment is made (but prior to the making of such payment) or in either of the two preceding calendar years, and has not notified the Indenture Trustee of the withdrawal or inaccuracy of such certificate or form prior to the date of such payment (and the Indenture Trustee has no reason to know that any information set forth in such form is inaccurate) or (y) which is a U.S. Person 33 39 has furnished to the Indenture Trustee a properly completed and currently effective U.S. Internal Revenue Service Form W-9, if applicable, prior to a payment hereunder or under the Equipment Notes held by such Holder, no amount shall be withheld from payments in respect of United States federal income tax. If any Note Holder has notified the Indenture Trustee that any of the foregoing forms or certificates is withdrawn or inaccurate, or if such Holder has not filed a form claiming an exemption from United States withholding tax or if the Code or the regulations thereunder or the administrative interpretation thereof are at any time after the date hereof amended to require such withholding of United States federal income taxes from payments under the Equipment Notes held by such Holder, the Indenture Trustee agrees to withhold from each payment due to the relevant Note Holder withholding taxes at the appropriate rate under law (and such withholding shall constitute payment in respect of such Equipment Notes) and will, on a timely basis as more fully provided above, deposit such amounts with an authorized depository and make such returns, statements, receipts and other documentary evidence in connection therewith as required by applicable law. None of the Owner Trustee, the Owner Participant or the Lessee shall have any liability for the failure of the Indenture Trustee to withhold taxes in the manner provided for herein or for any false, inaccurate or untrue evidence provided by a Holder hereunder. SECTION 2.05. Application of Payments. In the case of each Equipment Note, each payment of Principal Amount, Make-Whole Amount, if any, and interest or other amounts due thereon shall, except as otherwise expressly provided herein, be applied: First: to the payment of accrued interest on such Equipment Note (as well as any interest on any overdue Principal Amount, any overdue Make-Whole Amount, if any, and, to the extent permitted by law, any overdue interest and any other overdue amounts thereunder) to the date of such payment; Second: to the payment of the Principal Amount of such Equipment Note (or a portion thereof) then due thereunder; Third: to the payment of Make-Whole Amount, if any, and any other amount due hereunder or under such Equipment Note; and Fourth: the balance, if any, remaining thereafter, to the payment of the Principal Amount of such Equipment Note remaining unpaid (provided that such Equipment Note shall not be subject to redemption except as provided in Sections 2.10 and 2.11 hereof). 34 40 The amounts paid pursuant to clause "Fourth" above shall be applied to the installments of Principal Amount of such Equipment Note in the inverse order of their normal maturity. SECTION 2.06. Termination of Interest in Trust Indenture Estate. A Note Holder shall not, as such, have any further interest in, or other right with respect to, the Trust Indenture Estate when the Principal Amount of, Make-Whole Amount, if any, and interest on and other amounts due under all Equipment Notes held by such Note Holder and all other sums then payable to such Note Holder hereunder and under the Lease and the Refunding Agreement by the Lessee, the Owner Participant and the Owner Trustee (collectively, the "Secured Obligations") shall have been paid in full. SECTION 2.07. Registration, Transfer and Exchange of Equipment Notes. The Indenture Trustee shall keep a register (the "Register") in which the Indenture Trustee shall provide for the registration of Equipment Notes and the registration of transfers of Equipment Notes. No such transfer shall be given effect unless and until registration hereunder shall have occurred. The Register shall be kept at the Corporate Trust Office of the Indenture Trustee. The Indenture Trustee is hereby appointed "Registrar" for the purpose of registering Equipment Notes and transfers of Equipment Notes as herein provided. A Holder of any Equipment Note intending to exchange such Equipment Note shall surrender such Equipment Note to the Indenture Trustee at the Corporate Trust Office, together with a written request from the registered Holder thereof for the issuance of a new Equipment Note, specifying, in the case of a surrender for transfer, the name and address of the new Holder or Holders. Upon surrender for registration of transfer of any Equipment Note, the Owner Trustee shall execute, and the Indenture Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Equipment Notes of a like aggregate unpaid portion of the Principal Amount and of the same series. At the option of the Note Holder, Equipment Notes may be exchanged for other Equipment Notes of any authorized denominations of a like aggregate unpaid portion of the Principal Amount, upon surrender of the Equipment Notes to be exchanged to the Indenture Trustee at the Corporate Trust Office. Whenever any Equipment Notes are so surrendered for exchange, the Owner Trustee shall execute, and the Indenture Trustee shall authenticate and deliver, the Equipment Notes which the Note Holder making the exchange is entitled to receive. All Equipment Notes issued upon any registration of transfer or exchange of Equipment Notes (whether under this Section 2.07 or under Section 2.08 hereof or otherwise under this Indenture) shall be the valid obligations of the Owner Trustee evidencing the same respective obligations, and entitled to the same security and benefits under this Indenture, as the Equipment Notes surrendered upon such registration of transfer or exchange. Every Equipment Note presented or surrendered for registration of transfer or exchange shall (if so required by the Indenture Trustee) be duly endorsed, 35 41 or be accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by the Note Holder or such Holder's attorney duly authorized in writing, and the Indenture Trustee shall require evidence satisfactory to it as to the compliance of any such transfer with the Securities Act and the securities laws of any applicable state. The Indenture Trustee shall make a notation on each new Equipment Note of the amount of all payments of Principal Amount previously made on the old Equipment Note or Equipment Notes with respect to which such new Equipment Note is issued and the date to which interest on such old Equipment Note or Equipment Notes has been paid. Interest shall be deemed to have been paid on such new Equipment Note to the date on which interest shall have been paid on such old Equipment Note, and all payments of the Principal Amount marked on such new Equipment Note, as provided above, shall be deemed to have been made thereon. Neither the Indenture Trustee nor the Owner Trustee shall be required to exchange any surrendered Equipment Notes as provided above during the ten-day period preceding the Payment Date. The Indenture Trustee will promptly notify the Owner Trustee, the Owner Participant and Lessee of each registration of a transfer of an Equipment Note. Any such transferee of an Equipment Note, by its acceptance of an Equipment Note, agrees to the provisions of the Refunding Agreement applicable to Note Holders, and shall be deemed to have represented and warranted to the parties to the Refunding Agreement as to the matters represented and warranted by the Subordination Agent in its capacity as the initial Holder of the Equipment Notes. Subject to compliance by the Note Holder and its transferee (if any) of the requirements set forth in this Section 2.07, the Indenture Trustee and the Owner Trustee shall use all reasonable efforts to issue new Equipment Notes upon transfer or exchange within 10 Business Days of the date an Equipment Note is surrendered for transfer or exchange. SECTION 2.08. Mutilated, Destroyed, Lost or Stolen Equipment Notes. If any Equipment Note shall become mutilated, destroyed, lost or stolen, the Owner Trustee shall, upon the written request of the Holder of such Equipment Note, execute and the Indenture Trustee shall authenticate and deliver in replacement thereof a new Equipment Note, payable in the same Principal Amount dated the same date and captioned as originally issued. If the Equipment Note being replaced has become mutilated, such Equipment Note shall be surrendered to the Indenture Trustee and a copy thereof shall be furnished to the Owner Trustee. If the Equipment Note being replaced has been destroyed, lost or stolen, the Holder of such Equipment Note shall furnish to the Lessee, the Owner Trustee, the Owner Participant and the Indenture Trustee such security or indemnity as may be reasonably required by them to save the Lessee, the Owner Trustee, the Owner Participant and the Indenture Trustee harmless and evidence satisfactory to the Lessee, the Owner Trustee, the Owner Participant and the Indenture Trustee of the destruction, loss or theft of such Equipment Note and of the ownership thereof. If a bank or trust company with a net worth 36 42 of $200,000,000 or more is the Holder of any such destroyed, lost or stolen Equipment Note, then the written indemnity of such Person, signed by an authorized officer thereof, in favor of, delivered to and in form reasonably satisfactory to the Lessee, the Owner Participant, the Owner Trustee and the Indenture Trustee shall be accepted as satisfactory indemnity and security and no further indemnity or security shall be required as a condition to the execution and delivery of such new Equipment Note. Subject to compliance by the Note Holder of the requirements set forth in this Section 2.08, the Indenture Trustee and the Owner Trustee shall use all reasonable efforts to issue new Equipment Notes within 10 Business Days of the date of the written request therefor from the Note Holder. SECTION 2.09. Payment of Expenses on Transfer; Cancellation. (a) No service charge shall be made to a Note Holder for any registration of transfer or exchange of Equipment Notes, but the Indenture Trustee, as Registrar, may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Equipment Notes; provided, however, that none of the Lessee, the Owner Trustee, the Indenture Trustee or the Owner Participant shall bear costs of registration, transfer or exchange in connection with the consummation of the Refinancing Transaction. (b) The Indenture Trustee shall cancel all Equipment Notes surrendered for replacement, redemption, transfer, exchange, payment or cancellation and shall destroy the canceled Equipment Notes. SECTION 2.10. Mandatory Redemptions of Equipment Notes. The Equipment Notes are subject to redemption as provided in this Section 2.10 and Section 2.11 and purchase as provided in Section 2.12. On the date on which Lessee is required pursuant to Section 11(a) of the Lease to make payment for an Event of Loss with respect to the Aircraft, all of the Equipment Notes shall be redeemed in whole at a redemption price equal to 100% of the unpaid Principal Amount thereof, together with all accrued interest thereon to, but not including, the date of redemption and all other amounts payable hereunder or under the Refunding Agreement to the Note Holders but without Make-Whole Amount, all in the order of priority specified in Section 3.02 hereof. SECTION 2.11. Redemptions; Notice of Redemption. (a) Neither any redemption of any Equipment Note nor any purchase by the Owner Trustee of any Equipment Note may be made except to the extent and in the manner expressly permitted by this Indenture. No purchase of any Equipment Note may be made by the Indenture Trustee. (b) Notice of redemption or purchase with respect to the Equipment Notes shall be given by the Indenture Trustee by first-class mail, postage prepaid, mailed not less than 15 nor 37 43 more than 60 days prior to the applicable redemption date, to each Note Holder of such Equipment Notes to be redeemed or purchased, at such Note Holder's address appearing in the Register. 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, the redemption price will become due and payable upon each such Equipment Note, and that interest on such Equipment Notes shall cease to accrue on and after such redemption date, and (4) the place or places where such Equipment Notes are to be surrendered for payment of the redemption price. (c) On or before the redemption date, the Owner Trustee (or any Person on behalf of the Owner Trustee) shall, to the extent an amount equal to the redemption price for the Equipment Notes to be redeemed or purchased on the redemption date shall not then be held in the Trust Indenture Estate, deposit or cause to be deposited with the Indenture Trustee by 12:00 noon, New York City time, on the redemption date in immediately available funds the redemption price of the Equipment Notes to be redeemed or purchased. (d) Notice of redemption or purchase having been given as aforesaid, the Equipment Notes to be redeemed or purchased shall, on the redemption date, become due and payable at the Corporate Trust Office of the Indenture Trustee, and from and after such redemption date (unless there shall be a default in the payment of the redemption price) any such Equipment Notes then outstanding shall cease to bear interest. Upon surrender of any such Equipment Note for redemption or purchase in accordance with said notice, such Equipment Note shall be redeemed at the redemption price. If any Equipment Note called for redemption or purchase shall not be so paid upon surrender thereof for redemption, the principal amount thereof shall, until paid, continue to bear interest from the applicable redemption date at the interest rate in effect for such Equipment Note as of such redemption date. SECTION 2.12. Option to Purchase Equipment Notes. Either the Owner Trustee or the Owner Participant may, upon the events and subject to the terms and conditions and for the price set forth in this Section 2.12, purchase all but not less than all of the Equipment Notes outstanding hereunder, and each Note Holder agrees that it will, upon such events and subject to such terms and conditions and upon receipt of such price, sell, assign, transfer and convey to such purchaser or its nominee (without recourse or warranty of any kind except as to its title to the Equipment Notes and except against Liens on such Equipment Notes arising by, through or under such Holder), all of the right, title and interest of such Note Holder in and to the Trust Indenture Estate, this Indenture and the Equipment Notes held by it, and such purchaser or its nominee shall assume all of such Holder's obligations under the Refunding Agreement and hereunder. 38 44 Such option to purchase the Equipment Notes may be exercised by the Owner Trustee or the Owner Participant upon any of the following events, and, in any such event, the purchase price thereof shall equal for each Equipment Note the aggregate unpaid Principal Amount thereof, plus accrued and unpaid interest thereon to, but not including, the date of purchase and all other amounts (other than the Make-Whole Amount, except as provided in the next sentence) then payable hereunder or under the Refunding Agreement to the Holder thereof. Such option to purchase the Equipment Notes may be exercised: (i) upon an Indenture Trustee Event or (ii) in the event there shall have occurred and be continuing a Lease Event of Default, provided that if such option is exercised pursuant to this clause (ii) at a time when there shall have occurred and be continuing for less than 120 days a Lease Event of Default (and there is no Indenture Trustee Event), the purchase price thereof shall equal the price provided in the preceding sentence plus the Make-Whole Amount, if any; provided further, that under no circumstances shall the Make-Whole Amount be payable by the Lessee. Such option to purchase the Equipment Notes may be exercised by the Owner Trustee or the Owner Participant giving written notice of its election of such option to the Indenture Trustee, which notice shall specify a date for such purchase not more than 30 days or less than 15 days after the date of such notice. The Indenture Trustee shall not exercise any of the remedies hereunder or, without the consent of the Owner Trustee or the Owner Participant, under the Lease, during the period from the time that a notice of exercise by the Owner Participant of such option to purchase becomes irrevocable until the date on which such purchase is required to occur pursuant to the terms of the preceding sentence. Such election to purchase the Equipment Notes shall become irrevocable upon the fifteenth day preceding the date specified in the written notice described in the first sentence of this paragraph. If the Owner Trustee or the Owner Participant on or before the date of such purchase shall so request, the Note Holders will comply with all the provisions of Section 2.07 to enable new Equipment Notes to be issued to the Owner Trustee or the Owner Participant or its nominee in such denominations as the Owner Trustee or the Owner Participant shall request. All taxes and charges required pursuant to Section 2.09 in connection with the issuance of such new Equipment Note shall be borne by the Owner Participant. SECTION 2.13. Subordination. (a) The Owner Trustee and, by acceptance of its Equipment Notes of any Series, each Note Holder of such Series, hereby agree that no payment or distribution shall be made on or in respect of the Secured Obligations owed to such Note Holder of such Series, including any payment or distribution of cash, property or securities after the commencement of a proceeding of the type referred to in 39 45 Section 4.02(g), (h) or (i) hereof, except as expressly provided in Articles II and III hereof. (b) By the acceptance of its Equipment Notes of any Series (other than Series A), each Note Holder of such Series agrees that in the event that such Note Holder, in its capacity as a Note Holder, shall receive any payment or distribution on any Secured Obligations in respect of such Series which it is not entitled to receive under this Section 2.13 or Article III hereof, it will hold any amount so received in trust for the Senior Holder or Senior Holders (as defined in Section 2.13(c) hereof) and will forthwith turn over such payment to the Indenture Trustee in the form received to be applied as provided in Articles II and III hereof. (c) As used in this Section 2.13, the term "Senior Holder" or "Senior Holders" shall mean, (i) the Note Holders of Series A until the Secured Obligations in respect of Series A Equipment Notes have been paid in full, (ii) after the Secured Obligations in respect of Series A Equipment Notes have been paid in full, the Note Holders of Series B until the Secured Obligations in respect of Series B Equipment Notes have been paid in full and (iii) after the Secured Obligations in respect of Series B Equipment Notes have been paid in full, the Note Holders of Series C until the Secured Obligations in respect of Series C Equipment Notes have been paid in full. ARTICLE III RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE SECTION 3.01. Certain Rent Distributions. Except as otherwise provided in Section 3.02, 3.03 or 3.04 hereof, each installment of Basic Rent, any payment of Supplemental Rent, any payment received by the Indenture Trustee as contemplated by the first sentence of Section 4.03 hereof, and any payment received by the Indenture Trustee pursuant to any Sublease Assignment as rent under any Assigned Sublease shall be promptly distributed in the following order of priority: first, (i) 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 Amount, and interest and other amounts (as well as any interest on overdue Principal Amount, and to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due to the Note Holders under all Series A Equipment Notes shall be distributed to the Note Holders of Series A ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series A Equipment Note bears to the aggregate amount of the payments then due under all Series A Equipment Notes; 40 46 (ii) after giving effect to clause (i) above, so much of such installment or payment remaining as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due to the Note Holders under all Series B Equipment Notes shall be distributed to the Note Holders of Series B ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series B Equipment Note bears to the aggregate amount of the payments then due under all Series B Equipment Notes; (iii) after giving effect to clause (ii) above, so much of such installment or payment remaining as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due to the Note Holders under all Series C Equipment Notes shall be distributed to the Note Holders of Series C ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series C Equipment Note bears to the aggregate amount of the payments then due under all Series C Equipment Notes; and (iv) after giving effect to clause (iii) above, so much of such installment or payment remaining as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due to the Note Holders under all Series D Equipment Notes shall be distributed to the Note Holders of Series D ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series D Equipment Note bears to the aggregate amount of the payments then due under all Series D Equipment Notes; and second, the balance, if any, of such installment or payment remaining thereafter shall be distributed to the Owner Trustee 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 Trust Indenture Estate and invested in accordance with Section 3.07 hereof until whichever of the following shall first occur: (i) all Indenture Defaults shall have been 41 47 cured or waived, in which event such balance shall be distributed as provided in this clause "second", or (ii) Section 3.03 hereof shall be applicable, in which event such balance shall be distributed in accordance with the provisions of said Section 3.03, or (iii) the 180th day after receipt of such payment, in which event such balance shall be distributed as provided in this clause "second" without reference to this proviso. SECTION 3.02. Event of Loss and Replacement. (a) Any payment received by the Indenture Trustee with respect to the Airframe or the Airframe and one or both Engines as the result of an Event of Loss thereto shall be applied to the redemption of the Equipment Notes and to all other amounts payable hereunder by applying such funds in the following order of priority: first, to reimburse the Indenture Trustee for any reasonable out- of-pocket costs or expenses incurred in connection with such Event of Loss, second, to pay in full the aggregate amount of the payment or payments of unpaid Principal Amount, and unpaid interest and other amounts (as well as any interest on overdue Principal Amount, and to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due to the Note Holders under all Equipment Notes, all in the order of priority specified in clause "first" of Section 3.01 hereof, and third, if and to the extent required to be paid to the Lessee (or if directed by the Lessee, any Permitted Sublessee) in reimbursement of payment of Stipulated Loss Value pursuant to Section 11(d) of the Lease, to the Lessee (or if directed by the Lessee, any Permitted Sublessee), and otherwise as provided in clause "fourth" of Section 3.03 hereof; provided that, if a Replacement Airframe or a Replacement Airframe and one or more Replacement Engines are to be substituted for the Airframe or the Airframe and one or both Engines subject to such Event of Loss as provided in Section 11 of the Lease and Section 5.06 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 Trust Indenture Estate as security for the obligations of the Lessee under the Operative Documents and invested in accordance with the terms of Section 3.07 hereof and, unless theretofore applied in accordance with the provisions of the Lease and this Indenture, such proceeds shall, to the extent payable to the Lessee under the Lease, be released to the Lessee (or if directed by the Lessee, any Permitted Sublessee) upon or in connection with the replacement thereof as provided in such Sections. 42 48 (b) Any amounts received directly or indirectly from any governmental authority or insurer or other party pursuant to any provision of Section 11 or 12 of the Lease (other than as the result of an Event of Loss with respect to the Airframe or the Airframe and one or both Engines) shall be applied as provided in the applicable provisions of the Lease; provided, however, that to the extent that any portion of such amounts held for account of the Lessee are not at the time required to be paid to the Lessee (or any Permitted Sublessee) pursuant to the applicable provisions of Section 11 or 12 of the Lease, shall be held by the Indenture Trustee as security for the obligations of the Lessee under the Operative Documents and shall be invested in accordance with the terms of Section 3.07 hereof and at such time as the conditions specified in the Lease for payment of such amounts to the Lessee shall be fulfilled, such portion, and the net proceeds of any investment thereof, shall, unless theretofore applied in accordance with the provisions of the Lease and this Indenture, be paid to the Lessee to the extent provided in the Lease. SECTION 3.03. Payment After Indenture Event of Default, etc. Except as otherwise provided in Sections 2.13, 3.02, 3.04(a) and (c) and 6.07 hereof, and notwithstanding Section 2.05 hereof, all payments received and amounts held or realized by the Indenture Trustee after an Indenture Event of Default shall have occurred and be continuing or after the Indenture Trustee has given notice to the Owner Trustee and the Owner Participant pursuant to Section 4.04(a) hereof regarding its exercise of remedies under Section 18 of the Lease or of the foreclosure of this Indenture, or after the Equipment Notes shall have become due and payable as provided herein, and all payments or amounts then held by the Indenture Trustee as part of the Trust Indenture Estate, shall, so long as such Indenture Event of Default shall be continuing, be promptly distributed by the Indenture Trustee in the following order of priority, without duplication: first, so much of such payments or amounts as shall be required to reimburse the Indenture Trustee for all amounts due to it pursuant to Section 6.07 hereof, plus 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 Trust Indenture Estate pursuant to Section 4.05(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, reasonable 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; 43 49 second, so much of such payments or amounts remaining as shall be required to reimburse the then existing or prior Note Holders for payments made pursuant to Section 5.03 hereof (to the extent not previously reimbursed) shall be distributed to the then existing or prior Note Holders, and if the aggregate amount remaining shall be insufficient to pay all such amounts in full, it shall be distributed ratably, without priority of one over any other, in accordance with the amount of the payment or payments made by each such then existing or prior Note Holder pursuant to said Section 5.03 and applicable (in the case of each such then existing Note Holder) to the Equipment Notes held by such existing Note Holder at the time of distribution by the Indenture Trustee; third, (i) so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series A Equipment Notes, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations in respect of the Series A Equipment Notes (other than Make-Whole Amount, if any) to the date of distribution, shall be distributed to the Note Holders of Series A, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series A Equipment Notes held by each Holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Amount, if any) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series A Equipment Notes held by all such Holders plus the accrued but unpaid interest and other amounts due thereon to the date of distribution; (ii) after giving effect to paragraph (i) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series B Equipment Notes, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations in respect of the Series B Equipment Notes (other than Make-Whole Amount, if any) to the date of distribution, shall be distributed to the Note Holders of Series B, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series B Equipment Notes held by each Holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Amount, if any) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series B Equipment Notes held by all such Holders plus the accrued but unpaid interest and other amounts due thereon to the date of distribution; 44 50 (iii) after giving effect to paragraph (ii) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series C Equipment Notes, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations in respect of the Series C Equipment Notes (other than Make-Whole Amount, if any) to the date of distribution, shall be distributed to the Note Holders of Series C, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series C Equipment Notes held by each Holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Amount, if any) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series C Equipment Notes held by all such Holders plus the accrued but unpaid interest and other amounts due thereon to the date of distribution; and (iv) after giving effect to paragraph (iii) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series D Equipment Notes, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations in respect of the Series D Equipment Notes (other than Make-Whole Amount, if any) to the date of distribution, shall be distributed to the Note Holders of Series D, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series D Equipment Notes held by each Holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Amount, if any) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series D Equipment Notes held by all such Holders plus the accrued but unpaid interest and other amounts due thereon to the date of distribution; and fourth, 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 and the Lease. No Make-Whole Amount shall be due and payable on the Equipment Notes as a consequence of the acceleration of the Equipment Notes. SECTION 3.04. Certain Payments. (a) Any payments received by the Indenture Trustee for which provision as to the application thereof is made in the Lease and not otherwise provided for herein shall be applied forthwith to the purpose for which such payment was made in accordance with or as otherwise provided by the terms of the Lease. 45 51 (b) The Indenture Trustee will distribute promptly upon receipt any indemnity payment received by it from the Owner Trustee or the Lessee in respect of (i) the Indenture Trustee in its individual capacity, (ii) any Pass Through Trust, (iii) the Subordination Agent, (iv) the Liquidity Providers, and (v) the Pass Through Trustees, in each case whether pursuant to Section 10 or 13 of the Lease or Section 21 of the Refunding Agreement or as Supplemental Rent, directly to the Person entitled thereto. Any payment received by the Indenture Trustee under clause (b) of the fourth paragraph of Section 2.02 shall be distributed to the Subordination Agent to be distributed in accordance with the terms of the Intercreditor Agreement, and any payment received by the Indenture Trustee under clause (c) of the fourth paragraph of Section 2.02 shall be distributed directly to the Persons entitled thereto. (c) Notwithstanding anything to the contrary contained in this Article III, any sums received by the Indenture Trustee that constitute Excepted Payments shall be distributed promptly upon receipt by the Indenture Trustee directly to the Person or Persons entitled thereto. Further, and notwithstanding anything herein to the contrary, any sums received by the Indenture Trustee under the Lease or any Sublease Assignment as security for the obligations of the Lessee or the relevant Permitted Sublessee under the Operative Documents shall be applied only to such obligations or as otherwise provided in the Lease. SECTION 3.05. Other Payments. Subject to Sections 3.03 and 3.04 hereof, any payments received by the Indenture Trustee for which no provision as to the application thereof is made elsewhere in this Indenture shall be distributed by the Indenture Trustee, unless otherwise agreed in writing, subject to Section 6.07 hereof (i) to the extent received or realized at any time prior to the payment in full of all obligations to the Note Holders secured by the Lien of this Indenture, in the order of priority specified in Section 3.01 hereof, and (ii) to the extent received or realized at any time after payment in full of all obligations to the Note Holders secured by the Lien of this Indenture, in the following order of priority: first, to the extent payments or amounts described in clause "first" of Section 3.03 hereof are otherwise obligations of Lessee under the Operative Documents or for which Lessee is obligated to indemnify against thereunder, in the manner provided in clause "first" of Section 3.03 hereof, and second, in the manner provided in clause "fourth" of Section 3.03 hereof. SECTION 3.06. Payments to Owner Trustee. Any amounts distributed hereunder by the Indenture Trustee to the Owner Trustee shall be paid to the Owner Trustee by wire transfer of funds of the type received by the Indenture Trustee at such 46 52 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 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 pursuant to clause "second" of Section 3.01 hereof shall be distributed by wire transfer of funds of the type received by the Indenture Trustee to the Owner Participant's account as may be specified pursuant to the Refunding Agreement. SECTION 3.07. Investment of Amounts Held by Indenture Trustee. Any amounts held by the Indenture Trustee as assignee of the Owner Trustee's rights to hold moneys for security pursuant to Section 21(h) of the Lease shall be held in accordance with the terms of such Section; and the Indenture Trustee hereby agrees to perform the duties of the Owner Trustee under such Section. Except as provided in the preceding sentence, any amounts held by the Indenture Trustee pursuant to the proviso to clause "second" of Section 3.01 hereof, pursuant to Section 3.02 hereof, pursuant to the second sentence of Section 3.04(c) hereof, pursuant to the fourth sentence of Section 4.03 hereof, pursuant to a Sublease Assignment, or pursuant to any provision of any other Operative Document providing for amounts to be held by the Indenture Trustee which are not distributed pursuant to the other provisions of Article III hereof shall be invested by the Indenture Trustee from time to time in Specified Investments selected in writing in a timely manner by the Owner Trustee or, in the event the Owner Trustee shall so specify, by the Lessee. Unless otherwise expressly provided in this Indenture or the Lease, any income realized as a result of any such investment and any payments by or on behalf of the Lessee pursuant to the Lease in respect of any losses or expenses, 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 required to be made by it under this Indenture other than by reason of its willful misconduct or gross negligence, 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. 47 53 ARTICLE IV COVENANTS OF TRUST COMPANY AND OWNER TRUSTEE; INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE SECTION 4.01. Covenants of Trust Company and Owner Trustee. (a) The Trust Company hereby covenants and agrees that it will not directly or indirectly create, incur, assume or suffer to exist any Lessor's Lien attributable to it in its individual capacity with respect to any of the properties or assets of the Trust Indenture Estate and shall, at its own cost and expense promptly take such action as may be necessary duly to discharge any such Lessor's Lien, and the Trust Company will cause restitution to be made to the Trust Indenture Estate in the amount of any diminution of the value thereof as the result of any Lessor's Liens attributable to it. (b) The Owner Trustee hereby covenants and agrees as follows: (i) the Owner Trustee will duly and punctually pay the Principal Amount of, Make-Whole Amount, if any, and interest on and other amounts due under the Equipment Notes and hereunder in accordance with the terms of the Equipment Notes and this Indenture and all amounts payable by it to the Note Holders under the Refunding Agreement and the other Operative Documents; (ii) the Owner Trustee will not directly or indirectly create, incur, assume or suffer to exist any Lessor's Liens attributable to it with respect to any of the properties or assets of the Trust Indenture Estate, and shall, at its own cost and expense, promptly take such action as may be necessary duly to discharge any such Lessor's Lien, and the Owner Trustee will cause restitution to be made to the Trust Indenture Estate in the amount of any diminution of the value thereof as the result of any Lessor's Liens attributable to it; (iii) in the event an officer with responsibility for or familiarity with the transactions contemplated hereunder or under the other Operative Documents (or any Vice President) in the Corporate Trust Administration Department 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 48 54 Owner Trustee under the Lease or any Foreign Financing Document, including, without limitation, a copy of each report or notice received pursuant to Section 12(f) of the Lease, to the extent that the same shall not have been furnished, or is not required to be furnished by the Lessee, to the Indenture Trustee pursuant to the Lease or otherwise; (v) except as contemplated by the Operative Documents or with the consent of the Indenture Trustee acting in accordance with Article IX hereof, the Owner Trustee will not incur any indebtedness for borrowed money; and (vi) 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 Foreign Financing Documents, the Refunding Agreement, the Trust Agreement and the other Operative Documents. SECTION 4.02. Indenture Events 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 shall occur and be continuing (other than a failure to pay when due any amount in respect of Excepted Payments); or (b) the failure of the Owner Trustee to pay when due any payment of Principal Amount of, or interest on, any Equipment Note (other than as a result of a Lease Default) and such failure shall have continued unremedied for ten calendar days; or the failure of the Owner Trustee to pay when due any other amount due and payable under any Equipment Note or hereunder (other than as a result of a Lease Default) and such failure shall have continued unremedied for 15 calendar days after notice thereof being given to the Owner Trustee from the Indenture Trustee or any Note Holder; or (c) any Lessor's Lien required to be discharged by the Trust Company pursuant to Section 4.01(a) hereof or Section 13 of the Refunding Agreement or by the Owner Trustee as the Owner Trustee pursuant to Section 4.01(b)(ii) hereof or Section 13 of the Refunding Agreement or any Lessor's Lien required to be discharged by the Owner Participant pursuant to Section 13 of the Refunding Agreement shall remain undischarged for a period of 30 calendar days after, as the case may be, an officer with responsibility for or familiarity with the transactions contemplated hereunder or under the other Operative Documents (or any Vice President) in the 49 55 Corporate Trust Administration Department of the Trust Company or an officer of the managing partner of the Owner Participant with responsibility for or familiarity with the transactions contemplated hereunder and under the other Operative Documents (or any Vice President of the managing partner of the Owner Participant) shall have actual knowledge of such Lien; provided, that no Indenture Event of Default shall arise under this Section 4.02(c) as a result of a failure by the Owner Trustee or the Owner Participant to observe or perform any covenant referred to in this Section 4.02(c) if the Lessee shall have discharged all Lessor's Liens required to be discharged by the Owner Trustee or the Owner Participant pursuant to such covenants and compensated the Indenture Trustee and the Trust Indenture Estate for all claims, losses and expenses arising from the failure of the Owner Trustee or the Owner Participant, as the case may be, to observe and perform any such covenant; or (d) any representation or warranty made by the Owner Participant, the Owner Trustee or the Trust Company herein or in the Refunding Agreement (other than the representation made in Section 9(b)(8) thereof) or by any Person guaranteeing or supporting the obligations of the Owner Participant under the Operative Documents in any related guarantee or support agreement shall prove to have been false or incorrect when made in any respect materially adverse to the rights and interests of the Note Holders; and if such misrepresentation is capable of being corrected as of a subsequent date and if such correction is being sought diligently, such misrepresentation shall not have been corrected as of a day within 30 calendar days following notice thereof being given to the Owner Participant, the Owner Trustee, the Trust Company or such Person, as the case may be, by the Indenture Trustee or a Majority in Interest of Note Holders; or (e) any failure of the Owner Trustee to observe or perform any of its covenants or agreements in the fourth paragraph following the Habendum Clause hereof or in clauses (b)(v) and (b)(vi) of Section 4.01 hereof, or any failure by the Owner Participant or the Trust Company to observe or perform any of its respective covenants in Section 9(b)(10), 10 or 14 of the Refunding Agreement, or the disaffirmance or repudiation by any Person that has guaranteed or may guarantee or support the obligations of the Owner Participant under the Operative Documents; or (f) except as provided in the following paragraph (j), any failure by the Owner Trustee or the Trust Company to observe or perform any other covenant or obligation of the Owner Trustee contained in this Indenture or in the Refunding Agreement or any failure by the Owner Participant to observe or perform any other covenant or obligation of 50 56 the Owner Participant contained in the Refunding Agreement or any failure of any Person that has guaranteed or may guarantee or support the obligations of the Owner Participant under the Operative Documents to observe or perform any covenant or obligation of such Person contained in any such guarantee or support agreement, which failure, in any case and either individually or together with other then existing failures, shall have a material adverse effect on the rights and interests of the Indenture Trustee or any Note Holder and is not remedied within a period of 45 calendar days following notice being given to the Owner Trustee, the Owner Participant or such Person, as the case may be, by the Indenture Trustee or a Majority in Interest of Note Holders; or (g) either the Trust Estate or the Owner Trustee with respect thereto (and not in its individual capacity) or the Owner Participant, any of its partners, or any Person that has guaranteed or may guarantee or support the 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 the Bankruptcy 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 of itself or 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 Trust Estate or the Owner Trustee with respect thereto (and not in its individual capacity) or the Owner Participant, any of its partners, or any Person that has guaranteed or may guarantee or support the 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 it 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 in its individual capacity) or the Owner Participant, any of its partners, or such Person, as the case may be; or (i) any petition for any relief specified in the foregoing paragraph (h) shall be filed against the Trust 51 57 Estate or the Owner Trustee with respect thereto (and not in its individual capacity) or the Owner Participant, any of its partners, or any Person that has guaranteed or may guarantee or support the 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 when the Aircraft shall be registered in a jurisdiction outside the United States, the Owner Trustee, the Trust Company or the Owner Participant shall breach any covenant as may be agreed upon pursuant to Section 11 of the Refunding Agreement as the result of which the Lien of this Indenture shall cease to be a valid and duly perfected Lien on the Trust Indenture Estate. SECTION 4.03. Certain Rights. In the event of any default by the Lessee in the payment of any installment of Basic Rent due under the Lease, the Owner Participant may, within ten calendar days (or such longer period ending on the second day after the expiry of the applicable grace period specified in the Lease with respect to such default) after notice from the Indenture Trustee or the Lessee of such default, without the consent or concurrence of any Note Holder, pay, as provided in Section 2.04 hereof, for application in accordance with Section 3.01 hereof, a sum equal to the amount of all (but not less than all) of the Principal Amount and interest as shall then (without regard to any acceleration pursuant to Section 4.04(b) or (c) hereof) be due and payable on the Equipment Notes. In the event of any default by the Lessee in any obligation under the Lease other than the payment of Basic Rent, if such default can be remedied by the payment of money and the Owner Trustee shall have been furnished by the Owner Participant with all funds necessary for remedying such default, the Owner Participant may, within fifteen calendar days (or such longer period ending on the second day after the expiry of any applicable grace period specified in the Lease with respect to such default) after notice from the Indenture Trustee or the Lessee of such default, without the consent or concurrence of any Note Holder, instruct the Owner Trustee to exercise the Owner Trustee's rights under Section 21(d) of the Lease to perform such obligation on behalf of the Lessee. Solely for the purpose of determining whether there exists an Indenture Event of Default, (a) any timely payment by the Owner Participant pursuant to, and in compliance with, the first sentence of this Section 4.03 shall be deemed to remedy (but solely for purposes of this Indenture) any default by the Lessee in the payment of Basic Rent theretofore due and payable and to remedy (but solely for purposes of this Indenture) any default by the Owner Trustee in the payment of any amount due and payable under the Equipment Notes or hereunder, and (b) any timely performance by the Owner Trustee of any obligation of the Lessee under the Lease pursuant to, and in compliance with, the second sentence of this Section 4.03 shall be deemed to remedy (but solely for purposes of this Indenture) any default by the 52 58 Lessee under the Lease to the same extent that like performance by the Lessee itself would have remedied such default (but any such payment or performance shall not relieve the Lessee of its duty to pay all Rent and perform all of its obligations pursuant to the Lease). If, on the basis specified in the preceding sentence, such Lease Event of Default shall have been remedied, then any declaration pursuant to the Lease that the Lease is in default, and any declaration pursuant to this Indenture that the Equipment Notes are due and payable or that an Indenture Event of Default exists hereunder, based upon such Lease Event of Default, shall be deemed to be rescinded, and the Owner Participant or the Owner Trustee, as the case may be, shall (to the extent of any such payments made by it) be subrogated to the rights of the Note Holders hereunder to receive such payment of Rent from the Indenture Trustee (and the payment of interest on account of such Rent being overdue), and shall be entitled, so long as no other Indenture Default or Indenture Event of Default shall have occurred and be continuing, to receive, subject to the terms of this Indenture, such payment upon receipt thereof by the Indenture Trustee; provided that the Owner Participant shall not otherwise attempt to recover any such amount paid by it on behalf of the Lessee pursuant to this Section 4.03 except by demanding of the Lessee payment of such amount, or by commencing an action at law against the Lessee and obtaining and enforcing a judgment against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee or by demanding Excepted Payments or Excepted Rights; provided, however, 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) and any amounts nevertheless received by the 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 3.03 hereof; and provided, further, that (x) this Section 4.03 shall not apply with respect to any default in the payment of Basic Rent due under the Lease, if the Lessee itself shall have theretofore failed to pay Basic Rent in the manner required under the Lease (after giving effect to any applicable grace period) as to (i) each of the three Basic Rent Payment Dates immediately preceding the date of such default or (ii) in the aggregate more than six Basic Rent Payment Dates, (y) the second sentence of this Section 4.03 shall cease to apply, and no payment by the Owner Participant in respect of Supplemental Rent or performance of any obligation of the Lessee under the Lease by the Owner Trustee shall be deemed to remedy or to have remedied any Lease Event of Default for the purposes of this Indenture, if during the 12-month period immediately preceding the relevant default by the Lessee there shall have been expended by the Owner Participant pursuant to the second sentence of this Section 4.03 (and shall have not been 53 59 reimbursed by the Lessee or any Permitted Sublessee themselves to the Owner Trustee for distribution to the Owner Participant) an amount in excess of $3,500,000, and (z) neither the Owner Trustee nor the Owner Participant shall (without the prior written consent of a Majority in Interest of Note Holders) have the right to cure any Lease Default or Lease Event of Default except as specified in this Section 4.03. SECTION 4.04. Remedies. (a) If an Indenture Event of Default shall have occurred and be continuing and so long as the same shall be continuing unremedied, and if the Equipment Notes shall have been accelerated pursuant to Section 4.04(b) or 4.04(c) hereof, then and in every such case the Indenture Trustee may (subject to the rights of the Owner Participant or the Owner Trustee to cure any such Indenture Event of Default set forth in Section 4.03 hereof and the obligations of the Indenture Trustee set forth in this Section 4.04(a) and subject to Section 10.05 hereof) exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Article IV and shall have and may exercise all of the rights and remedies of a secured party under the Uniform Commercial Code and, in the event such Indenture Event of Default is an Indenture Event of Default referred to in paragraph (a) of Section 4.02 hereof, the Indenture Trustee may (subject as aforesaid), at the direction of a Majority in Interest of Note Holders, exercise any and all of the remedies pursuant to Section 18 of the Lease and pursuant to any Sublease Assignment and 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 but, in the case of the Aircraft, only as permitted by Section 18 of the Lease, and may exclude the Owner Participant, the Owner Trustee and the Lessee and all Persons claiming under any of them or wholly or partly therefrom; provided, however, that the Indenture Trustee shall give the Owner Trustee and the Owner Participant ten days' prior written notice of the initial exercise of such remedies by the Indenture Trustee under the Lease (if not stayed or otherwise precluded by applicable law from giving such notice); provided, further, that the Indenture Trustee shall give the Owner Trustee and the Owner Participant thirty days' prior written notice of its intention to sell the Aircraft. Without limiting any of the foregoing, 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. Anything in this Indenture to the contrary notwithstanding, the Indenture Trustee shall not be entitled to exercise any remedy hereunder if there shall have occurred or be continuing a Lease Event of Default unless the Indenture Trustee shall have exercised or concurrently be exercising one or more of the remedies provided for in Section 18 of the Lease to terminate 54 60 the Lease or take possession and/or sell the Aircraft; provided, however, that such requirement 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)(A) of the Bankruptcy Code (such 60-day or other period being the "Section 1110 Period"), 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 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 trustee or the debtor-in-possession in such proceeding during the Section 1110 Period with the approval of the relevant court to perform the Lease in accordance with Section 1110(a)(1)(A) of the Bankruptcy Code and continues to perform as required by Section 1110(a)(1) 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 (unless the Indenture Trustee is stayed or otherwise precluded by applicable law from giving such notice). In the event that the applicability of Section 1110 of the Bankruptcy Code to the Aircraft is being contested by the Lessee in judicial proceedings, so long as the Indenture Trustee fails to participate in such proceedings, the Owner Trustee shall have the right (without affecting in any way any right or remedy of the Indenture Trustee hereunder) to participate in such proceedings. The foregoing shall not preclude the Indenture Trustee from notifying any Permitted Sublessee that payments under any Assigned Sublease are to be made directly to it pursuant to the terms of the relevant Sublease Assignment, or, except as expressly provided above, from exercising its rights or remedies hereunder and under the other Operative Documents. For the avoidance of doubt, it is expressly understood and agreed, subject only to the immediately preceding paragraph, that the above-described inability of the Indenture Trustee to exercise any right or remedy under the Lease shall in no event and under no circumstance prevent the Indenture Trustee from otherwise exercising all of its rights, powers and remedies under this Indenture, including without limitation this Article IV. (b) If an Indenture Event of Default referred to in clause (g), (h) or (i) of Section 4.02 hereof shall have occurred, or a Lease Event of Default under clause (e), (f) or (g) of Section 17 of the Lease shall have occurred, then and in 55 61 every such case the unpaid Principal Amount of all Equipment Notes then outstanding, together with accrued but unpaid interest and all other amounts due thereunder and hereunder, shall immediately and without further act become due and payable without presentment, demand, protest or notice, all of which are hereby waived. (c) If any Indenture Event of Default not specified in Section 4.04(b) hereof shall have occurred and be continuing, then and in every such case the Indenture Trustee may (and shall, upon receipt of a written demand therefor from a Majority in Interest of Note Holders), subject to Section 4.03 hereof, at any time, by written notice or notices to the Owner Trustee, declare the unpaid Principal Amount of all Equipment Notes to be due and payable, whereupon the unpaid Principal Amount of all Equipment Notes then outstanding, together with accrued but unpaid interest thereon and all other amounts due thereunder and hereunder, shall immediately become due and payable without presentment, demand, protest or further notice, all of which are hereby waived. (d) Sections 4.04(b) and (c), however, are subject to the condition that, if at any time after the Principal Amount of the Equipment Notes shall have become so due and payable, and before any judgment or decree for the payment of the money so due, or any thereof, shall be entered, all overdue payments of interest upon the Equipment Notes and all other amounts payable under the Equipment Notes (except the Principal Amount of the Equipment Notes which by such declaration shall have become payable) shall have been duly paid and every other Indenture Default and Indenture Event of Default with respect to any covenant or provision of this Indenture shall have been cured, then and in every such case a Majority in Interest of Note Holders may (but shall not be obligated to), by written instrument filed with the Indenture Trustee, rescind and annul the Indenture Trustee's declaration and its consequences; but no such rescission or annulment shall extend to or affect any subsequent Indenture Default or Indenture Event of Default or impair any right consequent thereon. Any acceleration pursuant to Sections 4.04(b) and (c) shall be automatically rescinded and any related declaration of an Indenture Event of Default annulled in the event that the Owner Trustee or the Owner Participant, as the case may be, shall have cured, in accordance with Section 4.03, the Indenture Event of Default that resulted in such acceleration. No Make-Whole Amount shall become payable on the Equipment Notes as a result of any acceleration under Section 4.04(b) or 4.04(c). (e) Each Note Holder shall be entitled, at any sale pursuant to Section 18 of the Lease, to credit against any purchase price bid at such sale by such Note Holder all or any part of the unpaid obligations owing to such Note Holder and 56 62 secured by the Lien of this Indenture. The Owner Trustee or Owner Participant may be a cash purchaser at any such sale. (f) Notwithstanding anything contained herein, so long as the Pass Through Trustee under any Pass Through Trust Agreement or the Subordination Agent on its behalf is a Note Holder, the Indenture Trustee will not be authorized or empowered to acquire title to any property in the Trust Indenture Estate or take any action with respect to any property in the Trust Indenture Estate so acquired by it if such acquisition or action would cause any trust created pursuant to the Trust Agreement to fail to qualify as a "grantor trust" for federal income tax purposes. SECTION 4.05. Return of the Aircraft, etc. (a) Subject to the rights of the Owner Trustee and the Owner Participant under Section 4.03 hereof and unless the Owner Participant shall have theretofore purchased the Equipment Notes pursuant to Section 2.12 hereof, if an Indenture Event of Default shall have occurred and be continuing and the Equipment Notes shall have been accelerated pursuant to Section 4.04(b) or 4.04(c) hereof, 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 Trust Indenture Estate; provided that the Indenture Trustee shall at the time be entitled to obtain such possession under Section 4.04(a) and the other applicable provisions of this Indenture. 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 to the fullest extent it may lawfully do so, and (ii) to the extent permitted by law, pursue all or part of the Trust Indenture Estate wherever it may be found (but not in violation of Section 10.05 hereof or of the Lease) and may enter any of the premises of the Lessee wherever such Trust Indenture Estate may be or be supposed to be and search for and take possession of and remove the same (but not in violation of Section 10.05 hereof or of the Lease). 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 a Lease Event of Default which is continuing, the Indenture Trustee may, from time to time, at the expense of the Trust Indenture Estate, make all such expenditures for maintenance, insurance, repairs, replacements, alterations, 57 63 additions and improvements to and of the Trust Indenture Estate, as it may deem proper (it being understood and agreed that the provisions hereof shall not be construed so as to expand the obligations of the Lessee under the Lease, including Section 16 thereof). In each such case, the Indenture Trustee shall have the right to maintain, use, operate, store, lease, control or manage the Trust Indenture Estate and to carry on the business (without limiting the express provisions of Section 5.10 hereof) and to exercise all rights and powers of the Owner Participant and the Owner Trustee relating to the Trust Indenture Estate, as the Indenture Trustee shall deem best, 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 Trust Indenture Estate or any part thereof as the Indenture Trustee may determine; and the Indenture Trustee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits of the Trust Indenture Estate and every part thereof, except Excepted Payments, without prejudice, however, to the right of the Indenture Trustee under any provision of this Indenture to collect and receive all cash held by, or required to be deposited with, the Indenture Trustee hereunder, except Excepted Payments. The Indenture Trustee shall, pursuant to the exercise of its remedies under this Article IV, to the extent permitted by applicable law, be entitled to the appointment of a receiver for all or any part of the Trust Indenture Estate, whether such receivership be incidental to a proposed sale of the Trust Indenture Estate or otherwise, and the Owner Trustee hereby consents to the appointment of such receiver and will not oppose any such appointment. Such tolls, 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 Trust 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 Trust 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 that 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. SECTION 4.06. Remedies Cumulative. Each and every right, power and remedy given to the Indenture Trustee specifically or otherwise in this Indenture shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy 58 64 whether specifically herein given 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, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. No delay or omission by the Indenture Trustee 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 or the Lessee or to be an acquiescence therein. SECTION 4.07. Discontinuance of Proceedings. In case the Indenture Trustee or any Note Holder shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Indenture Trustee or such Note Holder, then and in every such case the Owner Trustee, the Indenture Trustee, the Note Holders and the Lessee shall, subject to any determination in such proceedings, be restored to their former positions and rights hereunder with respect to the Trust Indenture Estate, and all rights, remedies and powers of the Indenture Trustee and the Note Holders shall continue as if no such proceedings had been instituted. SECTION 4.08. Waiver of Past Indenture Defaults. Upon written instructions from a Majority in Interest of Note Holders, the Indenture Trustee shall waive any past Indenture Default hereunder and its consequences and upon any such waiver such Indenture Default shall cease to exist and any Indenture Event of 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 the Holders of all Equipment Notes then outstanding, the Indenture Trustee shall not waive any Indenture Default (i) in the payment of the Principal Amount of or interest on any Equipment Note then outstanding, or (ii) in respect of a covenant or provision hereof which, under Article IX hereof, cannot be modified or amended without the consent of each Note Holder. SECTION 4.09. Exercise of Remedies by Foreign Note Holders. If the Indenture Trustee shall exercise remedies pursuant to this Article IV, at a time when (i) the Aircraft is registered with the Federal Aviation Administration, (ii) 25% or more of the then unpaid Principal Amount of the Equipment Notes is held by one or more Persons which are not a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Federal Aviation Act and (iii) remedies are to be exercised pursuant to this Article IV as a result of the occurrence of an Indenture Event of Default which is not a Lease Event of Default, the Indenture Trustee shall make arrangements, if any, as may be 59 65 required by law so that such exercise of remedies shall not result in the ineligibility of the Aircraft to be registered under the Federal Aviation Act. ARTICLE V DUTIES OF THE INDENTURE TRUSTEE SECTION 5.01. Notice of Indenture Event of Default. In the event the Indenture Trustee shall have knowledge of an Indenture Event of Default, or shall have knowledge of an Indenture Default arising either from a failure to pay Rent or a Lease Default of the type referred to in the second sentence of Section 4.03, the Indenture Trustee shall give prompt notice thereof to the Owner Trustee, the Owner Participant and the Lessee by facsimile, telex, telegraph or telephone (confirmed by written notice in the manner provided by Section 10.06 hereof), and to each Note Holder by first- class mail. Subject to the terms of Sections 2.12, 4.03, 4.04, 4.08, 4.09, 5.03, 5.10 and 10.05 hereof and of this Section 5.01, the Indenture Trustee shall take such action, or refrain from taking such action, with respect to any Indenture Event of Default or Indenture Default (including with respect to the exercise of any rights or remedies hereunder) as the Indenture Trustee shall be instructed in writing by a Majority in Interest of Note Holders. Subject to the provisions of Section 5.03 hereof, if the Indenture Trustee shall not have received instructions as above provided within 20 calendar days after mailing notice of such Indenture Default or Indenture Event of Default to the Note Holders, the Indenture Trustee may, subject to instructions thereafter received pursuant to the preceding provisions of this Section 5.01, take such action, or refrain from taking such action, but shall be under no duty to take or refrain from taking any action, with respect to such Indenture Default or Indenture Event of Default as it shall determine to be advisable and in the best interests of the Note Holders and shall use the same degree of care and skill in connection therewith as a prudent person would use under the circumstances in the conduct of its own affairs; provided that the Indenture Trustee may not sell the Aircraft or any part thereof without the consent of a Majority in Interest of Note Holders. In the event the Indenture Trustee shall at any time elect to foreclose or otherwise enforce this Indenture, the Indenture Trustee shall forthwith notify, to the extent (in the case of any such party) not stayed or otherwise prohibited by applicable law, the Owner Participant, the Note Holders, the Owner Trustee and the Lessee. For all purposes of this Indenture, in the absence of actual knowledge on the part of an officer in the Corporate Trust Office, in the case of the Indenture Trustee, or its Corporate Trust Administration Department, in the case of the Owner Trustee, the Indenture Trustee or the Owner Trustee, as the case may be, shall not be deemed to have knowledge of an Indenture Event of Default (except, in the case of the Indenture Trustee, the failure of the 60 66 Lessee to pay any installment of Rent when due, if any portion of such installment was then required to be paid to the Indenture Trustee, which failure shall constitute knowledge of an Indenture Default for purposes of the first sentence of this Section 5.01) unless notified in writing by the Lessee, the Owner Trustee or one or more Note Holders or, in the case of the Owner Trustee, by the Indenture Trustee. SECTION 5.02. Action Upon Instructions. Subject to the terms of Sections 2.12, 4.03, 4.04, 4.08, 4.09, 5.01, 5.03, 5.10, 9.01 and 10.05 hereof, upon the written instructions at any time and from time to time of a Majority in Interest of Note Holders, the Indenture Trustee shall take such of the following actions as may be specified in such instructions: (i) exercise such election or option, or make such decision or determination, or give such notice, consent, waiver or approval or exercise such right, remedy or power to take such other action hereunder or under any other Indenture Document or in respect of any part or all of the Trust Indenture Estate as shall be specified in such instructions; (ii) take such action with respect to, or to preserve or protect, the Trust Indenture Estate (including the discharge of Liens) as shall be specified in such instructions and as are consistent with this Indenture; and (iii) take such other action in respect of the subject matter of this Indenture as is consistent with the terms hereof and of the other Indenture Documents. 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 Trust Indenture Estate as may be specified from time to time in written instructions of a Majority in Interest of Note Holders (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, notwithstanding the foregoing, the Indenture Trustee may, but shall not be obligated to, execute and file or cause to be filed any financing statement which it from time to time deems appropriate or any continuation statement that the Lessee, in discharge of its obligations under Section 3(v) of the Refunding Agreement or any other Operative Document (including, without limitation, Section 15 of the Lease), may so request. Notwithstanding the foregoing or anything in this Indenture to the contrary, the Indenture Trustee may, on the advice of its counsel and without the consent or approval of any Note Holder, approve any counsel asked to opine on any matters under Section 11(b)(ii) of the Refunding Agreement, Section 6(a)(iii) of the Lease or under this Indenture and approve any opinion issued by such counsel. None of the Owner Participant, the Owner Trustee or the Lessee have any liability for the failure of the Indenture Trustee to discharge its obligations hereunder. SECTION 5.03. Indemnification. The Indenture Trustee shall not be required to take any action or refrain from taking any action under Section 5.01 (other than the first sentence 61 67 thereof) or 5.02 or Article IV hereof unless the Indenture Trustee shall have been indemnified against any liability, cost or expense (including counsel fees) that may be incurred in connection therewith. The Indenture Trustee shall not be under any obligation to take any action under this Indenture and nothing in this Indenture contained shall require the Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. The Indenture Trustee shall not be required to take any action under Section 5.01 (other than the first sentence thereof) or 5.02 or Article IV hereof, nor shall any other provision of this Indenture be deemed to impose a duty on the Indenture Trustee to take any action, if the Indenture Trustee shall have been advised by counsel that such action is contrary to the terms hereof or of the other Indenture Documents or is otherwise contrary to law. SECTION 5.04. No Duties Except as Specified in Indenture or Instructions. The Indenture Trustee shall not have any duty or obligation to maintain, use, operate, store, lease, control, manage, sell, dispose of, insure or otherwise deal with the Aircraft or any other part of the Trust Indenture Estate, or to otherwise take or refrain from taking any action under, or in connection with, this Indenture or any Indenture Document or any part of the Trust Indenture Estate, except as expressly provided by the terms of this Indenture or as expressly provided in written instructions from Note Holders as provided in this Indenture and no implied duties or obligations shall be read into this Indenture against the Indenture Trustee. It is understood that, as between the Indenture Trustee and the Note Holders, with respect to all matters left to the discretion of the Indenture Trustee hereunder, or under any Indenture Document, the Indenture Trustee shall have the right to request written instructions from the Note Holders and, pending receipt of such instructions from the Note Holders or the required percentage thereof as provided herein, the Indenture Trustee shall not be required to take any such discretionary action hereunder; provided, however, that if the Indenture Trustee shall request written instructions pursuant to this Section 5.04, it will use reasonable efforts to seek and obtain such instructions promptly so as not unreasonably to delay the proposed action of Lessee in respect of which the instructions are sought. 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 VII hereof or any other Operative Document) promptly take such action as may be necessary to duly discharge all Lenders' Liens on any part of the Trust Indenture Estate attributable to it in its individual capacity. SECTION 5.05. No Action Except Under Lease, Refunding Agreement, Indenture or Instructions. The Owner Trustee and the 62 68 Indenture Trustee agree that they will not use, operate, store, lease, control, manage, sell, dispose of or otherwise deal with, or place Liens on, the Aircraft or any other part of the Trust Indenture Estate except (i) as required or permitted by the terms of the Lease or the Refunding Agreement, or (ii) in accordance with the powers granted to, or the authority conferred upon, the Owner Trustee and the Indenture Trustee pursuant to this Indenture and in accordance with the terms hereof. SECTION 5.06. Replacement Airframes, Replacement Engines and Replacement Parts. (a) If at any time and from time to time, the Airframe or Engine(s) may, or may be required to, be replaced under Section 6(a), 11(a), 11(b) or 16(c) of the Lease by a Replacement Airframe or Replacement Engine(s), as the case may be, in accordance with the provisions of this Section 5.06 and the provisions of said Sections of the Lease, the Owner Trustee shall, at such time or times, but subject to compliance with the conditions to such replacement set forth in the Lease, direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing such Airframe and/or Engine(s) as appropriate from the Lien of this Indenture and the Indenture Trustee shall execute and deliver such instrument as aforesaid, 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) so to be released and the Replacement Airframe and/or Replacement Engine(s). (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 which shall be identified by manufacturer, model, FAA registration number (or other applicable registration number) and manufacturer's serial number; (ii) a description of the Replacement Airframe (including the manufacturer, model, FAA registration number (or other applicable registration number) and manufacturer's serial number) to be received as consideration for the Airframe to be released; (iii) that on the date of the Indenture Supplement relating to the Replacement Airframe the Owner Trustee will hold legal title to such Replacement Airframe free and clear of all Liens except Permitted Liens, that such Replacement Airframe will on such date be in good operating condition, and that such Replacement Airframe has been or, substantially concurrently with such replacement, is in the 63 69 process of being duly registered with the Owner Trustee as owner thereof under the Federal Aviation Act or under the law then applicable to the registration of the Aircraft and that an airworthiness certificate has been duly issued under the Federal Aviation Act (or such other applicable law) with respect to such Replacement Airframe, and that such registration and certificate is in full force and effect, and the Lessee or a Permitted Sublessee will have the full right and authority to use such Replacement Airframe; (iv) that the insurance required by Section 12 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 a like Airbus A320-231 model airframe with equivalent or better modification status delivered by the Manufacturer not earlier than June 30, 1988; (vi) that no Lease Event of 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; (vii) an appraisal prepared in accordance with the Appraisal Procedure (as defined in the Lease) confirms that the Replacement Airframe has a value, utility and remaining useful life at least equal to that of the Airframe which suffered the Event of Loss assuming that the same were maintained in accordance with the requirements of the Lease whether or not they are in fact so maintained; and (viii) that each of the conditions specified in Section 11(a) and (c) of the Lease with respect to such Replacement Airframe have been satisfied. B. With respect to the replacement of any Engine: (i) a description of the Engine which shall be identified by manufacturer's name and serial number; (ii) a description of the Replacement Engine (including the manufacturer's name and serial number) to be received as consideration for the Engine to be released; (iii) that on the date of the Indenture Supplement relating to the Replacement Engine the Owner Trustee will hold title to such Replacement Engine free and clear of all Liens except Permitted Liens, that such Replacement Engine will on such date be in good operating condition, and that such Replacement Engine is the same or an improved model as the Engine to be released; 64 70 (iv) the value, remaining useful life and utility of the Replacement Engine as of the date of such certificate (which value, remaining useful life and utility shall not be less than the then value, remaining useful life and utility of the Engine requested to be released, assuming such Engine was in the condition and repair required to be maintained under the Lease (but without regard to hours and cycles until overhaul)); (v) that no Lease Event of Default has occurred and is continuing or would result from the making and granting of the request for release and the addition of such Replacement Engine; and (vi) that each of the conditions specified in Section 11(b) of the Lease with respect to such Replacement Engine have been satisfied. (3) The appropriate instrument or 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, (ii) assigning to the Owner Trustee the benefit of all manufacturer's and vendor's warranties generally available with respect to such Replacement Airframe or Replacement Engine (if any) (which warranties may be assigned by the Owner Trustee to Lessee pursuant to Section 5(d) of the Lease), and (iii) subjecting such Replacement Airframe or Replacement Engine to the Lien of this Indenture and subjecting to any relevant Assigned Sublease and Sublease Assignment, including, without limitation, an Indenture Supplement, and to the Foreign Lease Agreement, if then in effect, and to the Hire Purchase Agreement, if then in effect. (4) With respect to a Replacement Airframe, an appraisal from BK Associates, Avmark Services Ltd., AeroEconomics, Inc. or another firm of independent aircraft appraisers satisfactory to the Indenture Trustee confirming the accuracy of the information set forth in Section 5.06(a)2.A(vii) hereof. (5) The opinion of counsel to the Lessee, satisfactory to the Indenture Trustee, stating that: (i) the certificates, opinions and other instruments and/or property that 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; (ii) the Replacement Airframe and/or Replacement Engine(s) have been validly subjected to the Lien of this Indenture and covered by the Lease, subjected to the Lien of 65 71 the Foreign Lease Agreement, if then in effect, and subjected to the Lien of the Hire Purchase Agreement, if then in effect, the instruments subjecting such Replacement Airframe or Replacement Engine to the Lien of this Indenture and the Lease, and subjecting to any relevant Assigned Sublease and Sublease Assignment, as the case may be, have been duly filed for recordation pursuant to the Federal Aviation 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 in order to establish and perfect, in the United States and, if the Aircraft is registered outside the United States, in the jurisdiction of registration, the legal title to such Replacement Airframe and/or Replacement Engine and the Lien of this Indenture on such Replacement Airframe and/or Replacement Engine; and (iii) the Owner Trustee and the Indenture Trustee (as assignee of the Owner Trustee's rights under the Lease) shall be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to the Replacement Airframe and, if an Event of Loss with respect to the Aircraft has occurred, the Replacement Engines to the same extent as with respect to the Airframe and Engines then installed thereon prior to such replacement. (b) Upon the acquisition by the Owner Trustee of title to or other interest in any Part under and as provided in the Lease, the same shall automatically and without further act become subject to the Lien of this Indenture, and to the extent the Owner Trustee is divested of title to or other interest in any Part under and as provided in the Lease, the same shall automatically and without further act cease to be subject to the Lien of this Indenture. The Indenture Trustee shall at any time and from time to time at the request of the Lessee execute an appropriate written instrument or instruments to confirm the release of any Part from the Lien of this Indenture as provided in this Section 5.06(b), but only upon receipt by the Indenture Trustee of an Officers' Certificate of Lessee confirming such release is authorized by the terms hereof. SECTION 5.07. Indenture Supplements for Replacements. In the event of the substitution of a Replacement Airframe or Engine as contemplated by Section 11 of the Lease, the Owner Trustee and the Indenture Trustee agree for the benefit of the Note Holders and the Lessee, subject to fulfillment of the conditions precedent and compliance by the Lessee with its obligations set forth in Section 11 of the Lease, to execute and deliver the appropriate instruments as contemplated by Section 5.06 hereof, and execute and deliver to the Lessee (or any relevant Permitted Sublessee) an appropriate instrument releasing the Airframe and/or Engine(s) being replaced from the Lien of this Indenture. 66 72 SECTION 5.08. Effect of Replacement. In the event of the substitution of a Replacement Airframe or Engine as contemplated by Section 11 of the Lease and Section 5.06 hereof, all provisions of this Indenture relating to the Airframe or Engine(s) being replaced shall be applicable to such Replacement Airframe or Replacement Engine(s) with the same force and effect as if such Replacement Airframe or Replacement Engine(s) were the same airframe or engine(s), as the case may be, as the Airframe or Engine(s) being replaced. SECTION 5.09. Notices, etc. Where this Indenture expressly provides for notice to Note Holders, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first- class postage prepaid, to each Note Holder entitled thereto, at his last address as it appears in the Register. In any case where notice to Note Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Note Holder shall affect the sufficiency of such notice with respect to other Note 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 Note 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 mail service, it shall be impracticable to mail notice to the Note 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 5.10. Certain Rights of Owner Trustee and Owner Participant. Notwithstanding any other provisions of this Indenture, including the Granting Clause, but subject always to the final paragraph of this Section 5.10, the following rights shall be reserved to the Owner Trustee or Owner Participant, as the case may be (as separate and independent rights) to the extent described herein: (a) the Owner Trustee or the Owner Participant may, without the consent of the Indenture Trustee, demand, collect, sue for or otherwise obtain all amounts included in Excepted Payments from the Lessee, exercise any election or option or make any decision or determination or give or receive any notice, consent, waiver or approval in respect of any Excepted Payment and seek legal or equitable remedies to require the Lessee to maintain the insurance coverage referred to in Section 12 of the Lease (or the comparable provisions of any Assigned Sublease) and such specific 67 73 performance of the covenants of the Lessee under the Lease (or the comparable provisions of any Assigned Sublease) relating to the protection, maintenance, possession and use of the Aircraft; provided, that the rights referred to in this clause (a) shall not be deemed to include the exercise of any remedies provided for in Section 18 of the Lease (or the comparable provisions of any Assigned Sublease) other than the right to proceed by appropriate court action, either at law or in equity, to enforce payment by the Lessee of such amounts included in Excepted Payments or performance by the Lessee of such insurance covenant or to recover damages for the breach thereof or for specific performance of any covenant of the Lessee; (b) (i) the Indenture Trustee shall not, without the consent of the Owner Trustee, enter into, execute and deliver amendments or modifications in respect of any of the provisions of the Lease, any Assigned Sublease or any Sublease Assignment and (ii) unless an Indenture Event of Default and an Indenture Trustee Event shall have occurred and be continuing, the Indenture Trustee shall not, without the consent of the Owner Trustee, which consent shall not be withheld if no right or interest of the Owner Trustee or the Owner Participant shall be materially diminished or impaired thereby, (A) enter into, execute and deliver waivers or consents in respect of any of the provisions of the Lease, any Assigned Sublease or any Sublease Assignment, or (B) approve any accountants, engineers, appraisers or counsel as satisfactory to render services for or issue opinions to the Owner Trustee pursuant to the Operative Documents (other than tax opinions issued to the Owner Participant, any partner of the Owner Participant or the Owner Trustee); provided that, whether or not an Indenture Event of Default has occurred and is continuing, the Owner Trustee's consent shall be required with respect to any waivers or consents in respect of any of the provisions of Section 6, 12 or 16 of the Lease, or of any other Section of the Lease to the extent such action shall affect (y) the amount or timing of, or the right to enforce payment of any Excepted Payment or (z) the amount or timing of any amounts payable by the Lessee under the Lease as originally executed (or as subsequently modified with the consent of the Owner Trustee) which, absent the occurrence and continuance of an Indenture Event of Default hereunder, would be distributable to the Owner Trustee under Article III hereof; (c) at all times whether or not an Indenture Event of Default has occurred and is continuing, the Owner Trustee and the Owner Participant shall have the right, together with the Indenture Trustee, (i) to receive from the Lessee or any Permitted Sublessee all notices, certificates, reports, filings, opinions of counsel and other documents and all information which any thereof is permitted or required to give or furnish to the Owner Trustee pursuant to 68 74 any Operative Document (including pursuant to Section 10 of the Lease), (ii) to exercise inspection rights pursuant to Section 7 of the Lease, (iii) to retain all rights with respect to insurance maintained for its own account which Section 12 of the Lease specifically confers on the Owner Participant and (iv) to exercise, to the extent necessary to enable it to exercise its rights under Section 4.03 hereof, the rights of the Owner Trustee under Section 21(d) of the Lease and to give notices of default under Section 17 of the Lease; and (d) except as expressly provided to the contrary in clauses (a), (b) and (c) above, so long as no Indenture Event of Default has occurred and is continuing, all rights (including options, elections, determinations, consents, approvals, waivers and the giving of notices) of the Owner Trustee and the Owner Participant under the Lease shall be exercised by the Owner Trustee and/or the Owner Participant, as the case may be, to the exclusion of the Indenture Trustee and any Note Holder and without the consent of the Indenture Trustee or any Note Holder; provided that the foregoing shall not, nor shall any other provision of this Section 5.10, limit (A) any rights separately and expressly granted to the Indenture Trustee or any Note Holder under the Lease or the other Operative Documents (including, without limitation, Section 15 of the Refunding Agreement) or (B) the right of the Indenture Trustee or any Note Holder to receive any funds to be delivered to the Owner Trustee under the Lease (except with respect to Excepted Payments), the Foreign Lease Agreement, the Foreign Lease Assignment, the Hire Purchase Agreement, the Foreign Power of Attorney and the General Assumption Agreement or other Foreign Financing Documents. Notwithstanding the foregoing provisions of this Section 5.10, but subject always to Section 10.05 hereof and to the rights of the Owner Participant under Sections 2.12 and 4.03 hereof, the Indenture Trustee shall at all times have the right, to the exclusion of the Owner Trustee and the Owner Participant, to (A) demand, collect, sue for or otherwise receive and enforce the payment of all Rent due and payable under the Lease (other than any thereof constituting an Excepted Payment or Excepted Right), (B) declare the Lease to be in default under Section 18 thereof and (C) subject only to the provisions of Sections 4.03 and 4.04(a) hereof, exercise the remedies set forth in such Section 18 (other than in connection with Excepted Payments) and in Article IV hereof. SECTION 5.11. Evidence of Action Taken by Note Holder. Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Note Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Note Holders in person or by agent duly appointed in writing, 69 75 and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, if expressly required herein, to the Owner 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 5.04, 5.05, 6.02 and 6.05) conclusive in favor of the Indenture Trustee and the Owner Trustee if made in the manner provided in this Indenture. SECTION 5.12. Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Indenture Trustee, as provided in Section 5.11 hereof, of the taking of any action by the Note Holders of the percentage in aggregate Principal Amount of the Equipment Notes specified in this Indenture in connection with such action, any Note Holder which has consented to such action may, by filing written notice at the Corporate Trust Office and upon proof of holding an Equipment Note, revoke such action so far as concerns such Equipment Note. Except as aforesaid any such action taken by the Note Holder shall be conclusive and binding upon such Note Holder and upon all future Note Holders and owners of such Equipment Note and of any Equipment Notes issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Equipment Note. Any action taken by the Note Holders of the percentage in aggregate Principal Amount of the Equipment Notes specified in this Indenture in connection with such action shall be conclusively binding upon the Owner Trustee, the Indenture Trustee and the Note Holders. ARTICLE VI THE OWNER TRUSTEE AND THE INDENTURE TRUSTEE SECTION 6.01. Acceptance of Trusts and Duties. The Indenture Trustee in its individual capacity accepts the trust hereby created and agrees to perform the same but only upon the terms of this Indenture. The Indenture Trustee agrees for the benefit of the Note Holders, the Owner Trustee and the Owner Participant to receive and disburse all moneys constituting part of the Trust Indenture Estate in accordance with the terms hereof; and neither the Trust Company nor the Indenture Trustee in its individual capacity shall be answerable or accountable under any circumstances, except for its own willful misconduct or gross negligence (other than for the handling of funds, for which the standard of accountability shall be negligence), or as provided in the fourth sentence of Section 2.04(a) hereof and in the last sentence of Section 5.04 hereof, and except for liabilities that may result, in the case of the Trust Company, from the inaccuracy of any representation or warranty of the Trust Company in the Refunding Agreement or in the Trust Agreement or in Section 6.03 hereof or the failure to perform any covenant of the Trust Company pursuant to Section 4.01(a) hereof 70 76 or in the Trust Agreement, the Refunding Agreement, or, in the case of the Indenture Trustee, from the inaccuracy of any representation or warranty, or failure to perform any covenant, of the Indenture Trustee made in its individual capacity herein, in the Refunding Agreement or in any other document. None of the Owner Participant, the Trust Company or the Indenture Trustee shall be liable for any action or inaction of any other one of such parties, except, in the case of the Owner Participant, for any action or omission of the Owner Trustee performed or omitted on the instructions of the Owner Participant. The Owner Trustee shall not be deemed a trustee for the Note Holders for any purpose. SECTION 6.02. Absence of Duties. In the case of the Indenture Trustee, except in accordance with written instructions furnished pursuant to Section 5.01, 5.02 or 9.01 hereof, and except as provided in, and without limiting the generality of, Sections 5.03, 5.04 and 6.09 hereof and, in the case of the Owner Trustee, except as provided in Section 4.01(b), 6.09 or 9.01 hereof and in the Trust Agreement, the Lease and the Refunding Agreement, the Owner Trustee and the Indenture 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 Indenture or any other document, or to see to the maintenance of any such registration, recording or filing, (ii) to see to any insurance on the Aircraft, whether or not the Lessee shall be in default with respect thereto, (iii) to see to the payment or discharge of any Lien of any kind against any part of the Trust Estate or the Trust Indenture Estate, (iv) to confirm, verify or inquire into the failure to receive any financial statements of the Lessee or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of the Lessee's covenants under the Lease or any of the Permitted Sublessee's covenants under any Assigned Sublease with respect to the Aircraft. SECTION 6.03. No Representations or Warranties as to Aircraft or Documents. NEITHER THE INDENTURE TRUSTEE (INDIVIDUALLY OR AS INDENTURE TRUSTEE) NOR THE OWNER TRUSTEE NOR THE TRUST COMPANY MAKES OR SHALL BE DEEMED TO HAVE MADE, AND EACH HEREBY EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE (EXCEPT AS SET FORTH IN SECTION 5(a) OF THE LEASE), AIRWORTHINESS, VALUE, WORKMANSHIP, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN, QUALITY, DURABILITY, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OR PURPOSE OF THE AIRCRAFT OR ANY ENGINE 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, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE, except that the Trust Company warrants that (i) on the Delivery Date for the Aircraft the Owner Trustee shall have received whatever interest in the Aircraft was conveyed to it under the Hire Purchase 71 77 Agreement, the Hire Purchase Assignment, the Foreign Lease Agreement, the Foreign Lease Assignment, the First CSA Assignment, and the Second Aircraft Warranty Bill of Sale subject to the rights of the parties to the Indenture Documents 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 Equipment Notes or any Indenture Documents 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 in its individual capacity or as Indenture Trustee made under this Indenture or in the other Operative Documents. SECTION 6.04. No Segregation of Moneys; No Interest. Any moneys paid to or retained by the Indenture Trustee pursuant to any provision hereof and not then required to be distributed to any Note Holder, the Lessee or the Owner Trustee as provided in Article III hereof need not be segregated in any manner except to the extent required by law, and may be deposited under such general conditions as may be prescribed by law, and the Indenture Trustee shall not (except as otherwise provided in Section 3.07 hereof) be liable for any interest thereon; provided that any payments received or applied hereunder by the Indenture Trustee shall be accounted for by the Indenture Trustee so that any portion thereof paid or applied pursuant hereto shall be identifiable as to the source thereof. SECTION 6.05. Reliance; Agents; Advice of Counsel. Neither the Owner Trustee nor the Indenture Trustee shall incur any liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper believed by it to be genuine and believed by it to be signed by the proper party or parties. The Owner Trustee and the Indenture Trustee may accept a copy of a resolution of the Board of Directors of any party to the Refunding Agreement, certified by the Secretary or an Assistant Secretary thereof as duly adopted and in full force and effect, as conclusive evidence that such resolution has been duly adopted and that the same is in full force and effect. As to the aggregate unpaid Principal Amount of Equipment Notes outstanding as of any date, the Owner Trustee may for all purposes hereof rely on a certificate signed by any Vice President or other authorized corporate trust officer of the Indenture Trustee. As to any fact or matter relating to the Lessee the manner of ascertainment of which is not specifically described herein, the Owner Trustee and the Indenture Trustee may for all purposes hereof rely on a certificate, signed by a duly authorized officer of the Lessee, as to such fact or matter, and such certificate shall constitute full protection to the Owner Trustee and the Indenture Trustee for any action taken or omitted to be taken by them in good faith in reliance thereon, but in the case of any such 72 78 certificate, the Owner Trustee and the Indenture Trustee shall be under a duty to examine the same to determine whether or not it conforms to the requirements of this Indenture. The Indenture Trustee shall assume, and shall be fully protected in assuming, that the Owner Trustee is authorized by the Trust Agreement to enter into this Indenture and to take all action to be taken by it pursuant to the provisions hereof, and shall not inquire into the authorization of the Owner Trustee with respect thereto. In the administration of the trusts hereunder, the Owner Trustee and the Indenture Trustee each may execute any of the trusts or powers hereof and perform its powers and duties hereunder directly or (except in the case of the Indenture Trustee's obligations under the third sentence of Section 2.04(a)) through agents or attorneys and shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care hereunder. The Indenture Trustee may, at the expense of the Trust Indenture Estate, consult with counsel, accountants and other skilled Persons to be selected and retained by it, and the Owner Trustee and the Indenture Trustee shall not be liable for anything done, suffered or omitted in good faith by them in accordance with the written advice or written opinion of any such counsel, accountants or other skilled Persons. SECTION 6.06. Capacity in Which Acting. The Owner Trustee acts hereunder solely as trustee under the Trust Agreement provided, and not in its individual capacity, except as otherwise expressly provided herein. SECTION 6.07. Compensation. The Indenture Trustee shall be entitled to reasonable compensation (which compensation shall not (to the extent permitted by applicable law) be limited by any provision of law in regard to the compensation of a trustee of an express trust), including expenses, advances and disbursements, for all services rendered hereunder, and shall have a first priority claim (prior to the Note Holders) on the Trust Indenture Estate for the payment of such compensation, to the extent that such compensation shall not be paid by the Lessee, and shall have the right to use or apply any moneys held by it hereunder in the Trust Indenture Estate toward such payments. The Indenture Trustee agrees that it shall have no right against any Note Holder or the Owner Participant for any fee as compensation for its services as trustee under this Indenture. SECTION 6.08. May Become Note Holder. Each of the institutions acting as Owner Trustee and Indenture Trustee hereunder may become a Note Holder and have all rights and benefits of a Note Holder to the same extent as if it were not the institution acting as Owner Trustee or Indenture Trustee, as the case may be. SECTION 6.09. Further Assurances; Financing Statements. At any time and from time to time, upon the request of the Indenture Trustee, the Owner Trustee shall promptly and duly execute and deliver any and all such further instruments and 73 79 documents as may be specified in such request and as are necessary or desirable to perfect, preserve or protect the mortgage, security interests and assignments created or intended to be created hereby, or to obtain for the Indenture Trustee the full benefit of the specific rights and powers herein granted, 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 mortgage, security interests or assignments created or intended to be created hereby. ARTICLE VII INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE SECTION 7.01. Scope of Indemnification. 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 but except as otherwise provided in Section 2.03 hereof, to assume liability for, and does hereby indemnify, protect, save and keep harmless the Indenture Trustee, in its individual capacity and as Indenture Trustee, and its successors, permitted assigns, agents and servants solely from the Trust Estate, 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, and reasonable out-of-pocket costs, expenses or disbursements (including reasonable 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 and as trustee) from and after the Restatement Date (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, the Trust Agreement, the Equipment Notes, the 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, purchase, acceptance, nonacceptance, rejection, ownership, delivery, lease, sublease, 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 Trust Indenture Estate or the action or inaction of the Indenture Trustee hereunder, except only (i) in the case of willful misconduct or gross negligence (or negligence in the case of handling of funds) 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 made in the Refunding Agreement, (iii) as otherwise provided in Section 2.04(a) hereof or in the last sentence of Section 5.04 hereof or 74 80 (iv) as otherwise excluded by the terms of Sections 10(b) and 13 of the Lease from the Lessee's indemnities to the Indenture Trustee, in its individual capacity and as Indenture Trustee, and its successors, permitted assigns, agents and servants, thereunder; provided that so long as the Lease is in effect, the Indenture Trustee shall not make any claim under this Section 7.01 for any amount indemnified against by the Lessee under the Lease without first (but only to the extent not stayed or otherwise prevented by operation of law) making demand on the Lessee for payment of such amount. The Indenture Trustee shall notify the Owner Trustee and the Lessee promptly of any claim for which it may seek indemnity. The Lessee shall be entitled to defend any claim by the Indenture Trustee to the extent provided in Section 10 or 13 of the Lease. The Indenture Trustee shall be entitled to indemnification from the Trust Indenture Estate for any liability, obligation, loss, damage, penalty, claim, action, suit, cost, expense or disbursement indemnified against pursuant to this Section 7.01 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 Trust Indenture Estate. The indemnities contained in this Section 7.01 shall survive the termination of this Indenture. SECTION 7.02. Exculpation and Release of Liability. Without in any way affecting the limitations on liability set forth in the Operative Documents, the Indenture Trustee, and each Note Holder by accepting any Equipment Note hereunder, hereby acknowledge and agree that none of the Trust Company, the Owner Participant or any director, officer, employee, stockholder, partner, agent or affiliate of the Trust Company or the Owner Participant (the "Exculpated Equity Persons") shall have any obligation, duty or liability of any kind whatsoever to the Indenture Trustee or any such Note Holder in connection with the exercise by any Exculpated Equity Person of any rights of the Owner Trustee or the taking of any action or the failure to take any action by any Exculpated Equity Person in connection with any rights of the Owner Trustee under this Indenture or the Lease, and each such Note Holder hereby waives and releases, to the extent permitted by applicable law, each Exculpated Equity Person of any and all such obligations, duties or liabilities. ARTICLE VIII SUCCESSOR TRUSTEES AND SEPARATE TRUSTEES SECTION 8.01. 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 Trust Company pursuant to the Trust Agreement, the successor Owner Trustee shall give prompt written notice thereof to the Indenture Trustee and to each Note Holder. 75 81 SECTION 8.02. 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 calendar days' prior written notice to the Owner Trustee, the Owner Participant, each Note Holder and the Lessee, such resignation to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In addition, a Majority in Interest of Note Holders may at any time remove the Indenture Trustee without cause by an instrument in writing delivered to the Owner Trustee, the Lessee and the Indenture Trustee, and the Indenture Trustee shall promptly notify each Note 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 Note Holders may appoint, with the consent of the Lessee, a successor Indenture Trustee by an instrument signed by such Holders (whose fees shall be reasonably acceptable to the Lessee). If a successor Indenture Trustee shall not have been appointed within 30 calendar days after such notice of resignation or removal, the Indenture Trustee, any Note Holder, the Owner Trustee, the Lessee or the Owner Participant 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 above provided. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as above provided within one year from the date of the appointment by such court. (b) Any successor Indenture Trustee, however appointed, shall execute and deliver to the Owner Trustee and to the predecessor Indenture Trustee an instrument accepting and assuming such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Indenture Trustee, without further act, shall become vested with and bound by all the estates, properties, rights, powers, duties and obligations of the predecessor Indenture Trustee hereunder and under the other Indenture Documents in the trusts hereunder applicable to it with like effect as if originally named the Indenture Trustee herein; but nevertheless upon the written request of such successor Indenture Trustee, such predecessor Indenture Trustee shall execute and deliver an instrument transferring to such successor Indenture Trustee, upon the trusts herein expressed applicable to it, all the estates, properties, rights and powers of such predecessor Indenture Trustee, and such predecessor Indenture Trustee shall duly assign, transfer, deliver and pay over to such successor Indenture Trustee all moneys or other property then held by such predecessor Indenture Trustee hereunder, subject nevertheless to its claim provided for in Section 6.07 hereof. (c) Any successor Indenture Trustee, however appointed, shall be a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Federal Aviation Act and 76 82 shall also be a bank or trust company having a combined capital and surplus of at least $200,000,000 if there be such an institution willing, able and legally qualified to perform the duties of the Indenture Trustee hereunder upon reasonable or customary terms. (d) 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 to which substantially all the corporate trust business of the Indenture Trustee may be transferred, shall, subject to the terms of paragraph (c) of this Section 8.02, be the Indenture Trustee under this Indenture without further act. Notwithstanding the foregoing, upon the request of the Owner Trustee or the Lessee, any such successor corporation referred to in this Section 8.02(d) shall deliver to the Owner Trustee and the Lessee an instrument confirming its status as the Indenture Trustee hereunder and under the other Indenture Documents. SECTION 8.03. 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 Trust 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 Trust Indenture Estate to the full 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, she or they shall be vested with such title to the Trust Indenture Estate or any part thereof, and with such rights and duties, as shall be specified in the instrument of appointment, jointly with the Indenture Trustee (except insofar as local law makes it necessary for any such separate trustee or separate trustees to act alone) subject to all the terms of this Indenture. Any separate trustee or separate trustees or co-trustee may, at any time by an instrument in writing, constitute the Indenture Trustee its, his or her attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its, his or her behalf and in its, his or her name. In case any such separate trustee or co-trustee shall die, become incapable of 77 83 acting, resign or be removed, the title to the Trust Indenture Estate and all assets, property, rights, powers, trusts, 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 shall extend to and apply to each separate trustee or co-trustee appointed pursuant to the foregoing provisions of this Section 8.03, including without limitation Article VII hereof. (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 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 Trust 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 with respect to which it is hereby provided may be exercised 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. 78 84 (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 8.03, the powers of any additional trustee or separate trustee appointed pursuant to this Section 8.03 shall not in any case exceed those of the Indenture Trustee hereunder. ARTICLE IX SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER DOCUMENTS SECTION 9.01. Lease Amendments and Supplemental Indentures. (a) Except as otherwise provided in Section 5.10 hereof, and except with respect to Excepted Payments, the Owner Trustee agrees that it shall not enter into any amendment of or supplement to the Lease or any of the Foreign Financing Documents, or execute and deliver any written waiver or modification of, or consent under, the terms of the Lease or any of the Foreign Financing Documents, unless such supplement, amendment, waiver, modification or consent is consented to in writing by the Indenture Trustee acting on instructions of a Majority in Interest of Note Holders. Anything to the contrary contained in this Section 9.01 notwithstanding, without the necessity of the consent of any of the Note Holders or (as respects clauses (i) and (ii) below) the Indenture Trustee, (i) any Excepted Rights or Excepted Payments payable to the Owner Trustee or Owner Participant may be modified, amended, changed or waived in such manner as shall be agreed to by the Owner Participant and Lessee, (ii) the Owner Trustee and Lessee may, so long as no Indenture Event of Default has occurred and is continuing, enter into amendments of or additions to the Lease to modify Sections 6(d), 9 and 16 and Exhibits B and E (except to the extent that such amendment would adversely affect the rights or exercise of remedies under Section 18 of the Lease) so long as such amendments, modifications and changes do not and would not (A) affect the time of, or reduce the amount of, Basic Rent or Stipulated Loss Value payments until after the payment in full of all Secured Obligations, (B) impair the Lien of this Indenture, (C) adversely affect the value, utility or useful life of the Aircraft or any Engine or (D) otherwise adversely affect the Note Holders in any material respect and (iii) the Lessee may effect the re-registration of the Aircraft in accordance with but always subject to the terms and conditions applicable thereto specified in Section 11 of the Refunding Agreement and Section 6(e) of the Lease and the Indenture Trustee may approve any Permitted Sublessee as provided in clause (c) of the definition of such term set forth in the Lease and may exercise the rights of the Indenture Trustee under Section 15 of the Refunding Agreement. 79 85 For the avoidance of doubt, nothing in this Section 9.01 shall limit in any way the rights of the Owner Trustee and/or the Owner Participant under Section 5.10(d) to exercise certain rights and powers under the Lease to the exclusion of the Indenture Trustee and any Note Holder and without the consent of the Indenture Trustee or any Note Holder. The Indenture Trustee is hereby authorized to join in the execution of any supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained 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 official or individual capacity. Any supplemental indenture authorized by the provisions of this Section 9.01 may be executed without the consent of the Note Holders notwithstanding any of the provisions of this Section 9.01. (b) Without limiting the provisions of Section 9.01(a) hereof and subject to Sections 5.10(b) and 5.10(d) hereof, the Indenture Trustee agrees with the Note Holders that it shall not enter into any amendment, waiver or modification of, supplement or consent to this Indenture, the Lease, the Refunding Agreement or the other Indenture Documents, any of the Foreign Financing Documents or any other agreement included in the Trust Indenture Estate, unless such supplement, amendment, waiver, modification or consent is consented to in writing by a Majority in Interest of Note Holders, or does not adversely affect the Note Holders in any material respect. Upon the written request of a Majority in Interest of Note Holders, the Indenture Trustee shall from time to time enter into any such supplement or amendment, or execute and deliver any such waiver, modification or consent, as may be specified in such request and as may be (in the case of any such amendment, supplement or modification), to the extent such agreement is required, agreed to by the Owner Trustee and Lessee or, as may be appropriate, the Manufacturer; provided, however, that, without the consent of each Holder of an affected Equipment Note then outstanding and of each Liquidity Provider, no such amendment of or supplement to this Indenture, the Lease, the Refunding Agreement or any other Indenture Document or waiver or modification of the terms of, or consent under, any thereof, shall (i) modify any of the provisions of this Section 9.01, or of Section 2.02, 2.10, 2.13, 4.02, 4.04(e), 5.06 or 5.10 hereof, Section 17 (except to add a Lease Event of Default) of the Lease, the definitions of "Indenture Event of Default", "Indenture Default", "Indenture Trustee Event", "Lease Event of Default", "Lease Default", "Majority in Interest of Note Holders", "Make-Whole Amount" or "Note Holder", or the percentage of Note Holders required to take or approve any action hereunder, (ii) reduce the amount, or change the time of payment or method 80 86 of calculation of any amount, of Principal Amount, Make-Whole Amount, if any, or interest with respect to any Equipment Note, or alter or modify the provisions of Article III hereof with respect to the order of priorities in which distribution thereunder shall be made as among the Note Holders, the Owner Trustee and the Lessee, (iii) reduce, modify or amend any indemnities in favor of the Note Holders, (iv) consent to any change in this Indenture or the Lease which would permit redemption of Equipment Notes earlier than permitted under Section 2.10 hereof, (v) modify any of the provisions of Section 4(b) of the Lease, or modify, amend or supplement the Lease, any Assigned Sublease or any Sublease Assignment, or consent to any assignment of any thereof, in either case releasing the Lessee (or Permitted Sublessee) from its obligations in respect of the payment of Basic Rent or Stipulated Loss Value for the Aircraft or altering the absolute and unconditional character of the obligations of Lessee to pay Rent as set forth in Sections 4(b) and 4(d) of the Lease (or comparable provisions in any Assigned Sublease) or (vi) permit the creation of any Lien on the Trust Indenture Estate or any part thereof other than Permitted Liens or deprive any Note Holder of the benefit of the Lien of this Indenture on the Trust Indenture Estate, except as provided in connection with the exercise of remedies under Article IV hereof. (c) At any time after the date of the consummation of the Refinancing Transaction, the Owner Trustee and the Indenture Trustee may enter into one or more agreements supplemental hereto without the consent of any Note Holder for any of the following purposes: (i)(A) to cure any defect or inconsistency herein or in the Equipment Notes, or to make any change not inconsistent with the provisions hereof (provided that such change does not adversely affect the interests of any Note Holder in its capacity solely as Note Holder) or (B) to cure any ambiguity or correct any mistake; (ii) to evidence the succession of another party as the Owner Trustee in accordance with the terms of the Trust Agreement or to evidence the succession of a new trustee hereunder pursuant hereto, the removal of the trustee hereunder or the appointment of any co-trustee or co-trustees or any separate or additional trustee or trustees; (iii) to convey, transfer, assign, mortgage or pledge any property to or with the Indenture Trustee or to make any other provisions with respect to matters or questions arising hereunder so long as such action shall not adversely affect the interests of the Note Holders in its capacity solely as Note Holder or impose upon the Lessee any additional indemnification obligations; (iv) 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, the Airframe or Engines or any Replacement Airframe or Replacement Engine; (v) to add to the covenants of the Owner Trustee for the benefit of the Note Holders, or to surrender any rights or powers herein conferred upon the Owner Trustee, the Owner Participant or the Lessee; (vi) to add to the rights of the Note Holders; and 81 87 (vii) to include on the Equipment Notes any legend as may be required by law. (d) Without the consent of the Lessee no amendment or supplement to this Indenture or waiver or modification of the terms hereof shall adversely affect the Lessee in any material respect or impose upon the Lessee any additional indemnification obligations. SECTION 9.02. 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 and the Note 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 all and any purposes. SECTION 9.03. Documents to Be Given to Trustee. The Indenture Trustee shall be entitled to receive and shall be fully protected in relying upon an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture referred to in Section 9.01 complies with the applicable provisions of this Indenture. SECTION 9.04. Notation on Notes in Respect of Supplemental Indentures. Equipment Notes authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article IX 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 Equipment Notes 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 Equipment Notes then outstanding. SECTION 9.05. Trustees Protected. If, in the opinion of the institution acting as Owner Trustee under the Trust Agreement or the institution acting as Indenture Trustee hereunder, any document required to be executed by it pursuant to the terms of this Article IX affects adversely any right, duty, immunity or indemnity with respect to such institution under this Indenture, such institution may in its discretion decline to execute such document. SECTION 9.06. Documents Mailed to Note Holders. Promptly after the execution by the Owner Trustee or the Indenture Trustee of any document entered into pursuant to this 82 88 Article IX, the Owner Trustee shall mail, by certified mail, postage prepaid, conformed copies thereof to the Indenture Trustee (in such quantities as will permit the Indenture Trustee to distribute one copy to each Note Holder, and the Indenture Trustee shall mail one such copy to each Note Holder), but the failure of the Owner Trustee or the Indenture Trustee to mail such conformed copies shall not impair or affect the validity of such document. The Indenture Trustee will furnish to each Note Holder, promptly upon receipt thereof, duplicates or copies of all reports, notices, requests, demands, certificates and other instruments furnished to the Indenture Trustee under the Lease or hereunder to the extent that the same were not required to have been furnished to such Note Holder pursuant hereto or to the Lease. SECTION 9.07. No Request Necessary for Lease Supplement or Indenture Supplement. Notwithstanding anything contained in this Article IX, no written request or consent of the Indenture Trustee, any Note Holder or the Owner Participant pursuant to this Article IX shall be required to enable the Owner Trustee to enter into any Lease Supplement with the Lessee pursuant to the terms of the Lease to subject the Aircraft, any Engines or other property thereto or to release the Aircraft, any Engine or other property therefrom or to execute and deliver an Indenture Supplement, in each case pursuant to the terms hereof or to execute and deliver any supplement or certificate necessary with respect to the foregoing under the Foreign Lease Agreement or the Hire Purchase Agreement. SECTION 9.08. Notices to Liquidity Provider. Any request made to any Note Holder for consent to any amendment or supplement pursuant to this Article IX shall be promptly furnished by the Indenture Trustee to each Liquidity Provider. ARTICLE X MISCELLANEOUS SECTION 10.01. Termination of Indenture. Upon payment in full of the Principal Amount of, Make-Whole Amount, if any, and all accrued and unpaid interest on and other amounts then due with respect to the Equipment Notes and provided that there shall then be no other amounts then due to the Note Holders and the Indenture Trustee hereunder or under the Lease or the Refunding Agreement or otherwise secured hereby, the Lien of this Indenture shall be deemed discharged and the security interests in favor of the Indenture Trustee and the Note Holders hereunder shall terminate, and 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 evidencing the discharge of such Lien and the termination of such security interest in the Aircraft and release of the Indenture Documents from the assignment and pledge thereof hereunder, and the 83 89 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 discharge, termination and release; provided, however, that this Indenture and the trusts created hereby shall earlier terminate and this Indenture shall be of no further force or effect as expressly provided pursuant to Article X hereof or upon any sale or other final disposition by the Indenture Trustee of all property part of the Trust Indenture Estate and the final distribution by the Indenture Trustee of all moneys or other property or proceeds constituting part of the Trust Indenture Estate in accordance with the 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 10.02. No Legal Title to Trust Indenture Estate in Note Holders. No Note Holder shall have legal title to any part of the Trust Indenture Estate. No transfer, by operation of law or otherwise, of any Equipment Note or other right, title and interest of any Note Holder in and to the Trust Indenture Estate or hereunder shall operate to terminate this Indenture or entitle such Note 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 Trust Indenture Estate. SECTION 10.03. Sale of Aircraft by Indenture Trustee is Binding. Any sale or other conveyance of the Aircraft by the Indenture Trustee made pursuant to the terms of this Indenture or of the Lease shall bind the Note Holders 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 in and to the Aircraft. 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 10.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Lessee and Note Holders. Nothing in this Indenture, whether express or implied, shall be construed to give to any Person other than the Owner Trustee, the Indenture Trustee, the Owner Participant, the Note Holders, the Lessee and, with respect to any provisions hereof requiring payment to any Permitted Sublessee, such Permitted Sublessee, any legal or equitable right, remedy or claim under or in respect of this Indenture. SECTION 10.05. No Action Contrary to Lessee's Rights Under the Lease. Notwithstanding any of the provisions of this Indenture or the Trust Agreement to the contrary, each of the Note Holders, the Indenture Trustee and the Owner Trustee agrees for the benefit of the Lessee that it will not take any action contrary to the Lessee's rights under the Lease, including the 84 90 right of the Lessee to possession and use and quiet enjoyment of the Aircraft, except in accordance with the provisions of the Lease. SECTION 10.06. Notices. Unless otherwise expressly specified herein, all notices, requests, demands, authorizations, directions, consents, waivers or documents required or permitted by the terms of this Indenture shall be in English and in writing, mailed by first-class registered or certified mail, 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, Wilmington, Delaware 19890, Attention: Corporate Trust Administration Department (telex: 835437; answerback: WILMTR; telecopy: (302) 651-8464/8882), with a copy to the Owner Participant at its address set forth in the Refunding Agreement, (ii) if to the Indenture Trustee, addressed to it at its office at 450 West 33rd Street, 15th Floor, New York, New York 10001, Attention: Corporate Trust Department (telecopy: (212) 946-8160) or (iii) if to the Owner Participant, the Lessee or any Note Holder, 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 the signature pages to the Refunding Agreement or in the Register. Whenever any notice in writing is required to be given by the Owner Trustee or the Indenture Trustee or any Note Holder to any of the other of them, such notice shall be deemed and such requirement satisfied when such notice is received. 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. SECTION 10.07. 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 10.08. No Oral Modifications or Continuing Waivers. No terms or provisions of this Indenture or the Equipment Notes 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 hereof or of any Equipment Note shall be effective only in the specific instance and for the specific purpose given. SECTION 10.09. 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 permitted assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument 85 91 or action by any Note Holder shall bind the successors and assigns of such Note Holder. This Indenture and the Trust 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. Each Note Holder by its acceptance of an Equipment Note agrees to be bound by this Indenture and all provisions of the Refunding Agreement applicable to a Note Holder. SECTION 10.10. 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 10.11. Normal Commercial Relations. Anything contained in this Indenture to the contrary notwithstanding, the Indenture Trustee, the Owner Trustee, the Owner Participant, any Note Holder or any bank or other Affiliate of any of them may conduct any banking or other financial transactions, and have banking or other commercial relationships, with the Lessee or any Permitted Sublessee 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 10.12. Governing Law; Counterpart Form. THIS INDENTURE AND THE EQUIPMENT NOTES ISSUED HEREUNDER 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 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. SECTION 10.13. Section 1110. It is the intention of the parties that the Owner Trustee, as lessor under the Lease (and the Indenture Trustee as assignee of the Owner Trustee's rights hereunder), shall be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to the right to take possession of the Aircraft, Airframe, Engines and Parts as provided in the Lease in the event of a case under Chapter 11 of the Bankruptcy Code in which Lessee is a debtor, and in any instance where more than one construction is possible of the terms and conditions hereof or of any other pertinent Operative Document, each such party agrees that a construction which would preserve such benefits shall control over any construction which would not preserve such benefits. 86 92 IN WITNESS WHEREOF, the parties hereto have caused this Indenture, as amended and restated, 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. WILMINGTON TRUST COMPANY, not in its individual capacity, except as expressly provided herein, but solely as Owner Trustee By: --------------------------------------- Title: THE CHASE MANHATTAN BANK, not in its individual capacity, except as expressly provided herein, but solely as Indenture Trustee By: --------------------------------------- Title: 87 93 EXHIBIT A to First Amended and Restated Trust Indenture and Security Agreement [GPA 1989 BN-8] TRUST INDENTURE SUPPLEMENT NO. __________ [GPA 1989 BN-8] TRUST INDENTURE SUPPLEMENT NO. ___ dated _______, ____ of WILMINGTON TRUST COMPANY, not in its individual capacity but solely as owner trustee (the "Owner Trustee") under the Trust Agreement [GPA 1989 BN-8] dated as of December 19, 1989 (as amended, the "Trust Agreement") between Wilmington Trust Company and the Owner Participant named therein. W I T N E S S E T H : WHEREAS, the Trust Indenture and Security Agreement [GPA 1989 BN- 8] dated as of December 19, 1989, as amended and restated as of June __, 1997 (as so amended and restated, the "Indenture") between the Owner Trustee and The Chase Manhattan Bank (formerly known as Chemical Bank, successor by merger to Manufacturers Hanover Trust Company), as Indenture Trustee (the "Indenture Trustee"), provides for the execution and delivery of a supplement thereto substantially in the form hereof which shall particularly describe the Aircraft (such term and other defined terms in the Indenture being herein used with the same meanings) and any Replacement Airframe or Replacement Engine included in the Trust Indenture Estate, and shall specifically mortgage such Aircraft, Replacement Airframe or Replacement Engine, as the case may be, to the Indenture Trustee. WHEREAS(1), the Original Indenture, as supplemented by Trust Indenture Supplement No. 1 dated December 29, 1989 subjected to the Lien of such Original Indenture the airframe and engines described therein, which Original Indenture and Trust Indenture Supplement No. 1 have been duly recorded with the Federal Aviation Administration on January 19, 1990, as one document and assigned Conveyance No. H68557. WHEREAS(2), the Indenture relates to the Airframe and Engines described below and a counterpart of the Indenture is attached hereto and made a part hereof and this Indenture Supplement, together with such counterpart of the Indenture, is being filed for recordation on the date hereof with the Federal Aviation Administration as one document. - -------------------- (1) This recital to be included in the each Indenture Supplement. (2) This recital is to be included only in Indenture Supplement No. 2. 94 WHEREAS(3), the Owner Trustee has, as provided in the Indenture, heretofore executed and delivered to the Indenture Trustee[(4)] Indenture Supplement(s) for the purpose of specifically subjecting to the Lien of the Indenture certain airframes and/or engines therein described, which Indenture Supplement(s) is (are) dated and has (have) been duly recorded with the Federal Aviation Administration as set forth below, to wit: Date Recordation Date FAA Document No. NOW, THEREFORE, This Supplement Witnesseth, that, to secure the prompt payment of the Principal Amount of, interest on, Make-Whole Amount, if any, and all other amounts due with respect to, all Equipment Notes from time to time outstanding under the Indenture and the performance and observance by the Owner Trustee of all the agreements, covenants and provisions contained in the Indenture and the Refunding Agreement and the Equipment Notes, for the benefit of the Note Holders, and the prompt payment of any and all amounts from time to time owing under the Refunding Agreement by the Owner Trustee, the Owner Participant and the Lessee in each case to the Note Holders and for the uses and purposes and subject to the terms and provisions of the Indenture, and in consideration of the premises and of the covenants contained in the Indenture, and of the acceptance of the Equipment Notes by the Holders thereof, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of the Indenture, 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 Note Holders from time to time, in the trust created by the Indenture, a first priority security interest in and mortgage Lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property: - -------------------- (3) This recital not to be included in Indenture Supplement No. 2. (4) Insert appropriate number. 2 95 AIRFRAME(S) ( ) airframe(s) identified as follows:
FAA Registration Manufacturer's Manufacturer Model Number Serial Number - ------------ ----- ------ -------------
together with all appliances, equipment, instruments and accessories (including, without limitation, radio and radar) from time to time thereto belonging, owned by the Owner Trustee and installed in or appurtenant to said aircraft. AIRCRAFT ENGINES ( ) aircraft engines, each such engine having 750 or more rated takeoff horsepower or the equivalent thereof, identified as follows:
Manufacturer's Manufacturer Model Serial Number - ------------ ----- -------------
together with all equipment and accessories thereto belonging, by whomsoever manufactured, owned by the Owner Trustee and installed in or appurtenant to said aircraft engines. Together with all substitutions, replacements and renewals of the property above described, and all property which shall hereafter become physically attached to or incorporated in the property above described, whether the same are now owned by the Owner Trustee or shall hereafter be acquired by it. As further security for the obligations referred to above and secured by the Indenture and hereby, 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 Note Holders from time to time, in the trust created by the Indenture, all of the estate, right, title and interest of the Owner Trustee in, to and under the Lease and Lease Supplement [GPA 1989 BN-8] No. 3 of even date herewith (other than Excepted Payments and Excepted Rights) covering the property described above. TO HAVE AND TO HOLD all and singular the aforesaid property unto the Indenture Trustee, its successors and assigns, for the benefit and security of the Note Holders from time to 3 96 time for the uses and purposes and subject to the terms and provisions set forth in the Indenture. This Supplement shall be construed as supplemental to the Indenture and shall form a part of it, and the Indenture is hereby incorporated by reference herein and is hereby ratified, approved and confirmed. This Supplement is being delivered in the State of New York. AND, FURTHER, the Owner Trustee hereby acknowledges that the Aircraft and/or Engines referred to in this Supplement and the aforesaid Lease Supplement has been delivered to the Owner Trustee and is included in the property of the Owner Trustee covered by all the terms and conditions of the Trust Agreement, subject to the pledge and mortgage thereof under the Indenture. 4 97 IN WITNESS WHEREOF, the Owner Trustee has caused this Supplement to be duly executed by one of its officers thereunto duly authorized on the day and year first above written. WILMINGTON TRUST COMPANY, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By: -------------------------------------- Title: 5 98 SCHEDULE I
MATURITY PRINCIPAL AMOUNT DATE DEBT RATE ---------------- -------- --------- Series A . . . . . . . . . . . $ Series B . . . . . . . . . . . $ Series C . . . . . . . . . . . $ Series D . . . . . . . . . . . $
99 EQUIPMENT NOTES AMORTIZATION SERIES A Aircraft: N627AW
Principal Amount Percentage of Original Repayment Date Amount to be Paid ---------------- ----------------------
100 SERIES B Aircraft: N627AW
Principal Amount Percentage of Original Repayment Date Amount to be Paid ---------------- ----------------------
101 SERIES C Aircraft: N627AW
Principal Amount Percentage of Original Repayment Date Amount to be Paid ---------------- ----------------------
102 SERIES D Aircraft: N627AW
Principal Amount Percentage of Original Repayment Date Amount to be Paid ---------------- ----------------------
103 SCHEDULE II PASS THROUGH TRUST AGREEMENTS 1. Pass Through Trust Agreement, dated as of June __, 1997, between America West Airlines, Inc., and Fleet National Bank, as supplemented by Trust Supplement No. 1997-1A, dated June __, 1997. 2. Pass Through Trust Agreement, dated as of June __, 1997, between America West Airlines, Inc., and Fleet National Bank, as supplemented by Trust Supplement No. 1997-1B, dated June __, 1997. 3. Pass Through Trust Agreement, dated as of June __, 1997, between America West Airlines, Inc., and Fleet National Bank, as supplemented by Trust Supplement No. 1997-1C, dated June __, 1997. 4. Pass Through Trust Agreement, dated as of June __, 1997, between America West Airlines, Inc., and Fleet National Bank, as supplemented by Trust Supplement No. 1997-1D, dated June __, 1997. EX-4.19 17 1ST AMENDED & RESTATED TRUST INDENT GPA 1989 BN-11 1 Exhibit 4.19 ------------------------------------------------------------------- FIRST AMENDED AND RESTATED TRUST INDENTURE AND SECURITY AGREEMENT [GPA 1989 BN-11] Dated as of June __, 1997 between WILMINGTON TRUST COMPANY, not in its individual capacity except as expressly provided herein but solely as Owner Trustee and THE CHASE MANHATTAN BANK, not in its individual capacity except as expressly provided herein but solely as Indenture Trustee ------------------------------------------------------------------- Secured Equipment Notes Covering One Airbus A320-231 Aircraft Manufacturer's Serial No. 81 Registration No. N632AW Leased by America West Airlines, Inc. ------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ---- GRANTING CLAUSE . . . . . . . . . . . . . . . . . . . . . . . . . . 3 HABENDUM CLAUSE . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ARTICLE I DEFINITIONS . . . . . . . . . . . . . . 8 SECTION 1.01. Special Definitions . . . . . . . . . . . . . . . . 8 ARTICLE II THE EQUIPMENT NOTES . . . . . . . . . . . . 19 SECTION 2.01. Form of Equipment Notes . . . . . . . . . . . . . . 19 SECTION 2.02. Issuance and Terms of Equipment Notes . . . . . . . 24 SECTION 2.03. Payments from Trust Indenture Estate Only . . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 2.04. Method of Payment. . . . . . . . . . . . . . . . . . 28 SECTION 2.05. Application of Payments . . . . . . . . . . . . . . 31 SECTION 2.06. Termination of Interest in Trust Indenture Estate . . . . . . . . . . . . . . . . . 31 SECTION 2.07. Registration, Transfer and Exchange of Equipment Notes . . . . . . . . . . . . . . . . . 32 SECTION 2.08. Mutilated, Destroyed, Lost or Stolen Equipment Notes . . . . . . . . . . . . . . . . . 33 SECTION 2.09. Payment of Expenses on Transfer; Cancellation . . . . . . . . . . . . . . . . . . . 34 SECTION 2.10. Mandatory Redemptions of Equipment Notes . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 2.11. Redemptions; Notice of Redemption. . . . . . . . . . 34 SECTION 2.12. Option to Purchase Equipment Notes . . . . . . . . . 35 SECTION 2.13. Subordination. . . . . . . . . . . . . . . . . . . . 36 ARTICLE III RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE . . . . . . . 37 SECTION 3.01. Certain Rent Distributions . . . . . . . . . . . . . 37 SECTION 3.02. Event of Loss and Replacement . . . . . . . . . . . 38 SECTION 3.03. Payment After Indenture Event of Default, etc . . . . . . . . . . . . . . . . . . . 40 SECTION 3.04. Certain Payments . . . . . . . . . . . . . . . . . . 42 SECTION 3.05. Other Payments . . . . . . . . . . . . . . . . . . . 43 SECTION 3.06. Payments to Owner Trustee . . . . . . . . . . . . . 43 SECTION 3.07. Investment of Amounts Held by Indenture Trustee . . . . . . . . . . . . . . . . . . . . . 43
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Page ---- ARTICLE IV COVENANTS OF TRUST COMPANY AND OWNER TRUSTEE; INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE . . . . . . . . . . 44 SECTION 4.01. Covenants of Trust Company and Owner Trustee . . . . . . . . . . . . . . . . . . . . . 44 SECTION 4.02. Indenture Events of Default . . . . . . . . . . . . 45 SECTION 4.03. Certain Rights . . . . . . . . . . . . . . . . . . . 48 SECTION 4.04. Remedies . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 4.05. Return of the Aircraft, etc . . . . . . . . . . . . 53 SECTION 4.06. Remedies Cumulative . . . . . . . . . . . . . . . . 55 SECTION 4.07. Discontinuance of Proceedings . . . . . . . . . . . 55 SECTION 4.08. Waiver of Past Indenture Defaults . . . . . . . . . 55 SECTION 4.09. Exercise of Remedies by Foreign Note Holders . . . . . . . . . . . . . . . . . . . . . 56 ARTICLE V DUTIES OF THE INDENTURE TRUSTEE . . . . . . . . . 56 SECTION 5.01. Notice of Indenture Event of Default . . . . . . . . 56 SECTION 5.02. Action Upon Instructions . . . . . . . . . . . . . . 57 SECTION 5.03. Indemnification . . . . . . . . . . . . . . . . . . 58 SECTION 5.04. No Duties Except as Specified in Indenture or Instructions . . . . . . . . . . . . 58 SECTION 5.05. No Action Except Under Lease, Refunding Agreement, Indenture or Instructions . . . . . . . 59 SECTION 5.06. Replacement Airframes, Replacement Engines and Replacement Parts . . . . . . . . . . 59 SECTION 5.07. Indenture Supplements for Replacements . . . . . . . 62 SECTION 5.08. Effect of Replacement . . . . . . . . . . . . . . . 63 SECTION 5.09. Notices, etc. . . . . . . . . . . . . . . . . . . . 63 SECTION 5.10. Certain Rights of Owner Trustee and Owner Participant . . . . . . . . . . . . . . . . 63 SECTION 5.11. Evidence of Action Taken by Note Holder . . . . . . 65 SECTION 5.12. Right of Revocation of Action Taken . . . . . . . . 66 ARTICLE VI THE OWNER TRUSTEE AND THE INDENTURE TRUSTEE . . . . . . 66 SECTION 6.01. Acceptance of Trusts and Duties . . . . . . . . . . 66 SECTION 6.02. Absence of Duties . . . . . . . . . . . . . . . . . 67 SECTION 6.03. No Representations or Warranties as to Aircraft or Documents . . . . . . . . . . . . . . 67 SECTION 6.04. No Segregation of Moneys; No Interest . . . . . . . 68 SECTION 6.05. Reliance; Agents; Advice of Counsel . . . . . . . . 68 SECTION 6.06. Capacity in Which Acting . . . . . . . . . . . . . . 69 SECTION 6.07. Compensation . . . . . . . . . . . . . . . . . . . . 69 SECTION 6.08. May Become Note Holder . . . . . . . . . . . . . . . 69 SECTION 6.09. Further Assurances; Financing Statements . . . . . . . . . . . . . . . . . . . . 69
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Page ---- ARTICLE VII INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE . . . . 70 SECTION 7.01. Scope of Indemnification . . . . . . . . . . . . . . 70 SECTION 7.02. Exculpation and Release of Liability . . . . . . . . 71 ARTICLE VIII SUCCESSOR TRUSTEES AND SEPARATE TRUSTEES . . . . . . . 71 SECTION 8.01. Notice of Successor Owner Trustee . . . . . . . . . 71 SECTION 8.02. Resignation and Removal of Indenture Trustee; Appointment of Successor . . . . . . . . 71 SECTION 8.03. Appointment of Separate Trustees . . . . . . . . . . 73 ARTICLE IX SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER DOCUMENTS . . . . . . . . . . 75 SECTION 9.01. Lease Amendments and Supplemental Indentures . . . . . . . . . . . . . . . . . . . . 75 SECTION 9.02. Effect of Supplemental Indenture . . . . . . . . . . 77 SECTION 9.03. Documents to Be Given to Trustee . . . . . . . . . . 78 SECTION 9.04. Notation on Notes in Respect of Supplemental Indentures . . . . . . . . . . . . . 78 SECTION 9.05. Trustees Protected . . . . . . . . . . . . . . . . . 78 SECTION 9.06. Documents Mailed to Note Holders . . . . . . . . . . 78 SECTION 9.07. No Request Necessary for Lease Supplement or Indenture Supplement . . . . . . . . 79 SECTION 9.08. Notices to Liquidity Provider . . . . . . . . . . . 79 ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . 79 SECTION 10.01. Termination of Indenture . . . . . . . . . . . . . 79 SECTION 10.02. No Legal Title to Trust Indenture Estate in Note Holders . . . . . . . . . . . . . 79 SECTION 10.03. Sale of Aircraft by Indenture Trustee is Binding . . . . . . . . . . . . . . . . . . . 80 SECTION 10.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Lessee and Note Holders . . . . . . . . . . . . . 80 SECTION 10.05. No Action Contrary to Lessee's Rights Under the Lease . . . . . . . . . . . . . . . . . 80 SECTION 10.06. Notices . . . . . . . . . . . . . . . . . . . . . . 80 SECTION 10.07. Severability . . . . . . . . . . . . . . . . . . . 81 SECTION 10.08. No Oral Modifications or Continuing Waivers . . . . . . . . . . . . . . . . . . . . . 81 SECTION 10.09. Successors and Assigns . . . . . . . . . . . . . . 81 SECTION 10.10. Headings . . . . . . . . . . . . . . . . . . . . . 81
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Page ---- SECTION 10.11. Normal Commercial Relations . . . . . . . . . . . . 81 SECTION 10.12. Governing Law; Counterpart Form . . . . . . . . . . 82 SECTION 10.13. Section 1110 . . . . . . . . . . . . . . . . . . . 82 EXHIBIT A - Form of Trust Indenture Supplement SCHEDULE I - Equipment Notes Amortization SCHEDULE II - Pass Through Trust Agreements
iv 6 FIRST AMENDED AND RESTATED TRUST INDENTURE AND SECURITY AGREEMENT [GPA 1989 BN-11] FIRST AMENDED AND RESTATED TRUST INDENTURE AND SECURITY AGREEMENT [GPA 1989 BN-11] (this "First Amended and Restated Indenture" or this "Indenture") dated as of June __, 1997, 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 referred to below (in such capacity, together with its successors, the "Owner Trustee"), and THE CHASE MANHATTAN BANK (formerly known as Chemical Bank, successor by merger to Manufacturers Hanover Trust Company), a New York corporation, not in its individual capacity except as otherwise specifically set forth herein, but solely as indenture trustee hereunder (in such capacity, together with its successors, the "Indenture Trustee"). W I T N E S S E T H: WHEREAS, all capitalized terms used herein shall have the respective meanings set forth or referred to in Article I hereof; WHEREAS, the Owner Participant and Wilmington Trust Company entered into the Trust Agreement [GPA 1989 BN-11] dated as of December 19, 1989, as supplemented by Trust Agreement Supplement [GPA 1989 BN-11] No. 1 dated December 29, 1989, and as further supplemented by Trust Agreement Supplement [GPA 1989 BN-11] No. 2 dated the date hereof (as amended, assigned, supplemented or otherwise modified from time to time in accordance with the terms thereof, hereof and of the Refunding Agreement, the "Trust Agreement"), whereby, among other things, Wilmington Trust Company has declared a certain trust for the use and benefit of the Owner Participant, subject, however, to the Trust Indenture Estate created pursuant hereto for the use and benefit of (to the extent set forth herein), and with the priority of certain payments to, the Holders of Equipment Notes issued hereunder, and the Owner Trustee is authorized and directed to execute and deliver this Indenture; WHEREAS, (i) the Owner Trustee and the Indenture Trustee entered into the Trust Indenture and Security Agreement [GPA 1989 BN-11] dated as of December 19, 1989, as supplemented by Trust Indenture Supplement No. 1 dated December 29, 1989, which were recorded by the Federal Aviation Administration on January 3, 1990 as one instrument and assigned Conveyance No. V78689 (as so supplemented, the "Original Indenture"), (ii) the Owner Trustee and the Original Head Lessee entered into the Aircraft Lease Agreement [GPA 1989 BN-11] dated as of December 19, 1989, as supplemented by Lease Supplement [GPA 1989 BN-11] No. 1 dated December 29, 1989, which were recorded by the Federal Aviation Administration on January 3, 1990 as one instrument and assigned Conveyance No. V78690 and as further supplemented by Lease Supplement [GPA 1989 BN-11] No. 2 dated 7 January 5, 1995, which was recorded by the Federal Aviation Administration on March 9, 1995 and assigned Conveyance No. DD007547 (collectively, as so supplemented, the "Original Lease") and (iii) pursuant to the Original Indenture, the Owner Trustee issued and sold to the Lenders (as defined in the Original Indenture) the Original Loan Certificates; WHEREAS, the parties have agreed to (i) assign, amend and restate the Original Lease pursuant to Assignment and Amendment No. 1 and Sublease Termination Agreement [GPA 1989 BN-11] dated as of the date hereof among the Original Head Lessee, as assignor, and the Original Sublessee, as assignee, the Owner Trustee and the Indenture Trustee and the Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-11] dated as of the date hereof between the Owner Trustee and the Lessee (as so assigned, amended and restated, the "Amended and Restated Lease" or the "Lease") and to enter into Lease Supplement No. 3 and (ii) cause the implementation of the Refinancing Transaction pursuant to which, among other things, the Original Loan Certificates issued pursuant to the Original Indenture shall be prepaid and new Equipment Notes shall be issued to the Pass Through Trustees (or their designee); WHEREAS, in light of the foregoing and in anticipation of the Refinancing Transaction, the parties desire by this First Amended and Restated Indenture, among other things, (i) to amend and restate in its entirety the Original Indenture, (ii) to provide for the issuance by the Owner Trustee of the Equipment Notes and (iii) to provide for the assignment, mortgage and pledge by the Owner Trustee to the Indenture Trustee, as part of the Trust Indenture Estate hereunder, among other things, of certain of the Owner Trustee's estate, right, title and interest in and to the Aircraft and, except as hereinafter expressly provided, all of the Owner Trustee's right, title and interest in, to and under the Lease (as amended and restated to date and as the same may at any time and from time to time be further amended, restated or otherwise modified in accordance with the terms thereof and hereof) and all payments and other amounts received hereunder or thereunder in accordance with the terms hereof or thereof, as security for, among other things, the Owner Trustee's obligations to the Indenture Trustee, for the ratable benefit and security of the Note Holders, subject to Section 2.13 and Article III hereof; WHEREAS, all things have been done to make the Equipment Notes, when executed by the Owner Trustee and authenticated, issued and delivered by the Indenture Trustee hereunder, the legal, valid and binding obligations of the Owner Trustee; and WHEREAS, all things necessary to make this First Amended and Restated Indenture the legal, valid and binding obligation of the Owner Trustee, for the uses and purposes herein set forth, in accordance with its terms, have been done and performed and have happened; 2 8 GRANTING CLAUSE NOW, THEREFORE, THIS FIRST AMENDED AND RESTATED TRUST INDENTURE AND SECURITY AGREEMENT WITNESSETH, that, to secure the prompt payment of the Principal Amount of, interest on, Make-Whole Amount, if any, and all other amounts due with respect to, all Equipment Notes from time to time outstanding hereunder and the performance and observance by the Owner Trustee of all the agreements, covenants and provisions contained herein and in the Refunding Agreement and the Equipment Notes, for the benefit of the Note Holders, and the prompt payment of any and all amounts from time to time owing hereunder and under the Refunding Agreement by the Owner Trustee, the Owner Participant and the Lessee to the Note Holders 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 Equipment Notes 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 Note Holders from time to time, a security interest in and mortgage Lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property, rights, interests and privileges, whether now or hereafter acquired, other than Excepted Payments and Excepted Rights (which collectively, excluding Excepted Payments and Excepted Rights but including all property hereafter specifically subjected to the Lien of this Indenture by any Indenture Supplement or any indenture supplemental hereto, are included within the Trust Indenture Estate), 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 an interest under the Lease, all as more particularly described in the Indenture Supplement executed and delivered with respect to the Aircraft or any such replacements or substitutions therefor, as provided in this Indenture, and all records, logs and other documents to which the Owner Trustee shall from time to time acquire an interest at any time maintained by the Lessee with respect to the foregoing property; 3 9 (2) the Lease (including each Lease Supplement) and all Rent thereunder, including, without limitation, all amounts of Basic Rent, Supplemental Rent and payments of any kind thereunder; the Refunding Agreement; the Purchase Agreement (to the extent assigned to or for the benefit of the Owner Trustee); the Purchase Agreement Warranty Assignment; the Second Aircraft Warranty Bill of Sale; the BFE Bill of Sale; each notice, letter agreement or other document related to any of the foregoing entered into by or for the benefit of the Owner Trustee (or assigned to the Owner Trustee); in each case including, without limitation, (x) all rights of the Owner Trustee to exercise any election or option or to make any decision or determination or to give any notice, consent, waiver or approval or to take any other action under or in respect of any such document or to accept surrender or redelivery of the Aircraft or any part thereof, as well as all the rights, powers and remedies on the part of the Owner Trustee, whether arising under any such document or by statute or at law or in equity, or otherwise, arising out of any Lease Event of Default, and (y) any right to restitution from the Lessee, the Manufacturer or any other Person in respect of any determination of invalidity of any such document; (3) each Sublease Assignment and each Assigned Sublease (to the extent assigned under such Sublease Assignment), and including, without limitation, all rents or other payments of any kind made under such Assigned Sublease (to the extent assigned under such Sublease Assignment), all collateral security or credit support (in the nature of a guarantee, letter of credit, credit insurance, Lien on or security interest in any property or otherwise) for the obligations of the Permitted Sublessee thereunder (to the extent assigned under such Sublease Assignment) and all rights of the Owner Trustee to exercise any election or option or to give any notice, consent, waiver, or approval under or with respect of any thereof 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 (in each case to the extent assigned to the Owner Trustee), whether arising under any Assigned Sublease or any Sublease Assignment or by statute or at law or in equity, or otherwise, arising out of any default under any Assigned Sublease; (4) all tolls, rents, issues, profits, revenues and other income of the property subjected or required to be subjected to the Lien of this Indenture, including, without limitation, all payments or proceeds payable to the Owner Trustee after termination of the Lease with respect to the Aircraft as the result of the sale, lease or other disposition thereof, and all estate, right, title and interest of every nature whatsoever of the Owner Trustee in and to the same and every part thereof; 4 10 (5) all requisition proceeds with respect to the Aircraft or any part thereof (to the extent of the Owner Trustee's interest therein pursuant to the Lease), and all insurance proceeds with respect to the Aircraft or any part thereof, including but not limited to the insurance required under Section 12 of the Lease or under any comparable provision of any Assigned Sublease (but excluding any excess insurance maintained by the Lessee and not required under Section 12 of the Lease or any Assigned Sublease); (6) all moneys and securities now or hereafter paid or deposited or required to be paid or deposited to or with the Indenture Trustee by or for the account of the Owner Trustee pursuant to any term of any Operative Document and held or required to be held by the Indenture Trustee hereunder; (7) all rights of the Owner Trustee to amounts paid or payable by the Lessee to the Owner Trustee under the Refunding Agreement and all rights of the Owner Trustee to enforce payments of any such amounts thereunder; and (8) all proceeds of the foregoing. PROVIDED, HOWEVER, that the foregoing Granting Clause shall not subject to the Lien of this Indenture any (i) Excepted Payments, (ii) Excepted Rights or (iii) payment in amounts which have been distributed to the Owner Trustee or any other Person in accordance with the provisions of this Agreement, AND SUBJECT TO Sections 2.03, 5.10 and 9.01 hereof. Concurrently with the delivery of the Original Indenture, the Owner Trustee delivered to the Indenture Trustee the chattel paper original executed counterparts of the Original Lease and Lease Supplement No. 1, certified copies of the Purchase Agreement Warranty Assignment, and the original Second Aircraft Warranty Bill of Sale and the BFE Bill of Sale. Concurrently with the delivery of this Indenture, the Owner Trustee is delivering to the Indenture Trustee the chattel paper original executed counterparts of the Amended and Restated Lease and Lease Supplement No. 3. All property referred to in this Granting Clause, whenever acquired by the Owner Trustee, shall secure all obligations under and with respect to the Equipment Notes at any time outstanding. Any and all properties referred to in this Granting Clause which are hereafter acquired by the Owner Trustee, shall, without further conveyance, assignment or act by the Owner Trustee or the Indenture Trustee thereby become and be subject to the security interest hereby granted as fully and completely as though specifically described herein. 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 Note Holders from 5 11 time to time, except as set forth in Section 2.13 and Article III hereof without any preference, distinction or priority of any one Equipment Note over any other regardless of when issued, 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 Note 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 the Note 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. The Owner Trustee does hereby 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 but excluding Excepted Payments and Excepted Rights) due and to become due to the Owner Trustee under or arising out of the Indenture Documents and all other property which now or hereafter constitutes part of the Trust 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 this Indenture. Pursuant to each Sublease Assignment, each Permitted Sublessee will be directed from and after (i) notice of the occurrence of a Lease Event of Default and (ii) notice that the Lease is declared or deemed in default, to make all payments of rent and all other amounts which are required to be paid to or deposited with the Lessee pursuant to the related Assigned Sublease and which are assigned thereunder directly to the Indenture Trustee at such address or addresses as the Indenture Trustee shall specify, for application or to be held as provided in this Indenture. 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 Trust Indenture Estate, for 6 12 distribution by the Indenture Trustee pursuant to this Indenture, except (a) to the extent the Owner Trustee is entitled to distribution of such moneys pursuant to this Indenture and (b) 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 herein granted. 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 or otherwise dispose of, so long as this Indenture shall remain in effect and the Lien hereof shall not have been released pursuant to Section 10.01 hereof, any of its estate, right, title or interest hereby assigned, to anyone other than the Indenture Trustee, and that, with respect to such estate, right, title and interest hereby assigned, subject to its rights pursuant to Section 5.10 hereof, it will not, except as provided in this Indenture (including, without limitation, Section 9.01) and except as to Excepted Payments and Excepted Rights, (i) accept any payment from the Lessee or any Permitted Sublessee under any of the Indenture Documents, enter into any agreement amending, modifying 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, (iii) give any notice or exercise any right or take any action under any of the Indenture Documents, or (iv) 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 4.02(e) hereof, this is the fourth paragraph following the Habendum Clause. The Owner Trustee hereby ratifies and confirms its obligations under the Indenture Documents and does hereby agree that (except as permitted herein) it will not take, or omit to take, any action, the taking or omission of which might result in an alteration or impairment of any of the Indenture Documents or of any of the rights created by any thereof or the assignment hereunder. Notwithstanding the Granting Clause or any of the preceding paragraphs, there is hereby excluded from the foregoing sale, transfer, assignment, grant, pledge and security interest all Excepted Payments and Excepted Rights. Further, nothing in the Granting Clause or the preceding paragraphs shall impair any of the rights of the Owner Trustee or the Owner Participant under Section 5.10 hereof. 7 13 IT IS HEREBY COVENANTED AND AGREED by and between the parties hereto as follows: ARTICLE I DEFINITIONS SECTION 1.01. Special Definitions. The definitions contained in the Lease shall apply for all purposes of this Indenture except that the following terms shall have the following meanings (such definitions to be equally applicable to both the singular and plural forms of the terms defined) for all purposes of this Indenture. Except as otherwise indicated, all the agreements or instruments defined herein or in the Lease shall mean such agreements or instruments (including all annexes, appendices, exhibits, schedules and supplements thereto) as the same 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, the terms thereof and of the other Operative Documents and references to various Persons shall be deemed to be references to and include their respective permitted successors and assigns. "Amortization Amount" means, with respect to any Principal Amount Repayment Date, the amount set forth opposite such Principal Amount Repayment Date on the Amortization Schedule. "Amortization Schedule" means the amortization schedule for the Equipment Notes delivered pursuant to Section 2.02 hereof. "Assigned Sublease" means a Permitted Sublease required to be assigned to the Owner Trustee pursuant to Section 6(a) of the Lease. "Average Life Date" for each Equipment Note to be redeemed shall be the date which follows the redemption date by a period equal to the Remaining Weighted Average Life at the redemption date of such Equipment Note. "Remaining Weighted Average Life" of such Equipment Note, at the redemption date of such Equipment Note, shall be the number of days equal to the quotient obtained by dividing (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment of principal, including the payment due on the maturity date of such Equipment Note, by (ii) the number of days from and including the redemption date to but excluding the scheduled payment date of such principal installment; by (b) the then unpaid Principal Amount of such Equipment Note. "Bankruptcy Code" means Chapter 11 of Title 11 of the United States Code, 11 U.S.C. Sections 101 et seq., as amended. 8 14 "BFE Bill of Sale" means the full warranty (as to title) bill of sale covering the Buyer Furnished Equipment, transferring all right, title and interest therein to the Owner Trustee. "Business Day" means a day other than a Saturday, Sunday or a day on which banks are required or authorized to close in either The City of New York, New York or Hartford, Connecticut. "Cash Collateral Account" means one or more Eligible Deposit Accounts in the name of the Subordination Agent each maintained at the Subordination Agent, into which all amounts drawn under one or more Liquidity Facilities pursuant to Section 3.6(c) or 3.6(i) of the Intercreditor Agreement shall be deposited. "Code" means the Internal Revenue Code of 1986, as amended. "Continuous Stay Period" has the meaning specified in Section 4.04(a). "Corporate Trust Office" means the principal corporate trust office of the Indenture Trustee located at 450 West 33rd Street, New York, New York 10001, Attention: Corporate Trust Department, or such other office 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 and the Note Holders. "Debt" means any liability for borrowed money, or any liability for the payment of money in connection with any letter of credit transaction, or other liabilities evidenced or to be evidenced by bonds, debentures, notes or other similar instruments. "Debt Rate" means, with respect to Series A, Series B, Series C and Series D, the rate per annum specified for such Series under the heading "Debt Rate" in Schedule I to this Indenture. "Delivery Date" means December 29, 1989. "Dollars", "U.S. $" and "$" mean the lawful currency of the United States of America. "Downgrade Drawing" has the meaning assigned to such term in Section 3.6(c) of the Intercreditor Agreement. "Eligible Deposit Account" means either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the 9 15 United States of America or any one of the states thereof or the District of Columbia (or any U.S. branch of a foreign bank), having corporate trust powers and acting as trustee for funds deposited in such account, so long as any of the securities of such depository institution has a long-term unsecured debt rating from each Rating Agency of at least A-3 or its equivalent. "Eligible Institution" means (a) the corporate trust department of the Subordination Agent or any Pass Through Trustee, as applicable, or (b) a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any U.S. branch of a foreign bank), which has a long-term unsecured debt rating from each Rating Agency of at least A-3 or its equivalent. "Equipment Notes" means the Equipment Notes, in substantially the form set out in Section 2.01 hereof, issued by the Owner Trustee and authenticated by the Indenture Trustee pursuant to the terms of this Indenture. "Equity Collateral" has the meaning assigned to such term in the definition of "Excepted Payments." "Excepted Payments" means (i) any and all indemnity payments and interest in respect thereof paid or payable in respect of the Owner Participant, the partners of the Owner Participant, the Trust Company, the Owner Trustee (and not in support of any payment obligation of the Owner Trustee under any Indenture Document) or any of their respective successors, permitted assigns (and, in the case of a permitted assign of the Owner Participant that is a partnership, the partners of such partnership), directors, officers, employees, servants, agents, subsidiaries, affiliates or shareholders by the Lessee pursuant to the Lease (including, without limitation, Section 13 thereof and any corresponding payment of Supplemental Rent under the Lease), (ii) any proceeds of public liability insurance (or government indemnities in lieu thereof) in respect of the Aircraft payable as a result of insurance claims paid respecting, or losses suffered by, the Trust Company or the Indenture Trustee in its individual capacity or the Owner Participant, or any partner of the Owner Participant, (iii) any proceeds of insurance maintained with respect to the Aircraft by or for the benefit of the Owner Participant (whether directly or through the Owner Trustee) and not required under Section 12 of the Lease, (iv) payments of Supplemental Rent by the Lessee in respect of any amounts payable to the Owner Participant, any partner of the Owner Participant, the Trust Company, the Owner Trustee (and not in support of any payment obligation of the Owner Trustee under any Indenture Document), or any of their respective successors, permitted assigns (and, in the case of a permitted assign of the Owner Participant that is a 10 16 partnership, the partners of such partnership), directors, officers, employees, servants, agents, subsidiaries, affiliates or shareholders under Section 10 of the Lease or by the Lessee or the Parent Guarantor under the Tax Indemnification Agreement or the Amended and Restated Head Lease TIA (as defined in the Refunding Agreement), as the case may be, (v) Transaction Expenses paid or payable by the Lessee or the Parent Guarantor to the Trust Company, the Owner Trustee, the Indenture Trustee or the Owner Participant pursuant to Section 21 of the Refunding Agreement or the Lease, (vi) any letter of credit contemplated by Section 8(l) of the Lease (including, without limitation, any replacement letter of credit (the "Equity Collateral")) and any payment or proceeds of any such Equity Collateral to the extent retained or applied as provided in Section 8(l) of the Lease, (vii) any amount payable to the Owner Participant by any transferee as the purchase price of the Owner Participant's interest in the Trust Estate (or a portion thereof), (viii) any amount payable to the Owner Trustee, the Trust Company, the Owner Participant or any of their respective successors, permitted assigns (and, in the case of a permitted assign of the Owner Participant or any partner of the Owner Participant that is a partnership, the partners of such partnership), directors, officers, employees, servants, agents, subsidiaries, affiliates or shareholders attributable to the period prior to or on the Restatement Date or under the Original Participation Agreement, the Original Lease, the Parent Head Lease Guaranty, the Sublease, the Amended and Restated Head Lease TIA or the Amended and Restated Sublease TIA (as such terms are defined in the Refunding Agreement) or Retained Head Lease Rights and Obligations (as such term is defined in the Refunding Agreement), and (ix) subject to the last sentence of Section 5.10 hereof, any and all rights of the Owner Trustee, the Owner Participant or the Trust Company under the Operative Documents, whether or not a Lease Event of Default, a Lease Default, an Indenture Default or an Indenture Trustee Event has occurred and is continuing, to demand, collect, sue for, give notices, make determinations, enforce or exercise all rights with respect to and otherwise obtain all amounts described in clauses (i) through (viii) above and the proceeds thereof. "Excepted Rights" means (i) those rights of the Owner Participant and the Owner Trustee under Section 5.10 of this Indenture, (ii) all rights under the Equity Collateral to make a claim for, collect and retain all amounts payable with respect to any Equity Collateral, (iii) all rights of the Owner Participant, the Trust Company or the Owner Trustee to compromise or waive any such right or modify, amend or waive any provision of any Operative Document conferring such rights with respect to Excepted Payments, and (iv) all rights of the Owner Trustee to exercise any election or option, or to make any decision or determination, 11 17 or to give or receive any notice, consent, waiver or approval with respect to Excepted Payments. "Excess Amount" has the meaning specified in Section 2.03(b) hereof. "FAA" means the Federal Aviation Administration of the United States Department of Transportation or any successor agency. "Final Drawing" means, in respect of a Liquidity Facility, a borrowing or drawing of all available and undrawn amounts under such Liquidity Facility in accordance with the provisions thereof other than a Downgrade Drawing. "Government Obligations" means direct obligations of the United States of America that are not callable, redeemable or payable prior to maturity, in whole or in part, directly or indirectly, by any Person. "Indenture," "this Indenture," and "the Indenture" mean this First Amended and Restated Indenture, as it may from time to time be supplemented or amended as herein provided, including as supplemented by any Indenture Supplement pursuant hereto. "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 Refunding Agreement; the Trust Agreement (including any Trust Supplements); the Lease (including any Lease Supplements); the Equipment Notes; this Indenture (including any Indenture Supplements); any Sublease Assignment; any Assigned Sublease; the Purchase Agreement (to the extent assigned to or for the benefit of the Owner Trustee); the Purchase Agreement Warranty Assignment; the Second Aircraft Warranty Bill of Sale and the BFE Bill of Sale. "Indenture Event of Default" has the meaning set forth in Section 4.02 hereof. "Indentures" means, collectively, each Trust Indenture and Security Agreement listed on Schedule 1 to the Intercreditor Agreement, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms. "Indenture Supplement" or "Trust Indenture Supplement" means a supplement to this Indenture, in substantially the form of Exhibit A to this Indenture, which shall particularly describe the Aircraft and any Replacement Airframe and Replacement Engine included in the property of the Owner 12 18 Trustee covered by this Indenture, including, without limitation, Trust Indenture Supplement No. 1 dated December 29, 1989, which was recorded as one instrument by the FAA with the Original Indenture, and Trust Indenture Supplement No. 2 dated the date hereof, which is being filed for recordation as one instrument by the FAA with this First Amended and Restated Indenture. "Indenture Trustee Event" means either (i) the Equipment Notes shall have become due and payable pursuant to Section 4.04(b) or (c) of this Indenture or (ii) the Indenture Trustee has taken action or notified the Owner Trustee that it intends to take action to foreclose the Lien of this Indenture or otherwise commence the exercise of any significant remedy under this Indenture or the Lease. "Interest Drawing" has the meaning assigned to such term in Section 3.6(a) of the Intercreditor Agreement. "Investment Earnings" means investment earnings on funds on deposit in the Trust Accounts net of losses and investment expenses of the Subordination Agent in making such investments. "Lease" means the Original Lease, as the same may be modified, supplemented or amended from time to time in accordance with the provisions thereof and hereof and of the Refunding Agreement including, without limitation, as supplemented by Lease Supplement No. 1 dated the Delivery Date and Lease Supplement No. 2 dated January 5, 1995, and as further assigned, amended, restated and supplemented by Assignment and Amendment No. 1 and Sublease Termination Agreement [GPA 1989 BN-11] dated as of the date hereof and Amended and Restated Aircraft Lease Agreement [GPA 1989 BN-11] dated as of the date hereof and supplemented by Lease Supplement [GPA 1989 BN-11] No. 3 dated the date hereof, which are being filed for recordation with the FAA contemporaneously herewith. "Lease Default" means an event or condition that, with the giving of notice or the lapse of time or both, would become a Lease Event of Default. "Lease Event of Default" means any event or condition defined as an "Event of Default" in Section 17 of the Lease. "Lessee" means America West Airlines, Inc., a Delaware corporation, in its capacity as lessee under the Amended and Restated Lease, and its successors, and, to the extent permitted by the Refunding Agreement, its assigns thereunder. "Lien" means any mortgage, chattel mortgage, pledge, lien, charge, encumbrance, lease, exercise of rights, security interest, lease in the nature of a security 13 19 interest, statutory right in rem, or claim of any kind, including any thereof arising under any conditional sale agreement, equipment trust agreement or title retention agreement. "Majority in Interest of Note Holders" means, as of a particular date of determination and subject to Section 2.6 of the Intercreditor Agreement, the Holders of more than 50% in aggregate unpaid Principal Amount of all Equipment Notes outstanding as of such date. For purposes of this definition, there shall be excluded any Equipment Notes held by the Owner Trustee or the Owner Participant or any interests of the Owner Participant therein by reason of subrogation pursuant to Section 4.03 of the Indenture (unless all Equipment Notes then outstanding shall be held by the Owner Trustee and/or the Owner Participant) or any Equipment Notes held by the Lessee or any Affiliate of any thereof. "Make-Whole Amount" means, with respect to any Equipment Note, the amount (as determined by an independent investment banker selected by Lessee and reasonably acceptable to the Indenture Trustee and the Owner Participant) by which (a) the present value of the remaining scheduled payments of principal and interest from the redemption date to maturity of such Equipment Note computed by discounting each such payment on a semiannual basis from its respective Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to (i) in the case of Series A Equipment Notes and Series B Equipment Notes, the Treasury Yield and (ii) in the case of Series C Equipment Notes and Series D Equipment Notes, the Treasury Yield plus 0.75% exceeds (b) the outstanding principal amount of such Equipment Note plus accrued interest. For purposes of determining the Make-Whole Amount, "Treasury Yield" at the time of determination with respect to any Equipment Note means the interest rate (expressed as a semiannual equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semiannual yield to maturity for United States Treasury securities maturing on the Average Life Date of such Equipment Note and trading in the public securities market either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in the public securities markets, (A) one maturing as close as possible to, but earlier than, the Average Life Date of such Equipment Note and (B) the other maturing as close as possible to, but later than, the Average Life Date of such Equipment Note, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States Treasury securities maturing on the Average Life Date of such Equipment Note is reported on the most recent H.15(519), such weekly average yield to maturity as published in such H.15(519). "H.15(519)" means the weekly 14 20 statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Amount shall be the third Business Day prior to the applicable redemption date and the "most recent H.15(519)" means the H.15(519) published prior to the close of business on the third Business Day prior to the applicable redemption date. "Non-U.S. Holder" or "Non-U.S. Person" means any Person other than a U.S. Person or a U.S. Holder. "Note Holder" or "Holder" means any registered holder from time to time of one or more Equipment Notes as reflected in the Register maintained by the Registrar. "Officers' Certificate" means a certificate (i) signed by a Responsible Officer of the Owner Trustee or the Lessee, as the case may be, and (ii) signed by another officer of the Owner Trustee or the Lessee, as the case may be, certifying as to the authority and signature of such Responsible Officer, that is delivered to the Indenture Trustee. "Opinion of Counsel" means a written opinion of legal counsel, who in the case of legal counsel for the Lessee may be (i) an attorney employed by the Lessee who is generally empowered to deliver such written opinions or (ii) Latham & Watkins or other counsel designated by the Lessee and reasonably satisfactory to the Indenture Trustee or, in the case of legal counsel for the Owner Trustee, may be Morris, James, Hitchens & Williams or other counsel designated by the Owner Trustee and reasonably satisfactory to the Indenture Trustee. "Original Head Lessee" means GPA Leasing USA Sub I, Inc., a Connecticut corporation, in its capacity as lessee under the Original Lease. "Original Indenture" means the Trust Indenture and Security Agreement [GPA 1989 BN-11] dated as of December 19, 1989, as supplemented by Trust Indenture Supplement No. 1 dated December 29, 1989, which were recorded as one instrument by the FAA on January 3, 1990 and assigned Conveyance No. V78689. "Original Loan Certificates" means the Loan Certificates issued under and as defined in the Original Indenture. "Original Sublessee" means America West Airlines, Inc. ("AWA"), a Delaware corporation, in its capacity as sublessee under the Aircraft Sublease Agreement [GPA 1989 BN-11] dated as of September 21, 1990, as supplemented and amended to the date hereof, between the Original Head Lessee 15 21 in its capacity as sublessor thereunder and AWA in its capacity as sublessee. "Owner Participant" means ___________________, as Owner Participant under the Trust Agreement, and its successors and permitted assigns. "Parent Guarantor" means GPA Group plc, a public limited company organized and existing under the laws of Ireland. "Pass Through Trust" means each of the four Pass Through Trusts established under the relevant Pass Through Trust Agreement. "Pass Through Trust Agreement" means the Pass Through Trust Agreements set forth on Schedule II hereto. "Pass Through Trustee" means Fleet National Bank, a national banking association, not in its individual capacity but solely as pass through trustee under each of the four separate Pass Through Trust Agreements. "Past Due Rate" means, with respect to any amount not paid when due (whether at stated maturity, by acceleration or otherwise) under or in respect of any Equipment Note, a rate of interest per annum (computed on the basis of a year of 360 days comprised of twelve 30-day months) equal to 1% in excess of the Debt Rate for such Equipment Note. "Payment Date" means each January 2 and July 2, commencing on July 2, 1997 (or, if any such day is not a Business Day, the immediately succeeding Business Day) until the Equipment Notes have been paid in full. "Principal Amount" with respect to an Equipment Note means the stated original principal amount of such Equipment Note and, with respect to all Equipment Notes, means the aggregate stated original principal amounts of all Equipment Notes. "Principal Amount Repayment Date" means each Payment Date on which any portion of the Principal Amount is due and payable in accordance with the Amortization Schedule. "Purchase Agreement Warranty Assignment" means the Purchase Agreement Warranty Assignment [GPA 1989 BN-11], dated the Delivery Date, between the Original Head Lessee and the Owner Trustee. "Rating Agencies" means, collectively, at any time, each nationally recognized rating agency which shall have been requested to rate the Certificates issued pursuant to the Pass Through Trust Agreements and which shall then be rating the Certificates. Initially, the Rating Agencies 16 22 shall consist of Moody's Investors Service, Inc. and Standard & Poor's Ratings Group, a division of McGraw-Hill Inc. "Refinancing Transaction" means the transactions contemplated by the Refunding Agreement and the other documents entered into on and in connection with the Refunding Agreement on the Restatement Date. "Refunding Agreement" means the Refunding Agreement [GPA 1989 BN- 11] dated as of June __, 1997, among the Lessee, the Original Head Lessee, the Parent Guarantor, the Owner Trustee, the Pass Through Trustee, the Owner Participant, the Subordination Agent and the Indenture Trustee. "Register" has the meaning set forth in Section 2.07 hereof. "Registrar" has the meaning set forth in Section 2.07 hereof. "Responsible Officer" means, in the case of the Lessee, the president or any other officer with authority of at least a vice president or, in the case of the Owner Trustee, an officer of the Owner Trustee in its Corporate Trust Administration Department. "Restatement Date" means June __, 1997 or such other date agreed to by the parties to the Refunding Agreement as the date for the consummation of the Refinancing Transaction, as evidenced by the date of the filing with the FAA of Trust Indenture Supplement No. 2. "Second Aircraft Warranty Bill of Sale" means the full warranty (as to title) bill of sale covering the Aircraft (excluding all of the Buyer Furnished Equipment to be covered by the BFE Bill of Sale) executed by the Original Head Lessee in favor of the Owner Trustee, dated the Delivery Date. "Secured Obligations" has the meaning set forth in Section 2.06 hereof. "Securities Act" means the Securities Act of 1933, as amended. "Series A" or "Series A Equipment Notes" means Equipment Notes issued and designated as "Series A" hereunder, in the Principal Amount and maturities and bearing interest as specified in Section 2.02 and Schedule I hereto under the heading "Series A." "Series B" or "Series B Equipment Notes" means Equipment Notes issued and designated as "Series B" hereunder, in the Principal Amount and maturities and 17 23 bearing interest as specified in Section 2.02 and Schedule I hereto under the heading "Series B." "Series C" or "Series C Equipment Notes" means Equipment Notes issued and designated as "Series C" hereunder, in the Principal Amount and maturities and bearing interest as specified in Section 2.02 and Schedule I hereto under the heading "Series C." "Series D" or "Series D Equipment Notes" means Equipment Notes issued and designated as "Series D" hereunder, in the Principal Amount and maturities and bearing interest as specified in Section 2.02 and Schedule I hereto under the heading "Series D." "Sublease Assignment" means a sublease assignment by the Lessee in favor of the Owner Trustee (including the consent thereto given by the sublessee thereunder) with respect to the assignment of a Permitted Sublease pursuant to Section 6(a) of the Lease. "Transaction Expenses" means the costs, fees, expenses and disbursements set forth in Section 21 of the Refunding Agreement. "Trust Accounts" has the meaning assigned to such term in Section 2.2(a) of the Intercreditor Agreement. "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 Trustee. "Trust Indenture Estate" or "Indenture Estate" means all estate, right, title and interest of the Owner Trustee in and to the properties, rights and interests covered by the Granting Clause of the Indenture, excluding, however, in each case, Excepted Payments and Excepted Rights. "U.S. Holder" or "U.S. Person" means any Person that is a "United States Person" as that term is defined in Section 7701(a)(30) of the Code. 18 24 ARTICLE II THE EQUIPMENT NOTES SECTION 2.01. Form of Equipment Notes. The Equipment Notes shall be substantially in the form set forth below: THIS EQUIPMENT NOTE HAS NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR PURSUANT TO THE SECURITIES LAWS OF ANY STATE. ACCORDINGLY, THIS EQUIPMENT NOTE MAY NOT BE SOLD UNLESS EITHER REGISTERED UNDER THE ACT AND SUCH APPLICABLE STATE LAWS OR AN EXEMPTION FROM SUCH REGISTRATIONS IS AVAILABLE. WILMINGTON TRUST COMPANY, AS OWNER TRUSTEE UNDER TRUST AGREEMENT [GPA 1989 BN-11] DATED AS OF DECEMBER 19, 1989, AS AMENDED. SERIES [A/B/C/D] NON-RECOURSE EQUIPMENT NOTE DUE [ ] ISSUED IN CONNECTION WITH ONE AIRBUS 320-231 AIRCRAFT BEARING UNITED STATES REGISTRATION NUMBER N632AW No. $ Date: [ , 1997] ------------ ------------------- -------- DEBT RATE MATURITY DATE --------- ------------- [ ] [ , ] --------- ------- --- 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 [GPA 1989 BN-11], dated as of December 19, 1989, as amended, between the Owner Participant named therein and Wilmington Trust Company (herein as such Trust Agreement may be supplemented or amended from time to time called the "Trust Agreement"), hereby promises to pay to Fleet National Bank, as Subordination Agent under the Intercreditor Agreement, or the registered assignee thereof, the principal sum of $_______ (the "Principal Amount"), together with interest on the Principal Amount remaining unpaid from time to time (calculated on the basis of a year of 360 days comprised of twelve 30-day months) from the date hereof until paid in full at a rate per annum equal to the Debt Rate indicated above. The Principal Amount of this Equipment Note shall be payable in installments on the dates set forth in Schedule I hereto equal to the corresponding percentage of the Principal Amount of this Equipment Note set forth in Schedule I hereto. Accrued but unpaid interest shall be due and payable in semiannual installments commencing on July 2, 1997, and thereafter on July 2 and January 2 of each year, to and including ___________, ____. 19 25 Notwithstanding the foregoing or anything to the contrary contained herein, (i) the final payment made on this Equipment Note shall be in an amount sufficient to discharge in full the unpaid Principal Amount and all accrued and unpaid interest on, and any other amounts due under, this Equipment Note; and (ii) if any date on which a payment under this Equipment Note becomes due and payable is not a Business Day, then such payment shall not be made on such scheduled date but shall be made on the next succeeding Business Day and if such payment is made on such next succeeding Business Day, no interest shall accrue on the amount of such payment during such extension. For purposes hereof, the term "Indenture" means the First Amended and Restated Trust Indenture and Security Agreement [GPA 1989 BN-11], dated as of June __, 1997, between the Owner Trustee and The Chase Manhattan Bank (formerly known as Chemical Bank, successor by merger to Manufacturers Hanover Trust Company) (the "Indenture Trustee"), as the same may be amended or supplemented from time to time. All other capitalized terms used in this Equipment Note and not defined herein shall have the respective meanings assigned in the Indenture. This Equipment Note shall bear interest, payable on demand, at the Past Due Rate (calculated on the basis of a year of 360 days comprised of twelve 30-day months) on any overdue Principal Amount, any overdue Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest and any other amounts payable hereunder which are overdue, in each case for the period the same is overdue. Amounts shall be overdue if not paid when due (whether at stated maturity, by acceleration or otherwise). All payments of all or any portion of the Principal Amount, interest, Make-Whole Amount, if any, and other amounts, if any, to be made by the Owner Trustee hereunder and under the Indenture or the Refunding Agreement shall be payable only from the income and proceeds from the Trust Estate to the extent included in the Trust 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 Trust Indenture Estate to enable the Indenture Trustee to make such payments in accordance with the terms of Section 2.03 and Article III of the Indenture, and each Holder hereof, by its acceptance of this Equipment Note, agrees that it will look solely to the income and proceeds from the Trust Indenture Estate to the extent available for distribution to the Holder hereof as above provided and that none of the Owner Participant, the Owner Trustee and the Indenture Trustee is personally liable or liable in any manner, including, without limitation, extending to any assets other than the Trust Indenture Estate to the Holder hereof for any amounts payable or any liability under this Equipment Note or, except as provided in the Indenture or in the Refunding Agreement, for any liability under the Indenture or the Refunding Agreement; provided, however, that nothing herein contained shall limit, restrict or impair any and all rights or remedies of the 20 26 Indenture Trustee hereunder, subject always to the terms and provisions of the Indenture. There shall be maintained a Register for the purpose of registering transfers and exchanges of Equipment Notes at the Corporate Trust Office of the Indenture Trustee or at the office of any successor in the manner provided in Section 2.07 of the Indenture. Any payment of any portion of the Principal Amount and interest and other amounts due hereunder shall be payable in Dollars in immediately available funds at the Corporate Trust Office of the Indenture Trustee, or as otherwise provided in the Indenture. Each such payment shall be made on the date such payment is due and without any presentment or surrender of this Equipment Note, except that in the case of any final payment with respect to this Equipment Note, the Equipment Note shall be surrendered promptly thereafter to the Indenture Trustee for cancellation. The Holder hereof, by its acceptance of this Equipment Note, agrees that, except as provided in the Indenture, each payment received by it hereunder shall be applied, first, to the payment of accrued interest on this Equipment Note (as well as any interest on any overdue Principal Amount, any overdue Make-Whole Amount, if any, and, to the extent permitted by law, any overdue interest and any other overdue amounts hereunder) to the date of such payment, second, to the payment of the portion of the Principal Amount of this Equipment Note then due, third, to the payment of Make-Whole Amount, if any, and any other amount due hereunder or under the Indenture, and fourth, the balance, if any, remaining thereafter, to the payment of the portion of the Principal Amount of this Equipment Note remaining unpaid in the inverse order of its normal maturity. This Equipment Note is one of the Equipment Notes referred to in the Indenture which have been or are to be issued by the Owner Trustee pursuant to the terms of the Indenture. The Trust Indenture Estate is held by the Indenture Trustee as security, in part, for the Equipment Notes. The provisions of this Equipment Note are subject to the Indenture. Reference is hereby made to the Indenture and the Refunding Agreement for a complete statement of the rights and obligations of the Holder of, and the nature and extent of the security for, this Equipment Note and the rights and obligations of the Holders of, and the nature and extent of the security for, any other Equipment Notes executed and delivered under the Indenture, as well as for a statement of the terms and conditions of the trusts created by the Indenture, to all of which terms and conditions in the Indenture and the Refunding Agreement each Holder hereof agrees by its acceptance of this Equipment Note. As provided in the Indenture and subject to certain limitations therein set forth, this Equipment Note is exchangeable for a like aggregate unpaid portion of the Principal 21 27 Amount of Equipment Notes of different authorized denominations, as requested by the Holder surrendering the same. Prior to due presentment for registration of transfer of this Equipment Note, the Owner Trustee and the Indenture Trustee shall treat the Person in whose name this Equipment Note is registered as the owner hereof for all purposes whether or not this Equipment Note be overdue, and neither of the Owner Trustee nor the Indenture Trustee shall be affected by notice to the contrary. This Equipment Note is subject to redemption as provided in Sections 2.10 and 2.11 of the Indenture, to purchase by the Owner Participant or the Owner Trustee as provided in Section 2.12 of the Indenture and to acceleration by the Indenture Trustee as provided in Section 4.04 of the Indenture. [The indebtedness evidenced by this Equipment Note is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of the Secured Obligations (as defined in the Indenture) in respect of [Series A Equipment Notes](1) [Series B Equipment Notes](2) [Series C Equipment Notes](3), and this Equipment Note is issued subject to such provisions. The Note Holder of this Equipment Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Indenture Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Indenture Trustee his attorney-in-fact for such purpose.](4) Unless the certificate of authentication hereon has been executed by or on behalf of the Indenture Trustee by manual signature, this Equipment Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. THIS EQUIPMENT NOTE 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. * * * - ---------------------------------- (1) To be inserted in the case of Series B Equipment Notes. (2) To be inserted in the case of Series C Equipment Notes. (3) To be inserted in the case of Series D Equipment Notes. (4) To be inserted in the case of a Series B, Series C or Series D Equipment Note. 22 28 IN WITNESS WHEREOF, the Owner Trustee has caused this Equipment Note to be executed in its corporate name by its officer thereunto duly authorized on the date hereof. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee By: ------------------------------- Name: Title: INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Equipment Notes referred to in the within- mentioned Indenture. THE CHASE MANHATTAN BANK, as Indenture Trustee By: ------------------------------- Name: Title: 23 29 SCHEDULE I EQUIPMENT NOTES AMORTIZATION Percentage of Principal Amount Principal Amount Repayment Date to be Paid [SEE SCHEDULE I TO TRUST INDENTURE WHICH IS INSERTED UPON ISSUANCE] * * * SECTION 2.02. Issuance and Terms of Equipment Notes. The Equipment Notes shall be dated the date of issuance thereof, shall be issued in four separate series consisting of Series A, Series B, Series C and Series D and in the maturities and principal amounts and shall bear interest as specified in Schedule I hereto. On the date of the consummation of the Refinancing Transaction, (i) each Equipment Note shall be issued to the Pass Through Trustees (or their designee) under the Pass Through Trust Agreements set forth in Schedule II to be attached hereto in connection therewith and (ii) the Original Loan Certificates issued under the Original Indenture shall be concurrently prepaid. The Equipment Notes shall be issued in registered form only. The Equipment Notes shall be issued in denominations of $1,000 and integral multiples thereof, except that one Equipment Note of each Series may be in an amount that is not an integral multiple of $1,000. Each Equipment Note shall bear interest at the Debt Rate (calculated on the basis of a year of 360 days comprised of twelve 30-day months) on the unpaid Principal Amount thereof from time to time outstanding, payable in arrears on July 2, 1997, and on each July 2 and January 2 thereafter until maturity. The Principal Amount of each Equipment Note shall be payable on the dates and in the installments equal to the corresponding percentage of the Principal Amount as set forth in Schedule I hereto which shall be attached as Schedule I to the Equipment Notes. Notwithstanding the foregoing, the final payment made under each Equipment Note shall be in an amount sufficient to discharge in full the unpaid portion of the Principal Amount and all accrued and unpaid interest on, and any other amounts due under, such Equipment Note. Each Equipment Note shall bear interest at the Past Due Rate (calculated on the basis of a year of 360 days comprised of twelve 30-day months) on any part of the Principal Amount, Make-Whole Amount, if any, and, to the extent permitted by applicable law, interest and any other amounts payable thereunder not paid when due for any period during which the same shall be overdue, in each case for the 24 30 period the same is overdue. Amounts shall be overdue if not paid when due (whether at stated maturity, by acceleration or otherwise). Notwithstanding anything to the contrary contained herein, if any date on which a payment under any Equipment Note becomes due and payable is not a Business Day then such payment shall not be made on such scheduled date but shall be made on the next succeeding Business Day and if such payment is made on such next succeeding Business Day, no interest shall accrue on the amount of such payment during such extension. The Owner Trustee agrees to pay to the Indenture Trustee for distribution in accordance with Section 3.04 hereof (a) any and all indemnity amounts received by the Owner Trustee which are payable by Lessee to (i) the Indenture Trustee in its individual capacity, (ii) the Pass Through Trusts, (iii) the Subordination Agent, (iv) the Liquidity Providers, or (v) the Pass Through Trustees, in each case pursuant to Sections 10 and 13 of the Lease or Section 21 of the Refunding Agreement, (b) any and all amounts received by the Owner Trustee which are payable by Lessee in respect of and equal to the Owner Trustee's pro rata share (as defined below) of all amounts owed to the Liquidity Providers by the Subordination Agent under each Liquidity Facility (as determined by the Subordination Agent in consultation with the Liquidity Providers and notified to the Indenture Trustee) other than amounts due as (i) repayments of the principal of advances thereunder, and (ii) interest on Interest Drawings, Final Drawings and Applied Downgrade Drawings under any Liquidity Facility except to the extent included in Net Interest and Related Charges (as defined below), and (c) any and all amounts received by the Owner Trustee which are payable by Lessee under clause (vii) or (viii) of the definition of Supplemental Rent. The Indenture Trustee shall have no duty or obligation to (i) verify or confirm the accuracy of any of the amounts (other than the portion of the Principal Amount of, and interest on, the Equipment Notes issued hereunder) paid to it by the Owner Trustee or (ii) determine whether any amounts are owed by the Owner Trustee under this Section 2.02. As used in this Section 2.02, "Owner Trustee's pro rata share" means as of any time: (A) with respect to all amounts other than Net Interest and Related Charges, a fraction the numerator of which is the aggregate principal balance then outstanding of the Equipment Notes issued hereunder and the denominator of which is the aggregate principal balance then outstanding of all "Equipment Notes" issued under the Indentures, and (B) with respect to all Net Interest and Related Charges (x) if there exists a Payment Default (as defined below) under any Equipment Note a fraction, the numerator of which is the aggregate principal balance then outstanding of the Equipment Notes issued hereunder and the denominator of which is the aggregate principal balance then outstanding of all "Equipment Notes" issued under the Indentures under 25 31 which there exists a Payment Default or (y) at all other times, zero; provided, however, neither the numerator nor the denominator of the fractions in paragraphs (A) or (B) shall include any "Series D Equipment Notes" issued under the Indentures. As used in this Section 2.02, "Net Interest and Related Charges" means (as determined by the Subordination Agent in consultation with the Liquidity Providers and notified to the Indenture Trustee except that the Past Due Rate shall be determined by the Indenture Trustee and notified to the Subordination Agent) the sum of (i) the amount, if any, by which interest payable to any Liquidity Provider on any Interest Drawing, Final Drawing and/or Downgrade Drawing (other than a Downgrade Drawing that is not an Applied Downgrade Drawing (as defined in the Liquidity Facilities)) exceeds the amount which would be payable if such advances bore interest at the Designated Interest Rate (as defined below) plus (ii) any amounts payable under Section 3.1, Section 3.2, Section 3.3, Section 3.9 or Section 7.7 of each Liquidity Facility (or similar provisions of any succeeding liquidity facility) which result from any Interest Drawing, Final Drawing or Downgrade Drawing. As used in this Section 2.02, "Designated Interest Rate" means the weighted average Past Due Rate (as defined in the applicable Indentures) in respect of "Series A Equipment Notes," "Series B Equipment Notes" and "Series C Equipment Notes" issued under the Indentures, except with respect to that portion of any Final Drawing (or Downgrade Drawing which becomes a Final Drawing) which remains in a Cash Collateral Account, Designated Interest Rate means the weighted average Investment Earnings of funds in the Cash Collateral Accounts. As used in this Section 2.02, a "Payment Default" when used in connection with an "Equipment Note" issued under an Indenture means a default in the payment of principal thereof or interest thereon, other than a default in the payment of principal or interest on a "Series D Equipment Note" issued under the Indentures which has not been cured other than solely because of acceleration. For purposes of Section 3.04(b) hereof, this is the fourth paragraph of Section 2.02. The Equipment Notes shall be executed on behalf of the Owner Trustee by its President or one of its Vice Presidents, Assistant Vice Presidents or Assistant Secretaries or other authorized officer. Equipment Notes bearing the signatures of individuals who were at any time the proper officers of the Owner Trustee shall bind the Owner Trustee, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Equipment Notes or did not hold such offices at the respective dates of such Equipment Notes. The Owner Trustee may from time to time execute and deliver Equipment Notes with respect to the Aircraft to the Indenture Trustee for authentication upon original issue and such Equipment Notes shall thereupon be authenticated and delivered by the Indenture Trustee upon the written request of the Owner Trustee signed by a Vice President or Assistant Vice President or other authorized officer of the Owner Trustee; provided, however, 26 32 that each such request shall specify the aggregate Principal Amount of all Equipment Notes to be authenticated hereunder on original issue with respect to the Aircraft. No Equipment Note shall be secured by or be entitled to any benefit under this Indenture or be valid or obligatory for any purposes, unless there appears on such Equipment Note a certificate of authentication in the form provided for herein executed by the Indenture Trustee by the manual signature of one of its authorized officers and such certificate upon any Equipment Notes shall be conclusive evidence, and the only evidence, that such Equipment Note has been duly authenticated and delivered hereunder. SECTION 2.03. Payments from Trust Indenture Estate Only. (a) Without impairing any of the other rights, powers, remedies, privileges or Liens of the Note Holders under this Indenture, each Note Holder, by its acceptance of an Equipment Note, agrees that, except as expressly provided in this Indenture, the Refunding Agreement or any other Operative Document, (i) the obligation to make all payments of all or any portion of the Principal Amount of, interest on, Make-Whole Amount, if any, and all other amounts due with respect to the Equipment Notes, and the performance by the Owner Trustee of every obligation or covenant contained in this Indenture and in the Refunding Agreement or any of the other Operative Documents, shall be payable only from the income and proceeds from the Trust Estate to the extent included in the Trust 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 Trust Indenture Estate to enable the Indenture Trustee to make such payments in accordance with the terms of Article III hereof, and all of the statements, representations, covenants and agreements made by the Owner Trustee (when made in such capacity) contained in this Indenture and any other Operative Document other than the Trust Agreement, unless expressly otherwise stated, are made and intended only for the purpose of binding the Trust Estate and establishing the existence of rights and remedies which can be exercised and enforced against the Trust Estate; therefore, anything contained in this Indenture or such other agreements to the contrary notwithstanding (except for any express provisions or representations that the Trust Company is responsible for, or is making, for which there would be personal liability of the Trust Company), no recourse shall be had with respect to this Indenture or such other agreements against the Trust Company or against any institution or Person which becomes a successor trustee or co-trustee or any officer, director, trustee, servant or direct or indirect parent or controlling Person or Persons of any of them, and (ii) none of the Trust Company, the Owner Participant, any partner of the Owner Participant, the Indenture Trustee and any officer, director, trustee, servant, employee, agent or direct or indirect parent or controlling Person or Persons of any of them shall have any personal liability for any amounts payable, or other obligation owed, hereunder, under the Refunding Agreement or any of the other Operative Documents or under the Equipment Notes except as 27 33 expressly provided herein (in the case of the Owner Trustee and the Indenture Trustee) or therein; provided, however, nothing contained in this Section 2.03(a) shall be construed to limit the exercise and enforcement in accordance with the terms of this Indenture or such other agreements of rights and remedies against the Trust Indenture Estate. (b) If (i) all or any part of the Trust Estate becomes the property of, or the Owner Trustee or Owner Participant becomes, 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 Trust Company, the Owner Trustee or the Owner Participant is required, by reason of the Trust Company, the Owner Trustee or the Owner Participant being held to have recourse liability to any Note Holder or the Indenture Trustee, directly or indirectly (other than the recourse liability of the Trust Company, the Owner Trustee or the Owner Participant under the Operative Documents), to make payment on account of any amount payable as Principal Amount, Make-Whole Amount, if any, interest or other amounts on the Equipment Notes or under this Indenture and (iii) any Note Holder or the Indenture Trustee actually receives any Excess Amount (as hereinafter defined) which reflects any payment by the Trust Company, the Owner Trustee or the Owner Participant on account of clause (ii) above (other than aforesaid), then such Note Holder or the Indenture Trustee, as the case may be, shall promptly refund to the Trust Company, the Owner Trustee or the Owner Participant (whichever shall have made such payment) such Excess Amount. For purposes of this Section 2.03(b), "Excess Amount" means the amount by which such payment exceeds the amount that would have been received by a Note Holder or the Indenture Trustee if the Trust Company, the Owner Trustee or the Owner Participant had not become subject to the recourse liability referred to in clause (ii) above. Nothing contained in this Section 2.03(b) shall prevent a Note Holder or the Indenture Trustee from enforcing any personal recourse obligation (and retaining the proceeds thereof) of the Trust Company, the Owner Trustee or the Owner Participant under the Refunding Agreement, this Indenture (and any exhibits or annexes hereto or thereto) or any other Operative Document. SECTION 2.04. Method of Payment. (a) The Principal Amount of, interest on, Make-Whole Amount, if any, and other amounts due under each Equipment Note or hereunder will be payable in Dollars by wire transfer of immediately available funds not later than 12:00 noon, New York City time, on the due date of payment to the Indenture Trustee at the Corporate Trust Office for distribution among the Note Holders in the manner provided herein. After transferring (or causing the transfer of) the above amounts to the Indenture Trustee, the Owner Trustee shall not have any responsibility for the distribution of such payment to any Note Holder. Notwithstanding the foregoing or any provision in any Equipment Note to the contrary, the Indenture 28 34 Trustee will use reasonable efforts to pay or cause to be paid, if so directed in writing by any Note Holder (with a copy to the Owner Trustee), all amounts paid by the Owner Trustee hereunder and under such Holder's Equipment Note or Equipment Notes to such Holder or a nominee therefor (including all amounts distributed pursuant to Article III of this Indenture) by transferring, or causing to be transferred, by wire transfer of immediately available funds in Dollars, prior to 2:00 p.m., New York City time, on the due date of payment, to an account maintained by such Holder with a bank located in the continental United States the amount to be distributed to such Holder, for credit to the account of such Holder maintained at such bank. If the Indenture Trustee shall fail to make any such payment as provided in the immediately preceding sentence after its receipt of funds at the place and prior to the time specified above, the Indenture Trustee, in its individual capacity and not as trustee and without indemnification or right of reimbursement under any Operative Document, agrees to compensate such Holders for loss of use of funds in accordance with industry standards for this type of transaction until such payment is made and the Indenture Trustee shall be entitled to any interest earned on such funds until such payment is made. Any payment made hereunder shall be made free and clear of and without reduction for or on account of all wire and like charges and without any presentment or surrender of any Equipment Note, except that, in the case of the final payment in respect of any Equipment Note, such Equipment Note shall be surrendered to the Indenture Trustee for cancellation promptly after such payment. Notwithstanding any other provision of this Indenture to the contrary, the Indenture Trustee shall not be required to make, or cause to be made, wire transfers as aforesaid prior to the first Business Day on which it is practicable for the Indenture Trustee to do so if such funds were received after 12:00 noon, New York City time, at the place of payment. Prior to the due presentment for registration of transfer of any Equipment Note, the Owner Trustee and the Indenture Trustee shall deem and treat the Person in whose name any Equipment Note is registered on the Register as the absolute owner and Holder of such Equipment Note for the purpose of receiving payment of all amounts payable with respect to such Equipment Note and for all other purposes, and neither the Owner Trustee nor the Indenture Trustee shall be affected by any notice to the contrary, unless and until such change is reflected in the Register. So long as any signatory to the Refunding Agreement or nominee thereof shall be a registered Note Holder, all payments to it shall be made to the account of such Note Holder specified in Schedule III thereto and otherwise in the manner provided in or pursuant to the Refunding Agreement unless it shall have specified some other account or manner of payment by notice to the Indenture Trustee consistent with this Section 2.04. (b) The Indenture Trustee, as agent for the Owner Trustee, shall exclude and withhold at the appropriate rate from each payment of Principal Amount of, interest on, Make-Whole Amount, if any, and other amounts due hereunder or under each Equipment Note (and such exclusion and withholding shall 29 35 constitute payment in respect of such Equipment Note) any and all United States withholding taxes applicable thereto as required by law. The Indenture Trustee agrees to act as such withholding agent and, in connection therewith, whenever any present or future United States taxes or similar charges are required to be withheld with respect to any amounts payable hereunder or in respect of the Equipment Notes, to withhold such amounts (and such withholding shall constitute payment in respect of such Equipment Note) and timely pay the same to the appropriate authority in the name of and on behalf of the Note Holders, that it will file any necessary United States withholding tax returns or statements when due, and that as promptly as possible after the payment thereof it will deliver to each Note Holder (with a copy to the Owner Trustee and the Lessee) appropriate receipts showing the payment thereof, together with such additional documentary evidence as any such Note Holder, the Owner Participant and the Owner Trustee may reasonably request from time to time. If a Note Holder which is a Non-U.S. Person has furnished to the Indenture Trustee a properly completed and currently effective U.S. Internal Revenue Service Form 1001 or W-8 (or such successor form or forms as may be required by the United States Treasury Department) during the calendar year in which the payment hereunder or under the Equipment Note(s) held by such Holder is made (but prior to the making of such payment) or in either of the two preceding calendar years, and has not notified the Indenture Trustee of the withdrawal or inaccuracy of such form prior to the date of such payment (and the Indenture Trustee has no reason to know that any information set forth in such form is inaccurate), the Indenture Trustee shall withhold only the amount, if any, required by law (after taking into account any applicable exemptions claimed by the Note Holder) to be withheld from payments hereunder or under the Equipment Notes held by such Holder in respect of United States federal income tax (and such withholding shall constitute payment in respect of such Equipment Note). If a Note Holder (x) which is a Non-U.S. Person has furnished to the Indenture Trustee a properly completed and currently effective U.S. Internal Revenue Service Form 4224 in duplicate (or such successor certificate, form or forms as may be required by the United States Treasury Department as necessary in order to avoid withholding of United States federal income tax), during the calendar year in which the payment is made (but prior to the making of such payment) or in either of the two preceding calendar years, and has not notified the Indenture Trustee of the withdrawal or inaccuracy of such certificate or form prior to the date of such payment (and the Indenture Trustee has no reason to know that any information set forth in such form is inaccurate) or (y) which is a U.S. Person has furnished to the Indenture Trustee a properly completed and currently effective U.S. Internal Revenue Service Form W-9, if applicable, prior to a payment hereunder or under the Equipment Notes held by such Holder, no amount shall be withheld from payments in respect of United States federal income tax. If any Note Holder has notified the Indenture Trustee that any of the 30 36 foregoing forms or certificates is withdrawn or inaccurate, or if such Holder has not filed a form claiming an exemption from United States withholding tax or if the Code or the regulations thereunder or the administrative interpretation thereof are at any time after the date hereof amended to require such withholding of United States federal income taxes from payments under the Equipment Notes held by such Holder, the Indenture Trustee agrees to withhold from each payment due to the relevant Note Holder withholding taxes at the appropriate rate under law (and such withholding shall constitute payment in respect of such Equipment Notes) and will, on a timely basis as more fully provided above, deposit such amounts with an authorized depository and make such returns, statements, receipts and other documentary evidence in connection therewith as required by applicable law. None of the Owner Trustee, the Owner Participant or the Lessee shall have any liability for the failure of the Indenture Trustee to withhold taxes in the manner provided for herein or for any false, inaccurate or untrue evidence provided by a Holder hereunder. SECTION 2.05. Application of Payments. In the case of each Equipment Note, each payment of Principal Amount, Make-Whole Amount, if any, and interest or other amounts due thereon shall, except as otherwise expressly provided herein, be applied: First: to the payment of accrued interest on such Equipment Note (as well as any interest on any overdue Principal Amount, any overdue Make-Whole Amount, if any, and, to the extent permitted by law, any overdue interest and any other overdue amounts thereunder) to the date of such payment; Second: to the payment of the Principal Amount of such Equipment Note (or a portion thereof) then due thereunder; Third: to the payment of Make-Whole Amount, if any, and any other amount due hereunder or under such Equipment Note; and Fourth: the balance, if any, remaining thereafter, to the payment of the Principal Amount of such Equipment Note remaining unpaid (provided that such Equipment Note shall not be subject to redemption except as provided in Sections 2.10 and 2.11 hereof). The amounts paid pursuant to clause "Fourth" above shall be applied to the installments of Principal Amount of such Equipment Note in the inverse order of their normal maturity. SECTION 2.06. Termination of Interest in Trust Indenture Estate. A Note Holder shall not, as such, have any further interest in, or other right with respect to, the Trust Indenture Estate when the Principal Amount of, Make-Whole Amount, 31 37 if any, and interest on and other amounts due under all Equipment Notes held by such Note Holder and all other sums then payable to such Note Holder hereunder and under the Lease and the Refunding Agreement by the Lessee, the Owner Participant and the Owner Trustee (collectively, the "Secured Obligations") shall have been paid in full. SECTION 2.07. Registration, Transfer and Exchange of Equipment Notes. The Indenture Trustee shall keep a register (the "Register") in which the Indenture Trustee shall provide for the registration of Equipment Notes and the registration of transfers of Equipment Notes. No such transfer shall be given effect unless and until registration hereunder shall have occurred. The Register shall be kept at the Corporate Trust Office of the Indenture Trustee. The Indenture Trustee is hereby appointed "Registrar" for the purpose of registering Equipment Notes and transfers of Equipment Notes as herein provided. A Holder of any Equipment Note intending to exchange such Equipment Note shall surrender such Equipment Note to the Indenture Trustee at the Corporate Trust Office, together with a written request from the registered Holder thereof for the issuance of a new Equipment Note, specifying, in the case of a surrender for transfer, the name and address of the new Holder or Holders. Upon surrender for registration of transfer of any Equipment Note, the Owner Trustee shall execute, and the Indenture Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Equipment Notes of a like aggregate unpaid portion of the Principal Amount and of the same series. At the option of the Note Holder, Equipment Notes may be exchanged for other Equipment Notes of any authorized denominations of a like aggregate unpaid portion of the Principal Amount, upon surrender of the Equipment Notes to be exchanged to the Indenture Trustee at the Corporate Trust Office. Whenever any Equipment Notes are so surrendered for exchange, the Owner Trustee shall execute, and the Indenture Trustee shall authenticate and deliver, the Equipment Notes which the Note Holder making the exchange is entitled to receive. All Equipment Notes issued upon any registration of transfer or exchange of Equipment Notes (whether under this Section 2.07 or under Section 2.08 hereof or otherwise under this Indenture) shall be the valid obligations of the Owner Trustee evidencing the same respective obligations, and entitled to the same security and benefits under this Indenture, as the Equipment Notes surrendered upon such registration of transfer or exchange. Every Equipment Note presented or surrendered for registration of transfer or exchange shall (if so required by the Indenture Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by the Note Holder or such Holder's attorney duly authorized in writing, and the Indenture Trustee shall require evidence satisfactory to it as to the compliance of any such transfer with the Securities Act and the securities laws of any applicable state. The Indenture Trustee shall make a notation on each new Equipment Note of the amount of all payments of Principal Amount previously made on the old Equipment Note or Equipment Notes with respect to which such 32 38 new Equipment Note is issued and the date to which interest on such old Equipment Note or Equipment Notes has been paid. Interest shall be deemed to have been paid on such new Equipment Note to the date on which interest shall have been paid on such old Equipment Note, and all payments of the Principal Amount marked on such new Equipment Note, as provided above, shall be deemed to have been made thereon. Neither the Indenture Trustee nor the Owner Trustee shall be required to exchange any surrendered Equipment Notes as provided above during the ten-day period preceding the Payment Date. The Indenture Trustee will promptly notify the Owner Trustee, the Owner Participant and Lessee of each registration of a transfer of an Equipment Note. Any such transferee of an Equipment Note, by its acceptance of an Equipment Note, agrees to the provisions of the Refunding Agreement applicable to Note Holders, and shall be deemed to have represented and warranted to the parties to the Refunding Agreement as to the matters represented and warranted by the Subordination Agent in its capacity as the initial Holder of the Equipment Notes. Subject to compliance by the Note Holder and its transferee (if any) of the requirements set forth in this Section 2.07, the Indenture Trustee and the Owner Trustee shall use all reasonable efforts to issue new Equipment Notes upon transfer or exchange within 10 Business Days of the date an Equipment Note is surrendered for transfer or exchange. SECTION 2.08. Mutilated, Destroyed, Lost or Stolen Equipment Notes. If any Equipment Note shall become mutilated, destroyed, lost or stolen, the Owner Trustee shall, upon the written request of the Holder of such Equipment Note, execute and the Indenture Trustee shall authenticate and deliver in replacement thereof a new Equipment Note, payable in the same Principal Amount dated the same date and captioned as originally issued. If the Equipment Note being replaced has become mutilated, such Equipment Note shall be surrendered to the Indenture Trustee and a copy thereof shall be furnished to the Owner Trustee. If the Equipment Note being replaced has been destroyed, lost or stolen, the Holder of such Equipment Note shall furnish to the Lessee, the Owner Trustee, the Owner Participant and the Indenture Trustee such security or indemnity as may be reasonably required by them to save the Lessee, the Owner Trustee, the Owner Participant and the Indenture Trustee harmless and evidence satisfactory to the Lessee, the Owner Trustee, the Owner Participant and the Indenture Trustee of the destruction, loss or theft of such Equipment Note and of the ownership thereof. If a bank or trust company with a net worth of $200,000,000 or more is the Holder of any such destroyed, lost or stolen Equipment Note, then the written indemnity of such Person, signed by an authorized officer thereof, in favor of, delivered to and in form reasonably satisfactory to the Lessee, the Owner Participant, the Owner Trustee and the Indenture Trustee shall be accepted as satisfactory indemnity and security and no further indemnity or security shall be required as a condition to the execution and delivery of such new Equipment Note. Subject to compliance by the Note Holder of the requirements set forth in this Section 2.08, the Indenture 33 39 Trustee and the Owner Trustee shall use all reasonable efforts to issue new Equipment Notes within 10 Business Days of the date of the written request therefor from the Note Holder. SECTION 2.09. Payment of Expenses on Transfer; Cancellation. (a) No service charge shall be made to a Note Holder for any registration of transfer or exchange of Equipment Notes, but the Indenture Trustee, as Registrar, may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Equipment Notes; provided, however, that none of the Lessee, the Owner Trustee, the Indenture Trustee or the Owner Participant shall bear costs of registration, transfer or exchange in connection with the consummation of the Refinancing Transaction. (b) The Indenture Trustee shall cancel all Equipment Notes surrendered for replacement, redemption, transfer, exchange, payment or cancellation and shall destroy the canceled Equipment Notes. SECTION 2.10. Mandatory Redemptions of Equipment Notes. The Equipment Notes are subject to redemption as provided in this Section 2.10 and Section 2.11 and purchase as provided in Section 2.12. On the date on which Lessee is required pursuant to Section 11(a) of the Lease to make payment for an Event of Loss with respect to the Aircraft, all of the Equipment Notes shall be redeemed in whole at a redemption price equal to 100% of the unpaid Principal Amount thereof, together with all accrued interest thereon to, but not including, the date of redemption and all other amounts payable hereunder or under the Refunding Agreement to the Note Holders but without Make-Whole Amount, all in the order of priority specified in Section 3.02 hereof. SECTION 2.11. Redemptions; Notice of Redemption. (a) Neither any redemption of any Equipment Note nor any purchase by the Owner Trustee of any Equipment Note may be made except to the extent and in the manner expressly permitted by this Indenture. No purchase of any Equipment Note may be made by the Indenture Trustee. (b) Notice of redemption or purchase with respect to the Equipment Notes shall be given by the Indenture Trustee by first-class mail, postage prepaid, mailed not less than 15 nor more than 60 days prior to the applicable redemption date, to each Note Holder of such Equipment Notes to be redeemed or purchased, at such Note Holder's address appearing in the Register. 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, the redemption price will become due and payable upon each such Equipment Note, and that interest on such Equipment Notes shall cease to accrue on and after such redemption date, and (4) the place or places where such Equipment Notes are to be surrendered for payment of the redemption price. 34 40 (c) On or before the redemption date, the Owner Trustee (or any Person on behalf of the Owner Trustee) shall, to the extent an amount equal to the redemption price for the Equipment Notes to be redeemed or purchased on the redemption date shall not then be held in the Trust Indenture Estate, deposit or cause to be deposited with the Indenture Trustee by 12:00 noon, New York City time, on the redemption date in immediately available funds the redemption price of the Equipment Notes to be redeemed or purchased. (d) Notice of redemption or purchase having been given as aforesaid, the Equipment Notes to be redeemed or purchased shall, on the redemption date, become due and payable at the Corporate Trust Office of the Indenture Trustee, and from and after such redemption date (unless there shall be a default in the payment of the redemption price) any such Equipment Notes then outstanding shall cease to bear interest. Upon surrender of any such Equipment Note for redemption or purchase in accordance with said notice, such Equipment Note shall be redeemed at the redemption price. If any Equipment Note called for redemption or purchase shall not be so paid upon surrender thereof for redemption, the principal amount thereof shall, until paid, continue to bear interest from the applicable redemption date at the interest rate in effect for such Equipment Note as of such redemption date. SECTION 2.12. Option to Purchase Equipment Notes. Either the Owner Trustee or the Owner Participant may, upon the events and subject to the terms and conditions and for the price set forth in this Section 2.12, purchase all but not less than all of the Equipment Notes outstanding hereunder, and each Note Holder agrees that it will, upon such events and subject to such terms and conditions and upon receipt of such price, sell, assign, transfer and convey to such purchaser or its nominee (without recourse or warranty of any kind except as to its title to the Equipment Notes and except against Liens on such Equipment Notes arising by, through or under such Holder), all of the right, title and interest of such Note Holder in and to the Trust Indenture Estate, this Indenture and the Equipment Notes held by it, and such purchaser or its nominee shall assume all of such Holder's obligations under the Refunding Agreement and hereunder. Such option to purchase the Equipment Notes may be exercised by the Owner Trustee or the Owner Participant upon any of the following events, and, in any such event, the purchase price thereof shall equal for each Equipment Note the aggregate unpaid Principal Amount thereof, plus accrued and unpaid interest thereon to, but not including, the date of purchase and all other amounts (other than the Make-Whole Amount, except as provided in the next sentence) then payable hereunder or under the Refunding Agreement to the Holder thereof. Such option to purchase the Equipment Notes may be exercised: (i) upon an Indenture Trustee Event or (ii) in the event there shall have occurred and be continuing a Lease Event of Default, provided that if such option is exercised pursuant to this clause (ii) at a time when there 35 41 shall have occurred and be continuing for less than 120 days a Lease Event of Default (and there is no Indenture Trustee Event), the purchase price thereof shall equal the price provided in the preceding sentence plus the Make-Whole Amount, if any; provided further, that under no circumstances shall the Make- Whole Amount be payable by the Lessee. Such option to purchase the Equipment Notes may be exercised by the Owner Trustee or the Owner Participant giving written notice of its election of such option to the Indenture Trustee, which notice shall specify a date for such purchase not more than 30 days or less than 15 days after the date of such notice. The Indenture Trustee shall not exercise any of the remedies hereunder or, without the consent of the Owner Trustee or the Owner Participant, under the Lease, during the period from the time that a notice of exercise by the Owner Participant of such option to purchase becomes irrevocable until the date on which such purchase is required to occur pursuant to the terms of the preceding sentence. Such election to purchase the Equipment Notes shall become irrevocable upon the fifteenth day preceding the date specified in the written notice described in the first sentence of this paragraph. If the Owner Trustee or the Owner Participant on or before the date of such purchase shall so request, the Note Holders will comply with all the provisions of Section 2.07 to enable new Equipment Notes to be issued to the Owner Trustee or the Owner Participant or its nominee in such denominations as the Owner Trustee or the Owner Participant shall request. All taxes and charges required pursuant to Section 2.09 in connection with the issuance of such new Equipment Note shall be borne by the Owner Participant. SECTION 2.13. Subordination. (a) The Owner Trustee and, by acceptance of its Equipment Notes of any Series, each Note Holder of such Series, hereby agree that no payment or distribution shall be made on or in respect of the Secured Obligations owed to such Note Holder of such Series, including any payment or distribution of cash, property or securities after the commencement of a proceeding of the type referred to in Section 4.02(g), (h) or (i) hereof, except as expressly provided in Articles II and III hereof. (b) By the acceptance of its Equipment Notes of any Series (other than Series A), each Note Holder of such Series agrees that in the event that such Note Holder, in its capacity as a Note Holder, shall receive any payment or distribution on any Secured Obligations in respect of such Series which it is not entitled to receive under this Section 2.13 or Article III hereof, it will hold any amount so received in trust for the Senior Holder or Senior Holders (as defined in Section 2.13(c) hereof) and will forthwith turn over such payment to the Indenture Trustee in the form received to be applied as provided in Articles II and III hereof. 36 42 (c) As used in this Section 2.13, the term "Senior Holder" or "Senior Holders" shall mean, (i) the Note Holders of Series A until the Secured Obligations in respect of Series A Equipment Notes have been paid in full, (ii) after the Secured Obligations in respect of Series A Equipment Notes have been paid in full, the Note Holders of Series B until the Secured Obligations in respect of Series B Equipment Notes have been paid in full and (iii) after the Secured Obligations in respect of Series B Equipment Notes have been paid in full, the Note Holders of Series C until the Secured Obligations in respect of Series C Equipment Notes have been paid in full. ARTICLE III RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE SECTION 3.01. Certain Rent Distributions. Except as otherwise provided in Section 3.02, 3.03 or 3.04 hereof, each installment of Basic Rent, any payment of Supplemental Rent, any payment received by the Indenture Trustee as contemplated by the first sentence of Section 4.03 hereof, and any payment received by the Indenture Trustee pursuant to any Sublease Assignment as rent under any Assigned Sublease shall be promptly distributed in the following order of priority: first, (i) 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 Amount, and interest and other amounts (as well as any interest on overdue Principal Amount, and to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due to the Note Holders under all Series A Equipment Notes shall be distributed to the Note Holders of Series A ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series A Equipment Note bears to the aggregate amount of the payments then due under all Series A Equipment Notes; (ii) after giving effect to clause (i) above, so much of such installment or payment remaining as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due to the Note Holders under all Series B Equipment Notes shall be distributed to the Note Holders of Series B ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series B Equipment Note bears to the aggregate amount of the payments then due under all Series B Equipment Notes; (iii) after giving effect to clause (ii) above, so much of such installment or payment remaining as shall be 37 43 required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due to the Note Holders under all Series C Equipment Notes shall be distributed to the Note Holders of Series C ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series C Equipment Note bears to the aggregate amount of the payments then due under all Series C Equipment Notes; and (iv) after giving effect to clause (iii) above, so much of such installment or payment remaining as shall be required to pay in full the aggregate amount of the payment or payments of Principal Amount and interest and other amounts (as well as any interest on any overdue Principal Amount and, to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due to the Note Holders under all Series D Equipment Notes shall be distributed to the Note Holders of Series D ratably, without priority of one over the other, in the proportion that the amount of such payment or payments then due under each Series D Equipment Note bears to the aggregate amount of the payments then due under all Series D Equipment Notes; and second, the balance, if any, of such installment or payment remaining thereafter shall be distributed to the Owner Trustee 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 Trust Indenture Estate and invested in accordance with Section 3.07 hereof until whichever of the following shall first occur: (i) all Indenture Defaults shall have been cured or waived, in which event such balance shall be distributed as provided in this clause "second", or (ii) Section 3.03 hereof shall be applicable, in which event such balance shall be distributed in accordance with the provisions of said Section 3.03, or (iii) the 180th day after receipt of such payment, in which event such balance shall be distributed as provided in this clause "second" without reference to this proviso. SECTION 3.02. Event of Loss and Replacement. (a) Any payment received by the Indenture Trustee with respect to the Airframe or the Airframe and one or both Engines as the result of an Event of Loss thereto shall be applied to the redemption of the Equipment Notes and to all other amounts payable hereunder by applying such funds in the following order of priority: 38 44 first, to reimburse the Indenture Trustee for any reasonable out- of-pocket costs or expenses incurred in connection with such Event of Loss, second, to pay in full the aggregate amount of the payment or payments of unpaid Principal Amount, and unpaid interest and other amounts (as well as any interest on overdue Principal Amount, and to the extent permitted by applicable law, on any overdue interest and any other overdue amounts) then due to the Note Holders under all Equipment Notes, all in the order of priority specified in clause "first" of Section 3.01 hereof, and third, if and to the extent required to be paid to the Lessee (or if directed by the Lessee, any Permitted Sublessee) in reimbursement of payment of Stipulated Loss Value pursuant to Section 11(d) of the Lease, to the Lessee (or if directed by the Lessee, any Permitted Sublessee), and otherwise as provided in clause "fourth" of Section 3.03 hereof; provided that, if a Replacement Airframe or a Replacement Airframe and one or more Replacement Engines are to be substituted for the Airframe or the Airframe and one or both Engines subject to such Event of Loss as provided in Section 11 of the Lease and Section 5.06 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 Trust Indenture Estate as security for the obligations of the Lessee under the Operative Documents and invested in accordance with the terms of Section 3.07 hereof and, unless theretofore applied in accordance with the provisions of the Lease and this Indenture, such proceeds shall, to the extent payable to the Lessee under the Lease, be released to the Lessee (or if directed by the Lessee, any Permitted Sublessee) upon or in connection with the replacement thereof as provided in such Sections. (b) Any amounts received directly or indirectly from any governmental authority or insurer or other party pursuant to any provision of Section 11 or 12 of the Lease (other than as the result of an Event of Loss with respect to the Airframe or the Airframe and one or both Engines) shall be applied as provided in the applicable provisions of the Lease; provided, however, that to the extent that any portion of such amounts held for account of the Lessee are not at the time required to be paid to the Lessee (or any Permitted Sublessee) pursuant to the applicable provisions of Section 11 or 12 of the Lease, shall be held by the Indenture Trustee as security for the obligations of the Lessee under the Operative Documents and shall be invested in accordance with the terms of Section 3.07 hereof and at such time as the conditions specified in the Lease for payment of such amounts to the Lessee shall be fulfilled, such portion, and the net proceeds of any investment thereof, shall, unless theretofore applied in accordance with the provisions of the Lease and this Indenture, be paid to the Lessee to the extent provided in the Lease. 39 45 SECTION 3.03. Payment After Indenture Event of Default, etc. Except as otherwise provided in Sections 2.13, 3.02, 3.04(a) and (c) and 6.07 hereof, and notwithstanding Section 2.05 hereof, all payments received and amounts held or realized by the Indenture Trustee after an Indenture Event of Default shall have occurred and be continuing or after the Indenture Trustee has given notice to the Owner Trustee and the Owner Participant pursuant to Section 4.04(a) hereof regarding its exercise of remedies under Section 18 of the Lease or of the foreclosure of this Indenture, or after the Equipment Notes shall have become due and payable as provided herein, and all payments or amounts then held by the Indenture Trustee as part of the Trust Indenture Estate, shall, so long as such Indenture Event of Default shall be continuing, be promptly distributed by the Indenture Trustee in the following order of priority, without duplication: first, so much of such payments or amounts as shall be required to reimburse the Indenture Trustee for all amounts due to it pursuant to Section 6.07 hereof, plus 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 Trust Indenture Estate pursuant to Section 4.05(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, reasonable 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 remaining as shall be required to reimburse the then existing or prior Note Holders for payments made pursuant to Section 5.03 hereof (to the extent not previously reimbursed) shall be distributed to the then existing or prior Note Holders, and if the aggregate amount remaining shall be insufficient to pay all such amounts in full, it shall be distributed ratably, without priority of one over any other, in accordance with the amount of the payment or payments made by each such then existing or prior Note Holder pursuant to said Section 5.03 and applicable (in the case of each such then existing Note Holder) to the Equipment Notes held by such existing Note Holder at the time of distribution by the Indenture Trustee; third, (i) so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series A Equipment Notes, and the accrued but unpaid interest and other amounts due 40 46 thereon and all other Secured Obligations in respect of the Series A Equipment Notes (other than Make-Whole Amount, if any) to the date of distribution, shall be distributed to the Note Holders of Series A, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series A Equipment Notes held by each Holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Amount, if any) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series A Equipment Notes held by all such Holders plus the accrued but unpaid interest and other amounts due thereon to the date of distribution; (ii) after giving effect to paragraph (i) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series B Equipment Notes, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations in respect of the Series B Equipment Notes (other than Make-Whole Amount, if any) to the date of distribution, shall be distributed to the Note Holders of Series B, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series B Equipment Notes held by each Holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Amount, if any) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series B Equipment Notes held by all such Holders plus the accrued but unpaid interest and other amounts due thereon to the date of distribution; (iii) after giving effect to paragraph (ii) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series C Equipment Notes, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations in respect of the Series C Equipment Notes (other than Make-Whole Amount, if any) to the date of distribution, shall be distributed to the Note Holders of Series C, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series C Equipment Notes held by each Holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Amount, if any) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series C Equipment Notes held by all such Holders plus the accrued but unpaid interest and other amounts due thereon to the date of distribution; and 41 47 (iv) after giving effect to paragraph (iii) above, so much of such payments or amounts remaining as shall be required to pay in full the aggregate unpaid Principal Amount of all Series D Equipment Notes, and the accrued but unpaid interest and other amounts due thereon and all other Secured Obligations in respect of the Series D Equipment Notes (other than Make-Whole Amount, if any) to the date of distribution, shall be distributed to the Note Holders of Series D, and in case the aggregate amount so to be distributed shall be insufficient to pay in full as aforesaid, then ratably, without priority of one over the other, in the proportion that the aggregate unpaid Principal Amount of all Series D Equipment Notes held by each Holder plus the accrued but unpaid interest and other amounts due hereunder or thereunder (other than Make-Whole Amount, if any) to the date of distribution, bears to the aggregate unpaid Principal Amount of all Series D Equipment Notes held by all such Holders plus the accrued but unpaid interest and other amounts due thereon to the date of distribution; and fourth, 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 and the Lease. No Make-Whole Amount shall be due and payable on the Equipment Notes as a consequence of the acceleration of the Equipment Notes. SECTION 3.04. Certain Payments. (a) Any payments received by the Indenture Trustee for which provision as to the application thereof is made in the Lease and not otherwise provided for herein shall be applied forthwith to the purpose for which such payment was made in accordance with or as otherwise provided by the terms of the Lease. (b) The Indenture Trustee will distribute promptly upon receipt any indemnity payment received by it from the Owner Trustee or the Lessee in respect of (i) the Indenture Trustee in its individual capacity, (ii) any Pass Through Trust, (iii) the Subordination Agent, (iv) the Liquidity Providers, and (v) the Pass Through Trustees, in each case whether pursuant to Section 10 or 13 of the Lease or Section 21 of the Refunding Agreement or as Supplemental Rent, directly to the Person entitled thereto. Any payment received by the Indenture Trustee under clause (b) of the fourth paragraph of Section 2.02 shall be distributed to the Subordination Agent to be distributed in accordance with the terms of the Intercreditor Agreement, and any payment received by the Indenture Trustee under clause (c) of the fourth paragraph of Section 2.02 shall be distributed directly to the Persons entitled thereto. (c) Notwithstanding anything to the contrary contained in this Article III, any sums received by the Indenture Trustee that constitute Excepted Payments shall be distributed promptly upon receipt by the Indenture Trustee directly to the Person or 42 48 Persons entitled thereto. Further, and notwithstanding anything herein to the contrary, any sums received by the Indenture Trustee under the Lease or any Sublease Assignment as security for the obligations of the Lessee or the relevant Permitted Sublessee under the Operative Documents shall be applied only to such obligations or as otherwise provided in the Lease. SECTION 3.05. Other Payments. Subject to Sections 3.03 and 3.04 hereof, any payments received by the Indenture Trustee for which no provision as to the application thereof is made elsewhere in this Indenture shall be distributed by the Indenture Trustee, unless otherwise agreed in writing, subject to Section 6.07 hereof (i) to the extent received or realized at any time prior to the payment in full of all obligations to the Note Holders secured by the Lien of this Indenture, in the order of priority specified in Section 3.01 hereof, and (ii) to the extent received or realized at any time after payment in full of all obligations to the Note Holders secured by the Lien of this Indenture, in the following order of priority: first, to the extent payments or amounts described in clause "first" of Section 3.03 hereof are otherwise obligations of Lessee under the Operative Documents or for which Lessee is obligated to indemnify against thereunder, in the manner provided in clause "first" of Section 3.03 hereof, and second, in the manner provided in clause "fourth" of Section 3.03 hereof. SECTION 3.06. Payments to Owner Trustee. Any amounts distributed hereunder by the Indenture Trustee to the Owner Trustee shall be paid to the Owner Trustee by wire transfer of 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 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 pursuant to clause "second" of Section 3.01 hereof shall be distributed by wire transfer of funds of the type received by the Indenture Trustee to the Owner Participant's account as may be specified pursuant to the Refunding Agreement. SECTION 3.07. Investment of Amounts Held by Indenture Trustee. Any amounts held by the Indenture Trustee as assignee of the Owner Trustee's rights to hold moneys for security pursuant to Section 21(h) of the Lease shall be held in accordance with the terms of such Section; and the Indenture Trustee hereby agrees to perform the duties of the Owner Trustee under such Section. Except as provided in the preceding sentence, any amounts held by the Indenture Trustee pursuant to the proviso to clause "second" of Section 3.01 hereof, pursuant to Section 3.02 hereof, pursuant to the second sentence of 43 49 Section 3.04(c) hereof, pursuant to the fourth sentence of Section 4.03 hereof, pursuant to a Sublease Assignment, or pursuant to any provision of any other Operative Document providing for amounts to be held by the Indenture Trustee which are not distributed pursuant to the other provisions of Article III hereof shall be invested by the Indenture Trustee from time to time in Specified Investments selected in writing in a timely manner by the Owner Trustee or, in the event the Owner Trustee shall so specify, by the Lessee. Unless otherwise expressly provided in this Indenture or the Lease, any income realized as a result of any such investment and any payments by or on behalf of the Lessee pursuant to the Lease in respect of any losses or expenses, 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 required to be made by it under this Indenture other than by reason of its willful misconduct or gross negligence, 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. ARTICLE IV COVENANTS OF TRUST COMPANY AND OWNER TRUSTEE; INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE SECTION 4.01. Covenants of Trust Company and Owner Trustee. (a) The Trust Company hereby covenants and agrees that it will not directly or indirectly create, incur, assume or suffer to exist any Lessor's Lien attributable to it in its individual capacity with respect to any of the properties or assets of the Trust Indenture Estate and shall, at its own cost and expense promptly take such action as may be necessary duly to discharge any such Lessor's Lien, and the Trust Company will cause restitution to be made to the Trust Indenture Estate in the amount of any diminution of the value thereof as the result of any Lessor's Liens attributable to it. (b) The Owner Trustee hereby covenants and agrees as follows: (i) the Owner Trustee will duly and punctually pay the Principal Amount of, Make-Whole Amount, if any, and interest on and other amounts due under the Equipment Notes and hereunder in accordance with the terms of the Equipment Notes and this Indenture and all amounts payable by it to the Note Holders under the Refunding Agreement and the other Operative Documents; 44 50 (ii) the Owner Trustee will not directly or indirectly create, incur, assume or suffer to exist any Lessor's Liens attributable to it with respect to any of the properties or assets of the Trust Indenture Estate, and shall, at its own cost and expense, promptly take such action as may be necessary duly to discharge any such Lessor's Lien, and the Owner Trustee will cause restitution to be made to the Trust Indenture Estate in the amount of any diminution of the value thereof as the result of any Lessor's Liens attributable to it; (iii) in the event an officer with responsibility for or familiarity with the transactions contemplated hereunder or under the other Operative Documents (or any Vice President) in the Corporate Trust Administration Department 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 12(f) of the Lease, to the extent that the same shall not have been furnished, or is not required to be furnished by the Lessee, to the Indenture Trustee pursuant to the Lease or otherwise; (v) except as contemplated by the Operative Documents or with the consent of the Indenture Trustee acting in accordance with Article IX hereof, the Owner Trustee will not incur any indebtedness for borrowed money; and (vi) 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 Refunding Agreement, the Trust Agreement and the other Operative Documents. SECTION 4.02. Indenture Events 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 shall occur and be continuing (other than a failure to pay when due any amount in respect of Excepted Payments); or 45 51 (b) the failure of the Owner Trustee to pay when due any payment of Principal Amount of, or interest on, any Equipment Note (other than as a result of a Lease Default) and such failure shall have continued unremedied for ten calendar days; or the failure of the Owner Trustee to pay when due any other amount due and payable under any Equipment Note or hereunder (other than as a result of a Lease Default) and such failure shall have continued unremedied for 15 calendar days after notice thereof being given to the Owner Trustee from the Indenture Trustee or any Note Holder; or (c) any Lessor's Lien required to be discharged by the Trust Company pursuant to Section 4.01(a) hereof or Section 13 of the Refunding Agreement or by the Owner Trustee as the Owner Trustee pursuant to Section 4.01(b)(ii) hereof or Section 13 of the Refunding Agreement or any Lessor's Lien required to be discharged by the Owner Participant pursuant to Section 13 of the Refunding Agreement shall remain undischarged for a period of 30 calendar days after, as the case may be, an officer with responsibility for or familiarity with the transactions contemplated hereunder or under the other Operative Documents (or any Vice President) in the Corporate Trust Administration Department of the Trust Company or an officer of the managing partner of the Owner Participant with responsibility for or familiarity with the transactions contemplated hereunder and under the other Operative Documents (or any Vice President of the managing partner of the Owner Participant) shall have actual knowledge of such Lien; provided, that no Indenture Event of Default shall arise under this Section 4.02(c) as a result of a failure by the Owner Trustee or the Owner Participant to observe or perform any covenant referred to in this Section 4.02(c) if the Lessee shall have discharged all Lessor's Liens required to be discharged by the Owner Trustee or the Owner Participant pursuant to such covenants and compensated the Indenture Trustee and the Trust Indenture Estate for all claims, losses and expenses arising from the failure of the Owner Trustee or the Owner Participant, as the case may be, to observe and perform any such covenant; or (d) any representation or warranty made by the Owner Participant, the Owner Trustee or the Trust Company herein or in the Refunding Agreement (other than the representation made in Section 9(b)(8) thereof) or by any Person guaranteeing or supporting the obligations of the Owner Participant under the Operative Documents in any related guarantee or support agreement shall prove to have been false or incorrect when made in any respect materially adverse to the rights and interests of the Note Holders; and if such misrepresentation is capable of being corrected as of a subsequent date and if such correction is being sought diligently, such misrepresentation shall not have been corrected as of a day within 30 calendar days following 46 52 notice thereof being given to the Owner Participant, the Owner Trustee, the Trust Company or such Person, as the case may be, by the Indenture Trustee or a Majority in Interest of Note Holders; or (e) any failure of the Owner Trustee to observe or perform any of its covenants or agreements in the fourth paragraph following the Habendum Clause hereof or in clauses (b)(v) and (b)(vi) of Section 4.01 hereof, or any failure by the Owner Participant or the Trust Company to observe or perform any of its respective covenants in Section 9(b)(10), 10 or 14 of the Refunding Agreement, or the disaffirmance or repudiation by any Person that has guaranteed or may guarantee or support the obligations of the Owner Participant under the Operative Documents; or (f) except as provided in the following paragraph (j), any failure by the Owner Trustee or the Trust Company to observe or perform any other covenant or obligation of the Owner Trustee contained in this Indenture or in the Refunding Agreement or any failure by the Owner Participant to observe or perform any other covenant or obligation of the Owner Participant contained in the Refunding Agreement or any failure of any Person that has guaranteed or may guarantee or support the obligations of the Owner Participant under the Operative Documents to observe or perform any covenant or obligation of such Person contained in any such guarantee or support agreement, which failure, in any case and either individually or together with other then existing failures, shall have a material adverse effect on the rights and interests of the Indenture Trustee or any Note Holder and is not remedied within a period of 45 calendar days following notice being given to the Owner Trustee, the Owner Participant or such Person, as the case may be, by the Indenture Trustee or a Majority in Interest of Note Holders; or (g) either the Trust Estate or the Owner Trustee with respect thereto (and not in its individual capacity) or the Owner Participant, any of its partners, or any Person that has guaranteed or may guarantee or support the 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 the Bankruptcy 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 of itself or any substantial part of its property, or (v) take corporate or comparable action for the purpose of any of the foregoing; or 47 53 (h) a court or governmental authority of competent jurisdiction shall enter an order appointing, without consent by the Trust Estate or the Owner Trustee with respect thereto (and not in its individual capacity) or the Owner Participant, any of its partners, or any Person that has guaranteed or may guarantee or support the 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 it 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 in its individual capacity) or the Owner Participant, any of its partners, or such Person, as the case may be; or (i) any petition for any relief specified in the foregoing paragraph (h) shall be filed against the Trust Estate or the Owner Trustee with respect thereto (and not in its individual capacity) or the Owner Participant, any of its partners, or any Person that has guaranteed or may guarantee or support the 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 when the Aircraft shall be registered in a jurisdiction outside the United States, the Owner Trustee, the Trust Company or the Owner Participant shall breach any covenant as may be agreed upon pursuant to Section 11 of the Refunding Agreement as the result of which the Lien of this Indenture shall cease to be a valid and duly perfected Lien on the Trust Indenture Estate. SECTION 4.03. Certain Rights. In the event of any default by the Lessee in the payment of any installment of Basic Rent due under the Lease, the Owner Participant may, within ten calendar days (or such longer period ending on the second day after the expiry of the applicable grace period specified in the Lease with respect to such default) after notice from the Indenture Trustee or the Lessee of such default, without the consent or concurrence of any Note Holder, pay, as provided in Section 2.04 hereof, for application in accordance with Section 3.01 hereof, a sum equal to the amount of all (but not less than all) of the Principal Amount and interest as shall then (without regard to any acceleration pursuant to Section 4.04(b) or (c) hereof) be due and payable on the Equipment Notes. In the event of any default by the Lessee in any obligation under the Lease other than the payment of Basic Rent, if such default can be remedied by the payment of money and the Owner Trustee shall have been furnished by the Owner Participant with all funds necessary for remedying such default, the Owner Participant may, within 48 54 fifteen calendar days (or such longer period ending on the second day after the expiry of any applicable grace period specified in the Lease with respect to such default) after notice from the Indenture Trustee or the Lessee of such default, without the consent or concurrence of any Note Holder, instruct the Owner Trustee to exercise the Owner Trustee's rights under Section 21(d) of the Lease to perform such obligation on behalf of the Lessee. Solely for the purpose of determining whether there exists an Indenture Event of Default, (a) any timely payment by the Owner Participant pursuant to, and in compliance with, the first sentence of this Section 4.03 shall be deemed to remedy (but solely for purposes of this Indenture) any default by the Lessee in the payment of Basic Rent theretofore due and payable and to remedy (but solely for purposes of this Indenture) any default by the Owner Trustee in the payment of any amount due and payable under the Equipment Notes or hereunder, and (b) any timely performance by the Owner Trustee of any obligation of the Lessee under the Lease pursuant to, and in compliance with, the second sentence of this Section 4.03 shall be deemed to remedy (but solely for purposes of this Indenture) any default by the Lessee under the Lease to the same extent that like performance by the Lessee itself would have remedied such default (but any such payment or performance shall not relieve the Lessee of its duty to pay all Rent and perform all of its obligations pursuant to the Lease). If, on the basis specified in the preceding sentence, such Lease Event of Default shall have been remedied, then any declaration pursuant to the Lease that the Lease is in default, and any declaration pursuant to this Indenture that the Equipment Notes are due and payable or that an Indenture Event of Default exists hereunder, based upon such Lease Event of Default, shall be deemed to be rescinded, and the Owner Participant or the Owner Trustee, as the case may be, shall (to the extent of any such payments made by it) be subrogated to the rights of the Note Holders hereunder to receive such payment of Rent from the Indenture Trustee (and the payment of interest on account of such Rent being overdue), and shall be entitled, so long as no other Indenture Default or Indenture Event of Default shall have occurred and be continuing, to receive, subject to the terms of this Indenture, such payment upon receipt thereof by the Indenture Trustee; provided that the Owner Participant shall not otherwise attempt to recover any such amount paid by it on behalf of the Lessee pursuant to this Section 4.03 except by demanding of the Lessee payment of such amount, or by commencing an action at law against the Lessee and obtaining and enforcing a judgment against the Lessee for the payment of such amount or taking appropriate action in a pending action at law against the Lessee or by demanding Excepted Payments or Excepted Rights; provided, however, 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) and any amounts nevertheless received by the Owner Participant in respect thereof shall be held in trust for the benefit of, and promptly 49 55 paid to, the Indenture Trustee for distribution as provided in Section 3.03 hereof; and provided, further, that (x) this Section 4.03 shall not apply with respect to any default in the payment of Basic Rent due under the Lease, if the Lessee itself shall have theretofore failed to pay Basic Rent in the manner required under the Lease (after giving effect to any applicable grace period) as to (i) each of the three Basic Rent Payment Dates immediately preceding the date of such default or (ii) in the aggregate more than six Basic Rent Payment Dates, (y) the second sentence of this Section 4.03 shall cease to apply, and no payment by the Owner Participant in respect of Supplemental Rent or performance of any obligation of the Lessee under the Lease by the Owner Trustee shall be deemed to remedy or to have remedied any Lease Event of Default for the purposes of this Indenture, if during the 12-month period immediately preceding the relevant default by the Lessee there shall have been expended by the Owner Participant pursuant to the second sentence of this Section 4.03 (and shall have not been reimbursed by the Lessee or any Permitted Sublessee themselves to the Owner Trustee for distribution to the Owner Participant) an amount in excess of $3,500,000, and (z) neither the Owner Trustee nor the Owner Participant shall (without the prior written consent of a Majority in Interest of Note Holders) have the right to cure any Lease Default or Lease Event of Default except as specified in this Section 4.03. SECTION 4.04. Remedies. (a) If an Indenture Event of Default shall have occurred and be continuing and so long as the same shall be continuing unremedied, and if the Equipment Notes shall have been accelerated pursuant to Section 4.04(b) or 4.04(c) hereof, then and in every such case the Indenture Trustee may (subject to the rights of the Owner Participant or the Owner Trustee to cure any such Indenture Event of Default set forth in Section 4.03 hereof and the obligations of the Indenture Trustee set forth in this Section 4.04(a) and subject to Section 10.05 hereof) exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Article IV and shall have and may exercise all of the rights and remedies of a secured party under the Uniform Commercial Code and, in the event such Indenture Event of Default is an Indenture Event of Default referred to in paragraph (a) of Section 4.02 hereof, the Indenture Trustee may (subject as aforesaid), at the direction of a Majority in Interest of Note Holders, exercise any and all of the remedies pursuant to Section 18 of the Lease and pursuant to any Sublease Assignment and 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 but, in the case of the Aircraft, only as permitted by Section 18 of the Lease, and may exclude the Owner Participant, the Owner 50 56 Trustee and the Lessee and all Persons claiming under any of them or wholly or partly therefrom; provided, however, that the Indenture Trustee shall give the Owner Trustee and the Owner Participant ten days' prior written notice of the initial exercise of such remedies by the Indenture Trustee under the Lease (if not stayed or otherwise precluded by applicable law from giving such notice); provided, further, that the Indenture Trustee shall give the Owner Trustee and the Owner Participant thirty days' prior written notice of its intention to sell the Aircraft. Without limiting any of the foregoing, 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. Anything in this Indenture to the contrary notwithstanding, the Indenture Trustee shall not be entitled to exercise any remedy hereunder if there shall have occurred or be continuing a Lease Event of Default unless the Indenture Trustee shall have exercised or concurrently be exercising one or more of the remedies provided for in Section 18 of the Lease to terminate the Lease or take possession and/or sell the Aircraft; provided, however, that such requirement 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)(A) of the Bankruptcy Code (such 60-day or other period being the "Section 1110 Period"), 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 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 trustee or the debtor-in-possession in such proceeding during the Section 1110 Period with the approval of the relevant court to perform the Lease in accordance with Section 1110(a)(1)(A) of the Bankruptcy Code and continues to perform as required by Section 1110(a)(1) 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 (unless the Indenture Trustee is stayed or otherwise precluded by applicable law from giving such notice). In the event that the applicability of Section 1110 of the Bankruptcy Code to the Aircraft is being contested by the Lessee in judicial proceedings, so long as the Indenture Trustee fails to participate in such proceedings, the Owner Trustee shall have the right (without affecting in any way any right or remedy of 51 57 the Indenture Trustee hereunder) to participate in such proceedings. The foregoing shall not preclude the Indenture Trustee from notifying any Permitted Sublessee that payments under any Assigned Sublease are to be made directly to it pursuant to the terms of the relevant Sublease Assignment, or, except as expressly provided above, from exercising its rights or remedies hereunder and under the other Operative Documents. For the avoidance of doubt, it is expressly understood and agreed, subject only to the immediately preceding paragraph, that the above-described inability of the Indenture Trustee to exercise any right or remedy under the Lease shall in no event and under no circumstance prevent the Indenture Trustee from otherwise exercising all of its rights, powers and remedies under this Indenture, including without limitation this Article IV. (b) If an Indenture Event of Default referred to in clause (g), (h) or (i) of Section 4.02 hereof shall have occurred, or a Lease Event of Default under clause (e), (f) or (g) of Section 17 of the Lease shall have occurred, then and in every such case the unpaid Principal Amount of all Equipment Notes then outstanding, together with accrued but unpaid interest and all other amounts due thereunder and hereunder, shall immediately and without further act become due and payable without presentment, demand, protest or notice, all of which are hereby waived. (c) If any Indenture Event of Default not specified in Section 4.04(b) hereof shall have occurred and be continuing, then and in every such case the Indenture Trustee may (and shall, upon receipt of a written demand therefor from a Majority in Interest of Note Holders), subject to Section 4.03 hereof, at any time, by written notice or notices to the Owner Trustee, declare the unpaid Principal Amount of all Equipment Notes to be due and payable, whereupon the unpaid Principal Amount of all Equipment Notes then outstanding, together with accrued but unpaid interest thereon and all other amounts due thereunder and hereunder, shall immediately become due and payable without presentment, demand, protest or further notice, all of which are hereby waived. (d) Sections 4.04(b) and (c), however, are subject to the condition that, if at any time after the Principal Amount of the Equipment Notes shall have become so due and payable, and before any judgment or decree for the payment of the money so due, or any thereof, shall be entered, all overdue payments of interest upon the Equipment Notes and all other amounts payable under the Equipment Notes (except the Principal Amount of the Equipment Notes which by such declaration shall have become payable) shall have been duly paid and every other Indenture Default and Indenture Event of Default with respect to any covenant or provision of this Indenture shall have been cured, then and in every such case a Majority in Interest of Note Holders may (but shall not be obligated to), by written instrument filed with the Indenture Trustee, rescind and annul 52 58 the Indenture Trustee's declaration and its consequences; but no such rescission or annulment shall extend to or affect any subsequent Indenture Default or Indenture Event of Default or impair any right consequent thereon. Any acceleration pursuant to Sections 4.04(b) and (c) shall be automatically rescinded and any related declaration of an Indenture Event of Default annulled in the event that the Owner Trustee or the Owner Participant, as the case may be, shall have cured, in accordance with Section 4.03, the Indenture Event of Default that resulted in such acceleration. No Make-Whole Amount shall become payable on the Equipment Notes as a result of any acceleration under Section 4.04(b) or 4.04(c). (e) Each Note Holder shall be entitled, at any sale pursuant to Section 18 of the Lease, to credit against any purchase price bid at such sale by such Note Holder all or any part of the unpaid obligations owing to such Note Holder and secured by the Lien of this Indenture. The Owner Trustee or Owner Participant may be a cash purchaser at any such sale. (f) Notwithstanding anything contained herein, so long as the Pass Through Trustee under any Pass Through Trust Agreement or the Subordination Agent on its behalf is a Note Holder, the Indenture Trustee will not be authorized or empowered to acquire title to any property in the Trust Indenture Estate or take any action with respect to any property in the Trust Indenture Estate so acquired by it if such acquisition or action would cause any trust created pursuant to the Trust Agreement to fail to qualify as a "grantor trust" for federal income tax purposes. SECTION 4.05. Return of the Aircraft, etc. (a) Subject to the rights of the Owner Trustee and the Owner Participant under Section 4.03 hereof and unless the Owner Participant shall have theretofore purchased the Equipment Notes pursuant to Section 2.12 hereof, if an Indenture Event of Default shall have occurred and be continuing and the Equipment Notes shall have been accelerated pursuant to Section 4.04(b) or 4.04(c) hereof, 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 Trust Indenture Estate; provided that the Indenture Trustee shall at the time be entitled to obtain such possession under Section 4.04(a) and the other applicable provisions of this Indenture. 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 53 59 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 to the fullest extent it may lawfully do so, and (ii) to the extent permitted by law, pursue all or part of the Trust Indenture Estate wherever it may be found (but not in violation of Section 10.05 hereof or of the Lease) and may enter any of the premises of the Lessee wherever such Trust Indenture Estate may be or be supposed to be and search for and take possession of and remove the same (but not in violation of Section 10.05 hereof or of the Lease). 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 a Lease Event of Default which is continuing, the Indenture Trustee may, from time to time, at the expense of the Trust Indenture Estate, make all such expenditures for maintenance, insurance, repairs, replacements, alterations, additions and improvements to and of the Trust Indenture Estate, as it may deem proper (it being understood and agreed that the provisions hereof shall not be construed so as to expand the obligations of the Lessee under the Lease, including Section 16 thereof). In each such case, the Indenture Trustee shall have the right to maintain, use, operate, store, lease, control or manage the Trust Indenture Estate and to carry on the business (without limiting the express provisions of Section 5.10 hereof) and to exercise all rights and powers of the Owner Participant and the Owner Trustee relating to the Trust Indenture Estate, as the Indenture Trustee shall deem best, 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 Trust Indenture Estate or any part thereof as the Indenture Trustee may determine; and the Indenture Trustee shall be entitled to collect and receive directly all tolls, rents (including Rent), revenues, issues, income, products and profits of the Trust Indenture Estate and every part thereof, except Excepted Payments, without prejudice, however, to the right of the Indenture Trustee under any provision of this Indenture to collect and receive all cash held by, or required to be deposited with, the Indenture Trustee hereunder, except Excepted Payments. The Indenture Trustee shall, pursuant to the exercise of its remedies under this Article IV, to the extent permitted by applicable law, be entitled to the appointment of a receiver for all or any part of the Trust Indenture Estate, whether such receivership be incidental to a proposed sale of the Trust Indenture Estate or otherwise, and the Owner Trustee hereby consents to the appointment of such receiver and will not oppose any such appointment. Such tolls, 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 Trust Indenture Estate and of conducting the business thereof, and of all maintenance, repairs, replacements, alterations, additions and improvements, and to 54 60 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 Trust 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 that 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. SECTION 4.06. Remedies Cumulative. Each and every right, power and remedy given to the Indenture Trustee specifically or otherwise in this Indenture shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Indenture Trustee, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. No delay or omission by the Indenture Trustee 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 or the Lessee or to be an acquiescence therein. SECTION 4.07. Discontinuance of Proceedings. In case the Indenture Trustee or any Note Holder shall have instituted any proceeding to enforce any right, power or remedy under this Indenture by foreclosure, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Indenture Trustee or such Note Holder, then and in every such case the Owner Trustee, the Indenture Trustee, the Note Holders and the Lessee shall, subject to any determination in such proceedings, be restored to their former positions and rights hereunder with respect to the Trust Indenture Estate, and all rights, remedies and powers of the Indenture Trustee and the Note Holders shall continue as if no such proceedings had been instituted. SECTION 4.08. Waiver of Past Indenture Defaults. Upon written instructions from a Majority in Interest of Note Holders, the Indenture Trustee shall waive any past Indenture Default hereunder and its consequences and upon any such waiver such Indenture Default shall cease to exist and any Indenture Event of 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 the Holders of all Equipment Notes then outstanding, the Indenture Trustee shall not waive any Indenture 55 61 Default (i) in the payment of the Principal Amount of or interest on any Equipment Note then outstanding, or (ii) in respect of a covenant or provision hereof which, under Article IX hereof, cannot be modified or amended without the consent of each Note Holder. SECTION 4.09. Exercise of Remedies by Foreign Note Holders. If the Indenture Trustee shall exercise remedies pursuant to this Article IV, at a time when (i) the Aircraft is registered with the Federal Aviation Administration, (ii) 25% or more of the then unpaid Principal Amount of the Equipment Notes is held by one or more Persons which are not a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Federal Aviation Act and (iii) remedies are to be exercised pursuant to this Article IV as a result of the occurrence of an Indenture Event of Default which is not a Lease Event of Default, the Indenture Trustee shall make arrangements, if any, as may be required by law so that such exercise of remedies shall not result in the ineligibility of the Aircraft to be registered under the Federal Aviation Act. ARTICLE V DUTIES OF THE INDENTURE TRUSTEE SECTION 5.01. Notice of Indenture Event of Default. In the event the Indenture Trustee shall have knowledge of an Indenture Event of Default, or shall have knowledge of an Indenture Default arising either from a failure to pay Rent or a Lease Default of the type referred to in the second sentence of Section 4.03, the Indenture Trustee shall give prompt notice thereof to the Owner Trustee, the Owner Participant and the Lessee by facsimile, telex, telegraph or telephone (confirmed by written notice in the manner provided by Section 10.06 hereof), and to each Note Holder by first- class mail. Subject to the terms of Sections 2.12, 4.03, 4.04, 4.08, 4.09, 5.03, 5.10 and 10.05 hereof and of this Section 5.01, the Indenture Trustee shall take such action, or refrain from taking such action, with respect to any Indenture Event of Default or Indenture Default (including with respect to the exercise of any rights or remedies hereunder) as the Indenture Trustee shall be instructed in writing by a Majority in Interest of Note Holders. Subject to the provisions of Section 5.03 hereof, if the Indenture Trustee shall not have received instructions as above provided within 20 calendar days after mailing notice of such Indenture Default or Indenture Event of Default to the Note Holders, the Indenture Trustee may, subject to instructions thereafter received pursuant to the preceding provisions of this Section 5.01, take such action, or refrain from taking such action, but shall be under no duty to take or refrain from taking any action, with respect to such Indenture Default or Indenture Event of Default as it shall determine to be advisable and in the best interests of the Note Holders and shall use the same degree of care and skill in connection therewith as a prudent person would use under the 56 62 circumstances in the conduct of its own affairs; provided that the Indenture Trustee may not sell the Aircraft or any part thereof without the consent of a Majority in Interest of Note Holders. In the event the Indenture Trustee shall at any time elect to foreclose or otherwise enforce this Indenture, the Indenture Trustee shall forthwith notify, to the extent (in the case of any such party) not stayed or otherwise prohibited by applicable law, the Owner Participant, the Note Holders, the Owner Trustee and the Lessee. For all purposes of this Indenture, in the absence of actual knowledge on the part of an officer in the Corporate Trust Office, in the case of the Indenture Trustee, or its Corporate Trust Administration Department, in the case of the Owner Trustee, the Indenture Trustee or the Owner Trustee, as the case may be, shall not be deemed to have knowledge of an Indenture Event of Default (except, in the case of the Indenture Trustee, the failure of the Lessee to pay any installment of Rent when due, if any portion of such installment was then required to be paid to the Indenture Trustee, which failure shall constitute knowledge of an Indenture Default for purposes of the first sentence of this Section 5.01) unless notified in writing by the Lessee, the Owner Trustee or one or more Note Holders or, in the case of the Owner Trustee, by the Indenture Trustee. SECTION 5.02. Action Upon Instructions. Subject to the terms of Sections 2.12, 4.03, 4.04, 4.08, 4.09, 5.01, 5.03, 5.10, 9.01 and 10.05 hereof, upon the written instructions at any time and from time to time of a Majority in Interest of Note Holders, the Indenture Trustee shall take such of the following actions as may be specified in such instructions: (i) exercise such election or option, or make such decision or determination, or give such notice, consent, waiver or approval or exercise such right, remedy or power to take such other action hereunder or under any other Indenture Document or in respect of any part or all of the Trust Indenture Estate as shall be specified in such instructions; (ii) take such action with respect to, or to preserve or protect, the Trust Indenture Estate (including the discharge of Liens) as shall be specified in such instructions and as are consistent with this Indenture; and (iii) take such other action in respect of the subject matter of this Indenture as is consistent with the terms hereof and of the other Indenture Documents. 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 Trust Indenture Estate as may be specified from time to time in written instructions of a Majority in Interest of Note Holders (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, notwithstanding the foregoing, the Indenture Trustee may, but shall not be obligated to, execute and file or cause to be filed any financing statement which it from time to time deems appropriate or any continuation statement that the Lessee, in discharge of its obligations under Section 3(v) of the Refunding Agreement or any other Operative 57 63 Document (including, without limitation, Section 15 of the Lease), may so request. Notwithstanding the foregoing or anything in this Indenture to the contrary, the Indenture Trustee may, on the advice of its counsel and without the consent or approval of any Note Holder, approve any counsel asked to opine on any matters under Section 11(b)(ii) of the Refunding Agreement, Section 6(a)(iii) of the Lease or under this Indenture and approve any opinion issued by such counsel. None of the Owner Participant, the Owner Trustee or the Lessee have any liability for the failure of the Indenture Trustee to discharge its obligations hereunder. SECTION 5.03. Indemnification. The Indenture Trustee shall not be required to take any action or refrain from taking any action under Section 5.01 (other than the first sentence thereof) or 5.02 or Article IV hereof unless the Indenture Trustee shall have been indemnified against any liability, cost or expense (including counsel fees) that may be incurred in connection therewith. The Indenture Trustee shall not be under any obligation to take any action under this Indenture and nothing in this Indenture contained shall require the Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. The Indenture Trustee shall not be required to take any action under Section 5.01 (other than the first sentence thereof) or 5.02 or Article IV hereof, nor shall any other provision of this Indenture be deemed to impose a duty on the Indenture Trustee to take any action, if the Indenture Trustee shall have been advised by counsel that such action is contrary to the terms hereof or of the other Indenture Documents or is otherwise contrary to law. SECTION 5.04. No Duties Except as Specified in Indenture or Instructions. The Indenture Trustee shall not have any duty or obligation to maintain, use, operate, store, lease, control, manage, sell, dispose of, insure or otherwise deal with the Aircraft or any other part of the Trust Indenture Estate, or to otherwise take or refrain from taking any action under, or in connection with, this Indenture or any Indenture Document or any part of the Trust Indenture Estate, except as expressly provided by the terms of this Indenture or as expressly provided in written instructions from Note Holders as provided in this Indenture and no implied duties or obligations shall be read into this Indenture against the Indenture Trustee. It is understood that, as between the Indenture Trustee and the Note Holders, with respect to all matters left to the discretion of the Indenture Trustee hereunder, or under any Indenture Document, the Indenture Trustee shall have the right to request written instructions from the Note Holders and, pending receipt of such instructions from the Note Holders or the required percentage thereof as provided herein, the Indenture Trustee shall not be required to take any such discretionary action hereunder; provided, however, that if 58 64 the Indenture Trustee shall request written instructions pursuant to this Section 5.04, it will use reasonable efforts to seek and obtain such instructions promptly so as not unreasonably to delay the proposed action of Lessee in respect of which the instructions are sought. 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 VII hereof or any other Operative Document) promptly take such action as may be necessary to duly discharge all Lenders' Liens on any part of the Trust Indenture Estate attributable to it in its individual capacity. SECTION 5.05. No Action Except Under Lease, Refunding Agreement, Indenture or Instructions. The Owner Trustee and the Indenture Trustee agree that they will not use, operate, store, lease, control, manage, sell, dispose of or otherwise deal with, or place Liens on, the Aircraft or any other part of the Trust Indenture Estate except (i) as required or permitted by the terms of the Lease or the Refunding Agreement, or (ii) in accordance with the powers granted to, or the authority conferred upon, the Owner Trustee and the Indenture Trustee pursuant to this Indenture and in accordance with the terms hereof. SECTION 5.06. Replacement Airframes, Replacement Engines and Replacement Parts. (a) If at any time and from time to time, the Airframe or Engine(s) may, or may be required to, be replaced under Section 6(a), 11(a), 11(b) or 16(c) of the Lease by a Replacement Airframe or Replacement Engine(s), as the case may be, in accordance with the provisions of this Section 5.06 and the provisions of said Sections of the Lease, the Owner Trustee shall, at such time or times, but subject to compliance with the conditions to such replacement set forth in the Lease, direct the Indenture Trustee to execute and deliver to or as directed in writing by the Owner Trustee an appropriate instrument releasing such Airframe and/or Engine(s) as appropriate from the Lien of this Indenture and the Indenture Trustee shall execute and deliver such instrument as aforesaid, 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) so to be released and the Replacement Airframe and/or Replacement Engine(s). (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 which shall be identified by manufacturer, model, FAA registration number (or other applicable registration number) and manufacturer's serial number; 59 65 (ii) a description of the Replacement Airframe (including the manufacturer, model, FAA registration number (or other applicable registration number) and manufacturer's serial number) to be received as consideration for the Airframe to be released; (iii) that on the date of the Indenture Supplement relating to the Replacement Airframe the Owner Trustee will hold legal title to such Replacement Airframe free and clear of all Liens except Permitted Liens, that such Replacement Airframe will on such date be in good operating condition, and that such Replacement Airframe has been or, substantially concurrently with such replacement, is in the process of being duly registered with the Owner Trustee as owner thereof under the Federal Aviation Act or under the law then applicable to the registration of the Aircraft and that an airworthiness certificate has been duly issued under the Federal Aviation Act (or such other applicable law) with respect to such Replacement Airframe, and that such registration and certificate is in full force and effect, and the Lessee or a Permitted Sublessee will have the full right and authority to use such Replacement Airframe; (iv) that the insurance required by Section 12 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 a like Airbus A320-231 model airframe with equivalent or better modification status delivered by the Manufacturer not earlier than June 30, 1988; (vi) that no Lease Event of 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; (vii) an appraisal prepared in accordance with the Appraisal Procedure (as defined in the Lease) confirms that the Replacement Airframe has a value, utility and remaining useful life at least equal to that of the Airframe which suffered the Event of Loss assuming that the same were maintained in accordance with the requirements of the Lease whether or not they are in fact so maintained; and (viii) that each of the conditions specified in Section 11(a) and (c) of the Lease with respect to such Replacement Airframe have been satisfied. B. With respect to the replacement of any Engine: (i) a description of the Engine which shall be identified by manufacturer's name and serial number; 60 66 (ii) a description of the Replacement Engine (including the manufacturer's name and serial number) to be received as consideration for the Engine to be released; (iii) that on the date of the Indenture Supplement relating to the Replacement Engine the Owner Trustee will hold title to such Replacement Engine free and clear of all Liens except Permitted Liens, that such Replacement Engine will on such date be in good operating condition, and that such Replacement Engine is the same or an improved model as the Engine to be released; (iv) the value, remaining useful life and utility of the Replacement Engine as of the date of such certificate (which value, remaining useful life and utility shall not be less than the then value, remaining useful life and utility of the Engine requested to be released, assuming such Engine was in the condition and repair required to be maintained under the Lease (but without regard to hours and cycles until overhaul)); (v) that no Lease Event of Default has occurred and is continuing or would result from the making and granting of the request for release and the addition of such Replacement Engine; and (vi) that each of the conditions specified in Section 11(b) of the Lease with respect to such Replacement Engine have been satisfied. (3) The appropriate instrument or 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, (ii) assigning to the Owner Trustee the benefit of all manufacturer's and vendor's warranties generally available with respect to such Replacement Airframe or Replacement Engine (if any) (which warranties may be assigned by the Owner Trustee to Lessee pursuant to Section 5(d) of the Lease), and (iii) subjecting such Replacement Airframe or Replacement Engine to the Lien of this Indenture and subjecting to any relevant Assigned Sublease and Sublease Assignment, including, without limitation, an Indenture Supplement. (4) With respect to a Replacement Airframe, an appraisal from BK Associates, Avmark Services Ltd., AeroEconomics, Inc. or another firm of independent aircraft appraisers satisfactory to the Indenture Trustee confirming the accuracy of the information set forth in Section 5.06(a)2.A(vii) hereof. (5) The opinion of counsel to the Lessee, satisfactory to the Indenture Trustee, stating that: (i) the certificates, opinions and other instruments and/or property that have been or are therewith delivered to and deposited with the Indenture Trustee conform to the 61 67 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; (ii) the Replacement Airframe and/or Replacement Engine(s) have 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 Lien of this Indenture and the Lease, and subjecting to any relevant Assigned Sublease and Sublease Assignment, as the case may be, have been duly filed for recordation pursuant to the Federal Aviation 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 in order to establish and perfect, in the United States and, if the Aircraft is registered outside the United States, in the jurisdiction of registration, the legal title to such Replacement Airframe and/or Replacement Engine and the Lien of this Indenture on such Replacement Airframe and/or Replacement Engine; and (iii) the Owner Trustee and the Indenture Trustee (as assignee of the Owner Trustee's rights under the Lease) shall be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to the Replacement Airframe and, if an Event of Loss with respect to the Aircraft has occurred, the Replacement Engines to the same extent as with respect to the Airframe and Engines then installed thereon prior to such replacement. (b) Upon the acquisition by the Owner Trustee of title to or other interest in any Part under and as provided in the Lease, the same shall automatically and without further act become subject to the Lien of this Indenture, and to the extent the Owner Trustee is divested of title to or other interest in any Part under and as provided in the Lease, the same shall automatically and without further act cease to be subject to the Lien of this Indenture. The Indenture Trustee shall at any time and from time to time at the request of the Lessee execute an appropriate written instrument or instruments to confirm the release of any Part from the Lien of this Indenture as provided in this Section 5.06(b), but only upon receipt by the Indenture Trustee of an Officers' Certificate of Lessee confirming such release is authorized by the terms hereof. SECTION 5.07. Indenture Supplements for Replacements. In the event of the substitution of a Replacement Airframe or Engine as contemplated by Section 11 of the Lease, the Owner Trustee and the Indenture Trustee agree for the benefit of the Note Holders and the Lessee, subject to fulfillment of the conditions precedent and compliance by the Lessee with its obligations set forth in Section 11 of the Lease, to execute and deliver the appropriate instruments as contemplated by Section 62 68 5.06 hereof, and execute and deliver to the Lessee (or any relevant Permitted Sublessee) an appropriate instrument releasing the Airframe and/or Engine(s) being replaced from the Lien of this Indenture. SECTION 5.08. Effect of Replacement. In the event of the substitution of a Replacement Airframe or Engine as contemplated by Section 11 of the Lease and Section 5.06 hereof, all provisions of this Indenture relating to the Airframe or Engine(s) being replaced shall be applicable to such Replacement Airframe or Replacement Engine(s) with the same force and effect as if such Replacement Airframe or Replacement Engine(s) were the same airframe or engine(s), as the case may be, as the Airframe or Engine(s) being replaced. SECTION 5.09. Notices, etc. Where this Indenture expressly provides for notice to Note Holders, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first- class postage prepaid, to each Note Holder entitled thereto, at his last address as it appears in the Register. In any case where notice to Note Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Note Holder shall affect the sufficiency of such notice with respect to other Note 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 Note 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 mail service, it shall be impracticable to mail notice to the Note 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 5.10. Certain Rights of Owner Trustee and Owner Participant. Notwithstanding any other provisions of this Indenture, including the Granting Clause, but subject always to the final paragraph of this Section 5.10, the following rights shall be reserved to the Owner Trustee or Owner Participant, as the case may be (as separate and independent rights) to the extent described herein: (a) the Owner Trustee or the Owner Participant may, without the consent of the Indenture Trustee, demand, collect, sue for or otherwise obtain all amounts included in Excepted Payments from the Lessee, exercise any election or option or make any decision or determination or give or receive any notice, consent, waiver or approval in respect 63 69 of any Excepted Payment and seek legal or equitable remedies to require the Lessee to maintain the insurance coverage referred to in Section 12 of the Lease (or the comparable provisions of any Assigned Sublease) and such specific performance of the covenants of the Lessee under the Lease (or the comparable provisions of any Assigned Sublease) relating to the protection, maintenance, possession and use of the Aircraft; provided, that the rights referred to in this clause (a) shall not be deemed to include the exercise of any remedies provided for in Section 18 of the Lease (or the comparable provisions of any Assigned Sublease) other than the right to proceed by appropriate court action, either at law or in equity, to enforce payment by the Lessee of such amounts included in Excepted Payments or performance by the Lessee of such insurance covenant or to recover damages for the breach thereof or for specific performance of any covenant of the Lessee; (b) (i) the Indenture Trustee shall not, without the consent of the Owner Trustee, enter into, execute and deliver amendments or modifications in respect of any of the provisions of the Lease, any Assigned Sublease or any Sublease Assignment and (ii) unless an Indenture Event of Default and an Indenture Trustee Event shall have occurred and be continuing, the Indenture Trustee shall not, without the consent of the Owner Trustee, which consent shall not be withheld if no right or interest of the Owner Trustee or the Owner Participant shall be materially diminished or impaired thereby, (A) enter into, execute and deliver waivers or consents in respect of any of the provisions of the Lease, any Assigned Sublease or any Sublease Assignment, or (B) approve any accountants, engineers, appraisers or counsel as satisfactory to render services for or issue opinions to the Owner Trustee pursuant to the Operative Documents (other than tax opinions issued to the Owner Participant, any partner of the Owner Participant or the Owner Trustee); provided that, whether or not an Indenture Event of Default has occurred and is continuing, the Owner Trustee's consent shall be required with respect to any waivers or consents in respect of any of the provisions of Section 6, 12 or 16 of the Lease, or of any other Section of the Lease to the extent such action shall affect (y) the amount or timing of, or the right to enforce payment of any Excepted Payment or (z) the amount or timing of any amounts payable by the Lessee under the Lease as originally executed (or as subsequently modified with the consent of the Owner Trustee) which, absent the occurrence and continuance of an Indenture Event of Default hereunder, would be distributable to the Owner Trustee under Article III hereof; (c) at all times whether or not an Indenture Event of Default has occurred and is continuing, the Owner Trustee and the Owner Participant shall have the right, together with the Indenture Trustee, (i) to receive from the Lessee or any Permitted Sublessee all notices, certificates, 64 70 reports, filings, opinions of counsel and other documents and all information which any thereof is permitted or required to give or furnish to the Owner Trustee pursuant to any Operative Document (including pursuant to Section 10 of the Lease), (ii) to exercise inspection rights pursuant to Section 7 of the Lease, (iii) to retain all rights with respect to insurance maintained for its own account which Section 12 of the Lease specifically confers on the Owner Participant and (iv) to exercise, to the extent necessary to enable it to exercise its rights under Section 4.03 hereof, the rights of the Owner Trustee under Section 21(d) of the Lease and to give notices of default under Section 17 of the Lease; and (d) except as expressly provided to the contrary in clauses (a), (b) and (c) above, so long as no Indenture Event of Default has occurred and is continuing, all rights (including options, elections, determinations, consents, approvals, waivers and the giving of notices) of the Owner Trustee and the Owner Participant under the Lease shall be exercised by the Owner Trustee and/or the Owner Participant, as the case may be, to the exclusion of the Indenture Trustee and any Note Holder and without the consent of the Indenture Trustee or any Note Holder; provided that the foregoing shall not, nor shall any other provision of this Section 5.10, limit (A) any rights separately and expressly granted to the Indenture Trustee or any Note Holder under the Lease or the other Operative Documents (including, without limitation, Section 15 of the Refunding Agreement) or (B) the right of the Indenture Trustee or any Note Holder to receive any funds to be delivered to the Owner Trustee under the Lease (except with respect to Excepted Payments). Notwithstanding the foregoing provisions of this Section 5.10, but subject always to Section 10.05 hereof and to the rights of the Owner Participant under Sections 2.12 and 4.03 hereof, the Indenture Trustee shall at all times have the right, to the exclusion of the Owner Trustee and the Owner Participant, to (A) demand, collect, sue for or otherwise receive and enforce the payment of all Rent due and payable under the Lease (other than any thereof constituting an Excepted Payment or Excepted Right), (B) declare the Lease to be in default under Section 18 thereof and (C) subject only to the provisions of Sections 4.03 and 4.04(a) hereof, exercise the remedies set forth in such Section 18 (other than in connection with Excepted Payments) and in Article IV hereof. SECTION 5.11. Evidence of Action Taken by Note Holder. Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Note Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Note Holders in person or by agent duly appointed in writing, and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are 65 71 delivered to the Indenture Trustee and, if expressly required herein, to the Owner 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 5.04, 5.05, 6.02 and 6.05) conclusive in favor of the Indenture Trustee and the Owner Trustee if made in the manner provided in this Indenture. SECTION 5.12. Right of Revocation of Action Taken. At any time prior to (but not after) the evidencing to the Indenture Trustee, as provided in Section 5.11 hereof, of the taking of any action by the Note Holders of the percentage in aggregate Principal Amount of the Equipment Notes specified in this Indenture in connection with such action, any Note Holder which has consented to such action may, by filing written notice at the Corporate Trust Office and upon proof of holding an Equipment Note, revoke such action so far as concerns such Equipment Note. Except as aforesaid any such action taken by the Note Holder shall be conclusive and binding upon such Note Holder and upon all future Note Holders and owners of such Equipment Note and of any Equipment Notes issued in exchange or substitution therefor, irrespective of whether or not any notation in regard thereto is made upon any such Equipment Note. Any action taken by the Note Holders of the percentage in aggregate Principal Amount of the Equipment Notes specified in this Indenture in connection with such action shall be conclusively binding upon the Owner Trustee, the Indenture Trustee and the Note Holders. ARTICLE VI THE OWNER TRUSTEE AND THE INDENTURE TRUSTEE SECTION 6.01. Acceptance of Trusts and Duties. The Indenture Trustee in its individual capacity accepts the trust hereby created and agrees to perform the same but only upon the terms of this Indenture. The Indenture Trustee agrees for the benefit of the Note Holders, the Owner Trustee and the Owner Participant to receive and disburse all moneys constituting part of the Trust Indenture Estate in accordance with the terms hereof; and neither the Trust Company nor the Indenture Trustee in its individual capacity shall be answerable or accountable under any circumstances, except for its own willful misconduct or gross negligence (other than for the handling of funds, for which the standard of accountability shall be negligence), or as provided in the fourth sentence of Section 2.04(a) hereof and in the last sentence of Section 5.04 hereof, and except for liabilities that may result, in the case of the Trust Company, from the inaccuracy of any representation or warranty of the Trust Company in the Refunding Agreement or in the Trust Agreement or in Section 6.03 hereof or the failure to perform any covenant of the Trust Company pursuant to Section 4.01(a) hereof or in the Trust Agreement, the Refunding Agreement, or, in the case of the Indenture Trustee, from the inaccuracy of any representation or warranty, or failure to perform any covenant, 66 72 of the Indenture Trustee made in its individual capacity herein, in the Refunding Agreement or in any other document. None of the Owner Participant, the Trust Company or the Indenture Trustee shall be liable for any action or inaction of any other one of such parties, except, in the case of the Owner Participant, for any action or omission of the Owner Trustee performed or omitted on the instructions of the Owner Participant. The Owner Trustee shall not be deemed a trustee for the Note Holders for any purpose. SECTION 6.02. Absence of Duties. In the case of the Indenture Trustee, except in accordance with written instructions furnished pursuant to Section 5.01, 5.02 or 9.01 hereof, and except as provided in, and without limiting the generality of, Sections 5.03, 5.04 and 6.09 hereof and, in the case of the Owner Trustee, except as provided in Section 4.01(b), 6.09 or 9.01 hereof and in the Trust Agreement, the Lease and the Refunding Agreement, the Owner Trustee and the Indenture 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 Indenture or any other document, or to see to the maintenance of any such registration, recording or filing, (ii) to see to any insurance on the Aircraft, whether or not the Lessee shall be in default with respect thereto, (iii) to see to the payment or discharge of any Lien of any kind against any part of the Trust Estate or the Trust Indenture Estate, (iv) to confirm, verify or inquire into the failure to receive any financial statements of the Lessee or (v) to inspect the Aircraft at any time or ascertain or inquire as to the performance or observance of any of the Lessee's covenants under the Lease or any of the Permitted Sublessee's covenants under any Assigned Sublease with respect to the Aircraft. SECTION 6.03. No Representations or Warranties as to Aircraft or Documents. NEITHER THE INDENTURE TRUSTEE (INDIVIDUALLY OR AS INDENTURE TRUSTEE) NOR THE OWNER TRUSTEE NOR THE TRUST COMPANY MAKES OR SHALL BE DEEMED TO HAVE MADE, AND EACH HEREBY EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE (EXCEPT AS SET FORTH IN SECTION 5(a) OF THE LEASE), AIRWORTHINESS, VALUE, WORKMANSHIP, COMPLIANCE WITH SPECIFICATIONS, CONDITION, DESIGN, QUALITY, DURABILITY, OPERATION, MERCHANTABILITY OR FITNESS FOR USE OR PURPOSE OF THE AIRCRAFT OR ANY ENGINE 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, AS TO THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE AIRCRAFT OR ANY ENGINE, except that the Trust Company warrants that (i) on the Delivery Date for the Aircraft the Owner Trustee shall have received whatever interest in the Aircraft was conveyed to it under the Second Aircraft Warranty Bill of Sale subject to the rights of the parties to the Indenture Documents 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 67 73 to have made any representation or warranty as to the validity, legality or enforceability of this Indenture, the Trust Agreement, the Equipment Notes or any Indenture Documents 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 in its individual capacity or as Indenture Trustee made under this Indenture or in the other Operative Documents. SECTION 6.04. No Segregation of Moneys; No Interest. Any moneys paid to or retained by the Indenture Trustee pursuant to any provision hereof and not then required to be distributed to any Note Holder, the Lessee or the Owner Trustee as provided in Article III hereof need not be segregated in any manner except to the extent required by law, and may be deposited under such general conditions as may be prescribed by law, and the Indenture Trustee shall not (except as otherwise provided in Section 3.07 hereof) be liable for any interest thereon; provided that any payments received or applied hereunder by the Indenture Trustee shall be accounted for by the Indenture Trustee so that any portion thereof paid or applied pursuant hereto shall be identifiable as to the source thereof. SECTION 6.05. Reliance; Agents; Advice of Counsel. Neither the Owner Trustee nor the Indenture Trustee shall incur any liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, bond or other document or paper believed by it to be genuine and believed by it to be signed by the proper party or parties. The Owner Trustee and the Indenture Trustee may accept a copy of a resolution of the Board of Directors of any party to the Refunding Agreement, certified by the Secretary or an Assistant Secretary thereof as duly adopted and in full force and effect, as conclusive evidence that such resolution has been duly adopted and that the same is in full force and effect. As to the aggregate unpaid Principal Amount of Equipment Notes outstanding as of any date, the Owner Trustee may for all purposes hereof rely on a certificate signed by any Vice President or other authorized corporate trust officer of the Indenture Trustee. As to any fact or matter relating to the Lessee the manner of ascertainment of which is not specifically described herein, the Owner Trustee and the Indenture Trustee may for all purposes hereof rely on a certificate, signed by a duly authorized officer of the Lessee, as to such fact or matter, and such certificate shall constitute full protection to the Owner Trustee and the Indenture Trustee for any action taken or omitted to be taken by them in good faith in reliance thereon, but in the case of any such certificate, the Owner Trustee and the Indenture Trustee shall be under a duty to examine the same to determine whether or not it conforms to the requirements of this Indenture. The Indenture Trustee shall assume, and shall be fully protected in assuming, that the Owner Trustee is authorized by the Trust Agreement to enter into this Indenture and to take all action to be taken by it pursuant to the provisions hereof, and shall not inquire into the authorization of the Owner Trustee with respect 68 74 thereto. In the administration of the trusts hereunder, the Owner Trustee and the Indenture Trustee each may execute any of the trusts or powers hereof and perform its powers and duties hereunder directly or (except in the case of the Indenture Trustee's obligations under the third sentence of Section 2.04(a)) through agents or attorneys and shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care hereunder. The Indenture Trustee may, at the expense of the Trust Indenture Estate, consult with counsel, accountants and other skilled Persons to be selected and retained by it, and the Owner Trustee and the Indenture Trustee shall not be liable for anything done, suffered or omitted in good faith by them in accordance with the written advice or written opinion of any such counsel, accountants or other skilled Persons. SECTION 6.06. Capacity in Which Acting. The Owner Trustee acts hereunder solely as trustee under the Trust Agreement provided, and not in its individual capacity, except as otherwise expressly provided herein. SECTION 6.07. Compensation. The Indenture Trustee shall be entitled to reasonable compensation (which compensation shall not (to the extent permitted by applicable law) be limited by any provision of law in regard to the compensation of a trustee of an express trust), including expenses, advances and disbursements, for all services rendered hereunder, and shall have a first priority claim (prior to the Note Holders) on the Trust Indenture Estate for the payment of such compensation, to the extent that such compensation shall not be paid by the Lessee, and shall have the right to use or apply any moneys held by it hereunder in the Trust Indenture Estate toward such payments. The Indenture Trustee agrees that it shall have no right against any Note Holder or the Owner Participant for any fee as compensation for its services as trustee under this Indenture. SECTION 6.08. May Become Note Holder. Each of the institutions acting as Owner Trustee and Indenture Trustee hereunder may become a Note Holder and have all rights and benefits of a Note Holder to the same extent as if it were not the institution acting as Owner Trustee or Indenture Trustee, as the case may be. SECTION 6.09. Further Assurances; Financing Statements. At any time and from time to time, upon the request of the Indenture Trustee, the Owner Trustee shall promptly and duly execute and deliver any and all such further instruments and documents as may be specified in such request and as are necessary or desirable to perfect, preserve or protect the mortgage, security interests and assignments created or intended to be created hereby, or to obtain for the Indenture Trustee the full benefit of the specific rights and powers herein granted, including, without limitation, the execution and delivery of Uniform Commercial Code financing statements and continuation 69 75 statements with respect thereto, or similar instruments relating to the perfection of the mortgage, security interests or assignments created or intended to be created hereby. ARTICLE VII INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE SECTION 7.01. Scope of Indemnification. 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 but except as otherwise provided in Section 2.03 hereof, to assume liability for, and does hereby indemnify, protect, save and keep harmless the Indenture Trustee, in its individual capacity and as Indenture Trustee, and its successors, permitted assigns, agents and servants solely from the Trust Estate, 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, and reasonable out-of-pocket costs, expenses or disbursements (including reasonable 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 and as trustee) from and after the Restatement Date (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, the Trust Agreement, the Equipment Notes, the 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, purchase, acceptance, nonacceptance, rejection, ownership, delivery, lease, sublease, 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 Trust Indenture Estate or the action or inaction of the Indenture Trustee hereunder, except only (i) in the case of willful misconduct or gross negligence (or negligence in the case of handling of funds) 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 made in the Refunding Agreement, (iii) as otherwise provided in Section 2.04(a) hereof or in the last sentence of Section 5.04 hereof or (iv) as otherwise excluded by the terms of Sections 10(b) and 13 of the Lease from the Lessee's indemnities to the Indenture Trustee, in its individual capacity and as Indenture Trustee, and its successors, permitted assigns, agents and servants, thereunder; provided that so long as the Lease is in effect, the Indenture Trustee shall not make any claim under this Section 7.01 for any amount indemnified against by the Lessee under the Lease without first (but only to the extent not 70 76 stayed or otherwise prevented by operation of law) making demand on the Lessee for payment of such amount. The Indenture Trustee shall notify the Owner Trustee and the Lessee promptly of any claim for which it may seek indemnity. The Lessee shall be entitled to defend any claim by the Indenture Trustee to the extent provided in Section 10 or 13 of the Lease. The Indenture Trustee shall be entitled to indemnification from the Trust Indenture Estate for any liability, obligation, loss, damage, penalty, claim, action, suit, cost, expense or disbursement indemnified against pursuant to this Section 7.01 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 Trust Indenture Estate. The indemnities contained in this Section 7.01 shall survive the termination of this Indenture. SECTION 7.02. Exculpation and Release of Liability. Without in any way affecting the limitations on liability set forth in the Operative Documents, the Indenture Trustee, and each Note Holder by accepting any Equipment Note hereunder, hereby acknowledge and agree that none of the Trust Company, the Owner Participant or any director, officer, employee, stockholder, partner, agent or affiliate of the Trust Company or the Owner Participant (the "Exculpated Equity Persons") shall have any obligation, duty or liability of any kind whatsoever to the Indenture Trustee or any such Note Holder in connection with the exercise by any Exculpated Equity Person of any rights of the Owner Trustee or the taking of any action or the failure to take any action by any Exculpated Equity Person in connection with any rights of the Owner Trustee under this Indenture or the Lease, and each such Note Holder hereby waives and releases, to the extent permitted by applicable law, each Exculpated Equity Person of any and all such obligations, duties or liabilities. ARTICLE VIII SUCCESSOR TRUSTEES AND SEPARATE TRUSTEES SECTION 8.01. 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 Trust Company pursuant to the Trust Agreement, the successor Owner Trustee shall give prompt written notice thereof to the Indenture Trustee and to each Note Holder. SECTION 8.02. 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 calendar days' prior written notice to the Owner Trustee, the Owner Participant, each Note Holder and the Lessee, such resignation to be effective upon the acceptance of the trusteeship by a successor Indenture Trustee. In addition, a Majority in Interest of Note Holders may at any time remove the 71 77 Indenture Trustee without cause by an instrument in writing delivered to the Owner Trustee, the Lessee and the Indenture Trustee, and the Indenture Trustee shall promptly notify each Note 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 Note Holders may appoint, with the consent of the Lessee, a successor Indenture Trustee by an instrument signed by such Holders (whose fees shall be reasonably acceptable to the Lessee). If a successor Indenture Trustee shall not have been appointed within 30 calendar days after such notice of resignation or removal, the Indenture Trustee, any Note Holder, the Owner Trustee, the Lessee or the Owner Participant 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 above provided. The successor Indenture Trustee so appointed by such court shall immediately and without further act be superseded by any successor Indenture Trustee appointed as above provided within one year from the date of the appointment by such court. (b) Any successor Indenture Trustee, however appointed, shall execute and deliver to the Owner Trustee and to the predecessor Indenture Trustee an instrument accepting and assuming such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Indenture Trustee, without further act, shall become vested with and bound by all the estates, properties, rights, powers, duties and obligations of the predecessor Indenture Trustee hereunder and under the other Indenture Documents in the trusts hereunder applicable to it with like effect as if originally named the Indenture Trustee herein; but nevertheless upon the written request of such successor Indenture Trustee, such predecessor Indenture Trustee shall execute and deliver an instrument transferring to such successor Indenture Trustee, upon the trusts herein expressed applicable to it, all the estates, properties, rights and powers of such predecessor Indenture Trustee, and such predecessor Indenture Trustee shall duly assign, transfer, deliver and pay over to such successor Indenture Trustee all moneys or other property then held by such predecessor Indenture Trustee hereunder, subject nevertheless to its claim provided for in Section 6.07 hereof. (c) Any successor Indenture Trustee, however appointed, shall be a "citizen of the United States" within the meaning of Section 40102(a)(15) of the Federal Aviation Act and shall also be a bank or trust company having a combined capital and surplus of at least $200,000,000 if there be such an institution willing, able and legally qualified to perform the duties of the Indenture Trustee hereunder upon reasonable or customary terms. (d) Any corporation into which the Indenture Trustee may be merged or converted or with which it may be consolidated, 72 78 or any corporation resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation to which substantially all the corporate trust business of the Indenture Trustee may be transferred, shall, subject to the terms of paragraph (c) of this Section 8.02, be the Indenture Trustee under this Indenture without further act. Notwithstanding the foregoing, upon the request of the Owner Trustee or the Lessee, any such successor corporation referred to in this Section 8.02(d) shall deliver to the Owner Trustee and the Lessee an instrument confirming its status as the Indenture Trustee hereunder and under the other Indenture Documents. SECTION 8.03. 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 Trust 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 Trust Indenture Estate to the full 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, she or they shall be vested with such title to the Trust Indenture Estate or any part thereof, and with such rights and duties, as shall be specified in the instrument of appointment, jointly with the Indenture Trustee (except insofar as local law makes it necessary for any such separate trustee or separate trustees to act alone) subject to all the terms of this Indenture. Any separate trustee or separate trustees or co-trustee may, at any time by an instrument in writing, constitute the Indenture Trustee its, his or her attorney-in-fact and agent with full power and authority to do all acts and things and to exercise all discretion on its, his or her behalf and in its, his or her name. In case any such separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, the title to the Trust Indenture Estate and all assets, property, rights, powers, trusts, 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. 73 79 (c) All provisions of this Indenture which are for the benefit of the Indenture Trustee shall extend to and apply to each separate trustee or co-trustee appointed pursuant to the foregoing provisions of this Section 8.03, including without limitation Article VII hereof. (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 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 Trust 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 with respect to which it is hereby provided may be exercised 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. 74 80 (f) Notwithstanding any other provision of this Section 8.03, the powers of any additional trustee or separate trustee appointed pursuant to this Section 8.03 shall not in any case exceed those of the Indenture Trustee hereunder. ARTICLE IX SUPPLEMENTS AND AMENDMENTS TO THIS INDENTURE AND OTHER DOCUMENTS SECTION 9.01. Lease Amendments and Supplemental Indentures. (a) Except as otherwise provided in Section 5.10 hereof, and except with respect to Excepted Payments, the Owner Trustee agrees that it shall not enter into any amendment of or supplement to the Lease, or execute and deliver any written waiver or modification of, or consent under, the terms of the Lease, unless such supplement, amendment, waiver, modification or consent is consented to in writing by the Indenture Trustee acting on instructions of a Majority in Interest of Note Holders. Anything to the contrary contained in this Section 9.01 notwithstanding, without the necessity of the consent of any of the Note Holders or (as respects clauses (i) and (ii) below) the Indenture Trustee, (i) any Excepted Rights or Excepted Payments payable to the Owner Trustee or Owner Participant may be modified, amended, changed or waived in such manner as shall be agreed to by the Owner Participant and Lessee, (ii) the Owner Trustee and Lessee may, so long as no Indenture Event of Default has occurred and is continuing, enter into amendments of or additions to the Lease to modify Sections 6(d), 9 and 16 and Exhibits B and E (except to the extent that such amendment would adversely affect the rights or exercise of remedies under Section 18 of the Lease) so long as such amendments, modifications and changes do not and would not (A) affect the time of, or reduce the amount of, Basic Rent or Stipulated Loss Value payments until after the payment in full of all Secured Obligations, (B) impair the Lien of this Indenture, (C) adversely affect the value, utility or useful life of the Aircraft or any Engine or (D) otherwise adversely affect the Note Holders in any material respect and (iii) the Lessee may effect the re-registration of the Aircraft in accordance with but always subject to the terms and conditions applicable thereto specified in Section 11 of the Refunding Agreement and Section 6(e) of the Lease and the Indenture Trustee may approve any Permitted Sublessee as provided in clause (c) of the definition of such term set forth in the Lease and may exercise the rights of the Indenture Trustee under Section 15 of the Refunding Agreement. For the avoidance of doubt, nothing in this Section 9.01 shall limit in any way the rights of the Owner Trustee and/or the Owner Participant under Section 5.10(d) to exercise certain rights and powers under the Lease to the exclusion of the Indenture Trustee and any Note Holder and without the consent of the Indenture Trustee or any Note Holder. 75 81 The Indenture Trustee is hereby authorized to join in the execution of any supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained 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 official or individual capacity. Any supplemental indenture authorized by the provisions of this Section 9.01 may be executed without the consent of the Note Holders notwithstanding any of the provisions of this Section 9.01. (b) Without limiting the provisions of Section 9.01(a) hereof and subject to Sections 5.10(b) and 5.10(d) hereof, the Indenture Trustee agrees with the Note Holders that it shall not enter into any amendment, waiver or modification of, supplement or consent to this Indenture, the Lease, the Refunding Agreement or the other Indenture Documents, or any other agreement included in the Trust Indenture Estate, unless such supplement, amendment, waiver, modification or consent is consented to in writing by a Majority in Interest of Note Holders, or does not adversely affect the Note Holders in any material respect. Upon the written request of a Majority in Interest of Note Holders, the Indenture Trustee shall from time to time enter into any such supplement or amendment, or execute and deliver any such waiver, modification or consent, as may be specified in such request and as may be (in the case of any such amendment, supplement or modification), to the extent such agreement is required, agreed to by the Owner Trustee and Lessee or, as may be appropriate, the Manufacturer; provided, however, that, without the consent of each Holder of an affected Equipment Note then outstanding and of each Liquidity Provider, no such amendment of or supplement to this Indenture, the Lease, the Refunding Agreement or any other Indenture Document or waiver or modification of the terms of, or consent under, any thereof, shall (i) modify any of the provisions of this Section 9.01, or of Section 2.02, 2.10, 2.13, 4.02, 4.04(e), 5.06 or 5.10 hereof, Section 17 (except to add a Lease Event of Default) of the Lease, the definitions of "Indenture Event of Default", "Indenture Default", "Indenture Trustee Event", "Lease Event of Default", "Lease Default", "Majority in Interest of Note Holders", "Make-Whole Amount" or "Note Holder", or the percentage of Note Holders required to take or approve any action hereunder, (ii) reduce the amount, or change the time of payment or method of calculation of any amount, of Principal Amount, Make-Whole Amount, if any, or interest with respect to any Equipment Note, or alter or modify the provisions of Article III hereof with respect to the order of priorities in which distribution thereunder shall be made as among the Note Holders, the Owner Trustee and the Lessee, (iii) reduce, modify or amend any indemnities in favor of the Note Holders, (iv) consent to any change in this Indenture or the Lease which would permit redemption of Equipment Notes earlier 76 82 than permitted under Section 2.10 hereof, (v) modify any of the provisions of Section 4(b) of the Lease, or modify, amend or supplement the Lease, any Assigned Sublease or any Sublease Assignment, or consent to any assignment of any thereof, in either case releasing the Lessee (or Permitted Sublessee) from its obligations in respect of the payment of Basic Rent or Stipulated Loss Value for the Aircraft or altering the absolute and unconditional character of the obligations of Lessee to pay Rent as set forth in Sections 4(b) and 4(d) of the Lease (or comparable provisions in any Assigned Sublease) or (vi) permit the creation of any Lien on the Trust Indenture Estate or any part thereof other than Permitted Liens or deprive any Note Holder of the benefit of the Lien of this Indenture on the Trust Indenture Estate, except as provided in connection with the exercise of remedies under Article IV hereof. (c) At any time after the date of the consummation of the Refinancing Transaction, the Owner Trustee and the Indenture Trustee may enter into one or more agreements supplemental hereto without the consent of any Note Holder for any of the following purposes: (i)(A) to cure any defect or inconsistency herein or in the Equipment Notes, or to make any change not inconsistent with the provisions hereof (provided that such change does not adversely affect the interests of any Note Holder in its capacity solely as Note Holder) or (B) to cure any ambiguity or correct any mistake; (ii) to evidence the succession of another party as the Owner Trustee in accordance with the terms of the Trust Agreement or to evidence the succession of a new trustee hereunder pursuant hereto, the removal of the trustee hereunder or the appointment of any co-trustee or co-trustees or any separate or additional trustee or trustees; (iii) to convey, transfer, assign, mortgage or pledge any property to or with the Indenture Trustee or to make any other provisions with respect to matters or questions arising hereunder so long as such action shall not adversely affect the interests of the Note Holders in its capacity solely as Note Holder or impose upon the Lessee any additional indemnification obligations; (iv) 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, the Airframe or Engines or any Replacement Airframe or Replacement Engine; (v) to add to the covenants of the Owner Trustee for the benefit of the Note Holders, or to surrender any rights or powers herein conferred upon the Owner Trustee, the Owner Participant or the Lessee; (vi) to add to the rights of the Note Holders; and (vii) to include on the Equipment Notes any legend as may be required by law. (d) Without the consent of the Lessee no amendment or supplement to this Indenture or waiver or modification of the terms hereof shall adversely affect the Lessee in any material respect or impose upon the Lessee any additional indemnification obligations. 77 83 SECTION 9.02. 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 and the Note 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 all and any purposes. SECTION 9.03. Documents to Be Given to Trustee. The Indenture Trustee shall be entitled to receive and shall be fully protected in relying upon an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture referred to in Section 9.01 complies with the applicable provisions of this Indenture. SECTION 9.04. Notation on Notes in Respect of Supplemental Indentures. Equipment Notes authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article IX 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 Equipment Notes 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 Equipment Notes then outstanding. SECTION 9.05. Trustees Protected. If, in the opinion of the institution acting as Owner Trustee under the Trust Agreement or the institution acting as Indenture Trustee hereunder, any document required to be executed by it pursuant to the terms of this Article IX affects adversely any right, duty, immunity or indemnity with respect to such institution under this Indenture, such institution may in its discretion decline to execute such document. SECTION 9.06. Documents Mailed to Note Holders. Promptly after the execution by the Owner Trustee or the Indenture Trustee of any document entered into pursuant to this Article IX, the Owner Trustee shall mail, by certified mail, postage prepaid, conformed copies thereof to the Indenture Trustee (in such quantities as will permit the Indenture Trustee to distribute one copy to each Note Holder, and the Indenture Trustee shall mail one such copy to each Note Holder), but the failure of the Owner Trustee or the Indenture Trustee to mail such conformed copies shall not impair or affect the validity of such document. The Indenture Trustee will furnish to each Note Holder, promptly upon receipt thereof, duplicates or copies of 78 84 all reports, notices, requests, demands, certificates and other instruments furnished to the Indenture Trustee under the Lease or hereunder to the extent that the same were not required to have been furnished to such Note Holder pursuant hereto or to the Lease. SECTION 9.07. No Request Necessary for Lease Supplement or Indenture Supplement. Notwithstanding anything contained in this Article IX, no written request or consent of the Indenture Trustee, any Note Holder or the Owner Participant pursuant to this Article IX shall be required to enable the Owner Trustee to enter into any Lease Supplement with the Lessee pursuant to the terms of the Lease to subject the Aircraft, any Engines or other property thereto or to release the Aircraft, any Engine or other property therefrom or to execute and deliver an Indenture Supplement, in each case pursuant to the terms hereof. SECTION 9.08. Notices to Liquidity Provider. Any request made to any Note Holder for consent to any amendment or supplement pursuant to this Article IX shall be promptly furnished by the Indenture Trustee to each Liquidity Provider. ARTICLE X MISCELLANEOUS SECTION 10.01. Termination of Indenture. Upon payment in full of the Principal Amount of, Make-Whole Amount, if any, and all accrued and unpaid interest on and other amounts then due with respect to the Equipment Notes and provided that there shall then be no other amounts then due to the Note Holders and the Indenture Trustee hereunder or under the Lease or the Refunding Agreement or otherwise secured hereby, the Lien of this Indenture shall be deemed discharged and the security interests in favor of the Indenture Trustee and the Note Holders hereunder shall terminate, and 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 evidencing the discharge of such Lien and the termination of such security interest in the Aircraft and release of the Indenture Documents from the assignment and pledge 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 discharge, termination and release; provided, however, that this Indenture and the trusts created hereby shall earlier terminate and this Indenture shall be of no further force or effect as expressly provided pursuant to Article X hereof or upon any sale or other final disposition by the Indenture Trustee of all property part of the Trust Indenture Estate and the final distribution by the Indenture Trustee of all moneys or other property or proceeds constituting part of the Trust Indenture Estate in accordance with the terms hereof. Except as aforesaid otherwise provided, 79 85 this Indenture and the trusts created hereby shall continue in full force and effect in accordance with the terms hereof. SECTION 10.02. No Legal Title to Trust Indenture Estate in Note Holders. No Note Holder shall have legal title to any part of the Trust Indenture Estate. No transfer, by operation of law or otherwise, of any Equipment Note or other right, title and interest of any Note Holder in and to the Trust Indenture Estate or hereunder shall operate to terminate this Indenture or entitle such Note 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 Trust Indenture Estate. SECTION 10.03. Sale of Aircraft by Indenture Trustee is Binding. Any sale or other conveyance of the Aircraft by the Indenture Trustee made pursuant to the terms of this Indenture or of the Lease shall bind the Note Holders 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 in and to the Aircraft. 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 10.04. Indenture for Benefit of Owner Trustee, Indenture Trustee, Owner Participant, Lessee and Note Holders. Nothing in this Indenture, whether express or implied, shall be construed to give to any Person other than the Owner Trustee, the Indenture Trustee, the Owner Participant, the Note Holders, the Lessee and, with respect to any provisions hereof requiring payment to any Permitted Sublessee, such Permitted Sublessee, any legal or equitable right, remedy or claim under or in respect of this Indenture. SECTION 10.05. No Action Contrary to Lessee's Rights Under the Lease. Notwithstanding any of the provisions of this Indenture or the Trust Agreement to the contrary, each of the Note Holders, the Indenture Trustee and the Owner Trustee agrees for the benefit of the Lessee that it will not take any action contrary to the Lessee's rights under the Lease, including the right of the Lessee to possession and use and quiet enjoyment of the Aircraft, except in accordance with the provisions of the Lease. SECTION 10.06. Notices. Unless otherwise expressly specified herein, all notices, requests, demands, authorizations, directions, consents, waivers or documents required or permitted by the terms of this Indenture shall be in English and in writing, mailed by first-class registered or certified mail, 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, Wilmington, Delaware 19890, Attention: Corporate Trust Administration Department (telex: 835437; answerback: WILMTR; telecopy: (302) 651-8464/8882), with a copy to the Owner 80 86 Participant at its address set forth in the Refunding Agreement, (ii) if to the Indenture Trustee, addressed to it at its office at 450 West 33rd Street, 15th Floor, New York, New York 10001, Attention: Corporate Trust Department (telecopy: (212) 946-8160) or (iii) if to the Owner Participant, the Lessee or any Note Holder, 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 the signature pages to the Refunding Agreement or in the Register. Whenever any notice in writing is required to be given by the Owner Trustee or the Indenture Trustee or any Note Holder to any of the other of them, such notice shall be deemed and such requirement satisfied when such notice is received. 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. SECTION 10.07. 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 10.08. No Oral Modifications or Continuing Waivers. No terms or provisions of this Indenture or the Equipment Notes 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 hereof or of any Equipment Note shall be effective only in the specific instance and for the specific purpose given. SECTION 10.09. 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 permitted assigns of each, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by any Note Holder shall bind the successors and assigns of such Note Holder. This Indenture and the Trust 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. Each Note Holder by its acceptance of an Equipment Note agrees to be bound by this Indenture and all provisions of the Refunding Agreement applicable to a Note Holder. SECTION 10.10. Headings. The headings of the various Articles and Sections herein and in the table of contents hereto 81 87 are for the convenience of reference only and shall not define or limit any of the terms or provisions hereof. SECTION 10.11. Normal Commercial Relations. Anything contained in this Indenture to the contrary notwithstanding, the Indenture Trustee, the Owner Trustee, the Owner Participant, any Note Holder or any bank or other Affiliate of any of them may conduct any banking or other financial transactions, and have banking or other commercial relationships, with the Lessee or any Permitted Sublessee 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 10.12. Governing Law; Counterpart Form. THIS INDENTURE AND THE EQUIPMENT NOTES ISSUED HEREUNDER 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 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. SECTION 10.13. Section 1110. It is the intention of the parties that the Owner Trustee, as lessor under the Lease (and the Indenture Trustee as assignee of the Owner Trustee's rights hereunder), shall be entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to the right to take possession of the Aircraft, Airframe, Engines and Parts as provided in the Lease in the event of a case under Chapter 11 of the Bankruptcy Code in which Lessee is a debtor, and in any instance where more than one construction is possible of the terms and conditions hereof or of any other pertinent Operative Document, each such party agrees that a construction which would preserve such benefits shall control over any construction which would not preserve such benefits. 82 88 IN WITNESS WHEREOF, the parties hereto have caused this Indenture, as amended and restated, 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. WILMINGTON TRUST COMPANY, not in its individual capacity, except as expressly provided herein, but solely as Owner Trustee By: -------------------------------- Title: THE CHASE MANHATTAN BANK, not in its individual capacity, except as expressly provided herein, but solely as Indenture Trustee By: -------------------------------- Title: 83 89 EXHIBIT A to First Amended and Restated Trust Indenture and Security Agreement [GPA 1989 BN-11] TRUST INDENTURE SUPPLEMENT NO. __________ [GPA 1989 BN-11] TRUST INDENTURE SUPPLEMENT NO. ___ dated _______, ____ of WILMINGTON TRUST COMPANY, not in its individual capacity but solely as owner trustee (the "Owner Trustee") under the Trust Agreement [GPA 1989 BN_11] dated as of December 19, 1989 (as amended, the "Trust Agreement") between Wilmington Trust Company and the Owner Participant named therein. W I T N E S S E T H : WHEREAS, the Trust Indenture and Security Agreement [GPA 1989 BN_ 11] dated as of December 19, 1989, as amended and restated as of June __, 1997 (as so amended and restated, the "Indenture") between the Owner Trustee and The Chase Manhattan Bank (formerly known as Chemical Bank, successor by merger to Manufacturers Hanover Trust Company), as Indenture Trustee (the "Indenture Trustee"), provides for the execution and delivery of a supplement thereto substantially in the form hereof which shall particularly describe the Aircraft (such term and other defined terms in the Indenture being herein used with the same meanings) and any Replacement Airframe or Replacement Engine included in the Trust Indenture Estate, and shall specifically mortgage such Aircraft, Replacement Airframe or Replacement Engine, as the case may be, to the Indenture Trustee. WHEREAS (1), the Original Indenture, as supplemented by Trust Indenture Supplement No. 1 dated December 29, 1989 subjected to the Lien of such Original Indenture the airframe and engines described therein, which Original Indenture and Trust Indenture Supplement No. 1 have been duly recorded with the Federal Aviation Administration on January 3, 1990, as one document and assigned Conveyance No. V78689. WHEREAS (2), the Indenture relates to the Airframe and Engines described below and a counterpart of the Indenture is attached hereto and made a part hereof and this Indenture Supplement, together with such counterpart of the Indenture, is being filed for recordation on the date hereof with the Federal Aviation Administration as one document. - --------------------------------- (1) This recital to be included in the each Indenture Supplement. (2) This recital is to be included only in Indenture Supplement No. 2. 90 WHEREAS (3), the Owner Trustee has, as provided in the Indenture, heretofore executed and delivered to the Indenture Trustee [(4)] Indenture Supplement(s) for the purpose of specifically subjecting to the Lien of the Indenture certain airframes and/or engines therein described, which Indenture Supplement(s) is (are) dated and has (have) been duly recorded with the Federal Aviation Administration as set forth below, to wit:
Date Recordation Date FAA Document No. ---- ---------------- ---------------
NOW, THEREFORE, This Supplement Witnesseth, that, to secure the prompt payment of the Principal Amount of, interest on, Make-Whole Amount, if any, and all other amounts due with respect to, all Equipment Notes from time to time outstanding under the Indenture and the performance and observance by the Owner Trustee of all the agreements, covenants and provisions contained in the Indenture and the Refunding Agreement and the Equipment Notes, for the benefit of the Note Holders, and the prompt payment of any and all amounts from time to time owing under the Refunding Agreement by the Owner Trustee, the Owner Participant and the Lessee in each case to the Note Holders and for the uses and purposes and subject to the terms and provisions of the Indenture, and in consideration of the premises and of the covenants contained in the Indenture, and of the acceptance of the Equipment Notes by the Holders thereof, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee at or before the delivery of the Indenture, 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 Note Holders from time to time, in the trust created by the Indenture, a first priority security interest in and mortgage Lien on all estate, right, title and interest of the Owner Trustee in, to and under the following described property: - ------------------------------ (3) This recital not to be included in Indenture Supplement No. 2. (4) Insert appropriate number. 2 91 AIRFRAME(S) ( ) airframe(s) identified as follows: FAA Registration Manufacturer's
Manufacturer Model Number Serial Number ------------ ----- ------ -------------
together with all appliances, equipment, instruments and accessories (including, without limitation, radio and radar) from time to time thereto belonging, owned by the Owner Trustee and installed in or appurtenant to said aircraft. AIRCRAFT ENGINES ( ) aircraft engines, each such engine having 750 or more rated takeoff horsepower or the equivalent thereof, identified as follows:
Manufacturer's Manufacturer Model Serial Number - ------------ ----- --------------
together with all equipment and accessories thereto belonging, by whomsoever manufactured, owned by the Owner Trustee and installed in or appurtenant to said aircraft engines. Together with all substitutions, replacements and renewals of the property above described, and all property which shall hereafter become physically attached to or incorporated in the property above described, whether the same are now owned by the Owner Trustee or shall hereafter be acquired by it. As further security for the obligations referred to above and secured by the Indenture and hereby, 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 Note Holders from time to time, in the trust created by the Indenture, all of the estate, right, title and interest of the Owner Trustee in, to and under the Lease and Lease Supplement [GPA 1989 BN-11] No. 3 of even date herewith (other than Excepted Payments and Excepted Rights) covering the property described above. TO HAVE AND TO HOLD all and singular the aforesaid property unto the Indenture Trustee, its successors and assigns, for the benefit and security of the Note Holders from time to time for the uses and purposes and subject to the terms and provisions set forth in the Indenture. 3 92 This Supplement shall be construed as supplemental to the Indenture and shall form a part of it, and the Indenture is hereby incorporated by reference herein and is hereby ratified, approved and confirmed. This Supplement is being delivered in the State of New York. AND, FURTHER, the Owner Trustee hereby acknowledges that the Aircraft and/or Engines referred to in this Supplement and the aforesaid Lease Supplement has been delivered to the Owner Trustee and is included in the property of the Owner Trustee covered by all the terms and conditions of the Trust Agreement, subject to the pledge and mortgage thereof under the Indenture. 4 93 IN WITNESS WHEREOF, the Owner Trustee has caused this Supplement to be duly executed by one of its officers thereunto duly authorized on the day and year first above written. WILMINGTON TRUST COMPANY, not in its individual capacity, except as otherwise expressly provided herein, but solely as Owner Trustee By: -------------------------------- Title: 5 94 SCHEDULE I
MATURITY PRINCIPAL AMOUNT DATE DEBT RATE ---------------- ---- --------- Series A...... $ Series B...... $ Series C...... $ Series D...... $
95 EQUIPMENT NOTES AMORTIZATION SERIES A Aircraft: N632AW
96 SERIES B Aircraft: N632AW
Principal Amount Percentage of Original Repayment Date Amount to be Paid ---------------- ----------------------
97 SERIES C Aircraft: N632AW
Principal Amount Percentage of Original Repayment Date Amount to be Paid ---------------- ----------------------
98 SERIES D Aircraft: N632AW
Principal Amount Percentage of Original Repayment Date Amount to be Paid ---------------- ----------------------
99 SCHEDULE II PASS THROUGH TRUST AGREEMENTS 1. Pass Through Trust Agreement, dated as of June __, 1997, between America West Airlines, Inc., and Fleet National Bank, as supplemented by Trust Supplement No. 1997-1A, dated June __, 1997. 2. Pass Through Trust Agreement, dated as of June __, 1997, between America West Airlines, Inc., and Fleet National Bank, as supplemented by Trust Supplement No. 1997-1B, dated June __, 1997. 3. Pass Through Trust Agreement, dated as of June __, 1997, between America West Airlines, Inc., and Fleet National Bank, as supplemented by Trust Supplement No. 1997-1C, dated June __, 1997. 4. Pass Through Trust Agreement, dated as of June __, 1997, between America West Airlines, Inc., and Fleet National Bank, as supplemented by Trust Supplement No. 1997-1D, dated June __, 1997. Schedule II-1 EX-5.1 18 OPINION OF ANDREWS & KURTH LLP/LEGALITY OF CERTIF. 1 EXHIBIT 5.1 [ANDREWS & KURTH L.L.P. LETTERHEAD] June 2, 1997 America West Airlines, Inc. 4000 East Sky Harbor Boulevard Phoenix, Arizona 85034 Re: America West Airlines, Inc. Registration Statement on Form S-3 America West Airlines 1997-1 Pass Through Trusts Pass Through Certificates, Series 1997-1 Ladies and Gentlemen: We have acted as counsel for America West Airlines, Inc., a Delaware corporation (the "Company"), in connection with a Registration Statement on Form S-3 (File No. 333-27351) (such Registration Statement, as amended, the "Registration Statement") originally filed on May 16, 1997 with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the "Securities Act"), in respect of Pass Through Certificates, Series 1997-1 (the "Certificates"). Each Certificate will represent a fractional undivided interest in one of the four America West Airlines 1997-1 Pass Through Trusts (collectively, the "Trusts") to be formed pursuant to a pass through trust agreement (the "Basic Agreement") and four separate supplements thereto (each, a "Trust Supplement" and together with the Basic Agreement, collectively, the "Pass Through Trust Agreements") between the Company and Fleet National Bank, as trustee under each Pass Through Trust Agreement. We have examined forms of the Pass Through Trust Agreements and forms of the Certificates included therein and such other documents, records, certificates of the Company and public officials and other instruments as we have deemed necessary for the purposes of rendering this opinion. In all such examinations, we have assumed the genuineness of all signatures, the authority to sign of all signatories, the due execution of all original and certified documents, and the conformity to the original and certified documents of all copies submitted to us as conformed, photostatic or facsimile copies. In addition, we have assumed that the Pass Through Trust Agreements will be duly executed and delivered by each of the parties thereto, that the Certificates will be duly executed and delivered substantially in the forms contemplated by the applicable Pass Through Trust Agreements, and that the Certificates will be sold as described in the Registration 2 America West Airlines, Inc. June 2, 1997 Page 2 Statement. As to various questions of fact material to our opinion, we have relied upon statements and certificates of officers of the Company, public officials and others. On the basis of the foregoing and subject to the limitations and qualifications set forth below and assuming the due authorization, execution and delivery of the Pass Through Trust Agreements by each party thereto and the due authorization of the Certificates by all necessary action on the part of the Company, we are of the opinion that, when validly executed, authenticated and issued in accordance with the applicable Pass Through Trust Agreements and when sold, the Certificates will be legally issued, fully paid and non-assessable. The opinion expressed above is subject to the qualification that we do not purport to be experts as to the laws of any jurisdiction other than the federal laws of the United States of America and the laws of the States of Texas and New York, and we express no opinion herein as to the effect that the laws and decisions of courts of any such other jurisdiction may have upon such opinions. We consent to the use and filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the Prospectus contained therein. In giving such consent we do not imply or admit that we are an expert with respect to any part of the Registration Statement, including this exhibit, within the meaning of the term "expert" as used in the Securities Act or the rules and regulations of the Securities and Exchange Commission thereunder. Very truly yours, /s/ Andrews & Kurth L.L.P. EX-8.1 19 OPINION OF ANDREWS & KURTH RE: TAX MATTERS 1 EXHIBIT 8.1 [ANDREWS & KURTH L.L.P. LETTERHEAD] June 2, 1997 America West Airlines, Inc. 4000 East Sky Harbor Boulevard Phoenix, Arizona 85034 Re: America West Airlines, Inc. Registration Statement on Form S-3 America West Airlines 1997-1 Pass Through Trusts Pass Through Certificates, Series 1997-1 Ladies and Gentlemen: We have acted as counsel for America West Airlines, Inc., a Delaware corporation (the "Company"), in connection with a Registration Statement on Form S-3 (File No. 333-27351) (the "Registration Statement") filed on May 16, 1997, with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the "Securities Act"), in respect of Pass Through Certificates, Series 1997-1 (the "Certificates"). Each Certificate will represent a fractional undivided interest in one of the four America West Airlines 1997-1 Pass Through Trusts (collectively, the "Trusts") to be formed pursuant to a pass through trust agreement (the "Basic Agreement") and four separate supplements thereto (each, a "Trust Supplement" and together with the Basic Agreement, collectively, the "Pass Through Trust Agreements") between the Company and Fleet National Bank, as trustee under each Pass Through Trust Agreement. The property of the Trusts will include, among other things, equipment notes (the "Equipment Notes") to be issued on a nonrecourse basis by the trustees (each, an "Owner Trustee") of separate owner trusts. The Equipment Notes will be issued in four series under a separate Indenture (each, an "Indenture") between the related Owner Trustee and the indenture trustee thereunder. We have examined originals or copies, certified or otherwise identified to our satisfaction, of the forms of the Pass Through Trust Agreements and the forms of Certificates included therein, the forms of Indentures and such other documents, records, certificates of the Company and public officials and other instruments as we have deemed necessary for the purposes of rendering this opinion. In all such examinations, we have assumed the genuineness of all signatures, the authority to sign of all signatories, the due execution of all original and certified documents, and the conformity to the original and certified documents of all copies submitted to us as conformed, photostatic or facsimile copies. In addition, we have assumed that the Indentures will be duly 2 America West Airlines, Inc. June 2, 1997 Page 2 executed and delivered by each of the parties thereto and that the Notes will be duly executed and delivered substantially in the forms contemplated by the respective Indentures. We have also assumed that the Pass Through Trust Agreements will be duly executed and delivered by each of the parties thereto, that the Certificates will be duly executed and delivered substantially in the forms contemplated by the applicable Pass Through Trust Agreements, and that the Certificates will be sold as described in the Registration Statement. As to various questions of fact material to our opinion, we have relied upon statements and certificates of officers of the Company, public officials and others. On the basis of the foregoing and subject to the limitations and qualifications set forth below, we are of the opinion that (i) each Trust will be classified as a grantor trust under subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986 and not as an association taxable as a corporation for U.S. federal income tax purposes; and (ii) the description of federal income tax consequences appearing under the heading "Certain U.S. Federal Income Tax Consequences" in the prospectus contained in the Registration Statement relating to the Certificates accurately describes the material federal income tax consequences to holders of Certificates under existing law, subject to the qualifications and assumptions stated therein. The opinion herein is based upon our interpretations of current law, including court authority and existing Final and Temporary Regulations, which are subject to change both prospectively and retroactively, and upon the facts and assumptions discussed herein. This opinion letter is limited to the matters set forth herein, and no opinions are intended to be implied or may be inferred beyond those expressly stated herein. Our opinion is rendered as of the date hereof and we assume no obligation to update or supplement this opinion or any matter related to this opinion to reflect any change of fact, circumstances, or law after the date hereof. In addition, our opinion is based on the assumption that the matter will be properly presented to the applicable court. Furthermore, our opinion is not binding on the Internal Revenue Service or a court. In addition, we must note that our opinion represents merely our best legal judgment on the matters presented and that others may disagree with our conclusion. There can be no assurance that the Internal Revenue Service will not take a contrary position or that a court would agree with our opinion if litigated. In the event any one of the statements, representations or assumptions we have relied upon to issue this opinion is incorrect, our opinion might be adversely affected and may not be relied upon. We consent to the use and filing of this opinion as Exhibit 8.1 to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the Prospectus contained therein. In giving such consent we do not imply or admit that we are an expert with respect to any part of the Registration Statement, including this exhibit, within the meaning of the term "expert" as used in the Securities Act or the rules and regulations of the Securities and Exchange Commission thereunder. Very truly yours, /s/ Andrews & Kurth L.L.P. EX-8.2 20 OPINION OF SHIPMAN & GOODWIN LLP 1 EXHIBIT 8.2 [SHIPMAN & GOODWIN L.L.P. LETTERHEAD] June 2, 1997 America West Airlines, Inc. 4000 East Sky Harbor Boulevard Phoenix, AZ 85034 Re: America West Airlines, Inc. Pass Through Certificates Ladies and Gentlemen: We have acted as special counsel to Fleet National Bank, in its individual capacity and as pass through trustee (the "Pass Through Trustee") of four separate pass through trusts (the "Pass Through Trusts") to be created under Pass Through Trust Agreement 1997-1 (the "Pass Through Trust Agreement"), and four separate supplements thereto, between American West Airlines, Inc. (the "Company") and the Pass Through Trustee for each of the Pass Through Trusts. Pursuant to the Pass Through Trust Agreement and the supplements thereto, each Pass Through Trustee will execute, authenticate and deliver pass through certificates as contemplated by the Company's Registration Statement on Form S-3, Registration No. 333-27351 (the "Registration Statement"), filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. As such counsel, we have examined the form of the Pass Through Trust Agreement which has been filed as an exhibit to the Registration Statement. We have also examined and relied upon originals, or copies certified or otherwise identified to our satisfaction, of such documents, corporate records and other instruments as we have deemed necessary or appropriate for purposes of this opinion. With respect to the discussion in the prospectus forming a part of the Registration Statement (the "Prospectus") entitled "State Tax Considerations", the assumptions set forth therein are specifically incorporated herein. In addition, we have assumed that the Pass Through Trusts do not otherwise engage in business in the State of Connecticut. Based on the foregoing, we are of the opinion that the discussion in the Prospectus under the caption entitled "State Tax Considerations", insofar as it relates to statements of laws or legal conclusions, is correct in all material respects. 2 We consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption entitled "State Tax Considerations" in the Prospectus. We are attorneys admitted to practice in the State of Connecticut and in rendering the foregoing opinions we are not opining on the laws of any jurisdictions other than the State of Connecticut and the federal banking and trust laws governing the banking and trust powers of Fleet National Bank. Very truly yours, /s/ SHIPMAN & GOODWIN LLP Shipman & Goodwin LLP - 2 - EX-12.1 21 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12.1 AMERICA WEST AIRLINES, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (IN THOUSANDS EXCEPT RATIO OF EARNINGS TO FIXED CHARGES)
REORGANIZED COMPANY ------------------------------------------------------------------------ THREE MONTHS ENDED YEAR ENDED MARCH 31, DECEMBER 31, PERIOD FROM -------------------- --------------------- AUGUST 26 TO 1997 1996 1996 1995 DECEMBER 31, 1994 ------ ------ ------ ------ ---------------------- Computation of Earnings: Income (loss) before income taxes and extraordinary item $ 25,918 $ 25,420 $ 34,493 $ 108,378 $19,736 Add: Interest expense including amortization of debt expense 12,172 12,385 49,678 59,418 22,827 Interest portion of rent expense 25,640 21,945 93,539 83,680 26,879 -------- -------- -------- --------- ------- Income (loss), as adjusted $ 63,730 $ 59,750 $177,710 $ 251,476 $69,442 ======== ======== ======== ========= ======= Computation of Fixed Charges: Interest expense including amortization of debt expense $ 12,172 $ 12,385 $ 49,678 $ 59,418 $22,827 Interest portion of rent expense 25,640 21,945 93,539 83,680 26,879 Capitalized interest -- 606 -- 2,666 621 -------- -------- -------- --------- ------- Fixed charges $ 37,812 $ 34,936 $143,217 $ 145,764 $50,327 ======== ======== ======== ========= ======= Ratio of earnings to fixed charges 1.69 1.71 1.24 1.73 1.38
PREDECESSOR COMPANY ------------------------------------------- YEAR ENDED PERIOD FROM DECEMBER 31, JANUARY 1 TO ----------------------- AUGUST 25, 1994 1993 1992 --------------- ------ ------- Computation of Earnings: Income (loss) before income taxes and extraordinary item $(201,209) $37,924 $(131,761) Add: Interest expense including amortization of debt expense 34,038 54,252 55,886 Interest portion of rent expense 51,538 81,795 102,314 --------- -------- --------- Income (loss), as adjusted $(115,633) $173,971 $ 26,439 ========= ======== ========= Computation of Fixed Charges: Interest expense including amortization of debt expense $ 34,038 $ 54,252 $ 55,886 Interest portion of rent expense 51,538 81,795 102,314 Capitalized interest -- -- -- --------- -------- --------- Fixed charges $ 85,576 $136,047 $ 158,200 ========= ======== ========= Ratio of earnings to fixed charges (*) 1.28 (*)
(*) For the purpose of computing the ratio of earnings to fixed charges, "earnings" consist of income (loss) before income taxes and extraordinary item plus fixed charges less capitalized interest. "Fixed charges" consist of interest expense including amortization of debt expense, one-third of rent expense, which is deemed to be representative of an interest factor, and capitalized interest. For the period ended August 25, 1994 earnings were insufficient to cover fixed charges by $201.2 million. For the year ended December 31, 1992 earnings were insufficient to cover fixed charges by $131.8 million. EX-25.1 22 FORM T-1 1 EXHIBIT 25.1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------- FORM T-1 -------------------------- STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE [ ] CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) FLEET NATIONAL BANK ---------------------------------------------------------- (Exact name of trustee as specified in its charter) Not applicable 06-0850628 ---------------------------- ------------------ (State of incorporation if (I.R.S. Employer not a national bank) Identification No.) 777 Main Street, Hartford, Connecticut 06115 --------------------------------------------------- (Address of principal executive offices) (Zip Code) Patricia Beaudry, 777 Main Street, Hartford, CT (860) 728-2065 ------------------------------------------------------------------ (Name, address and telephone number of agent for service) AMERICA WEST AIRLINES, INC. ------------------------------------------------------------------ (Exact name of obligor as specified in its charter) Delaware 86-0418245 - ------------------------------- ------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4000 East Sky Harbor Boulevard, Phoenix, Arizona 85034 ------------------------------------------------------------------ (Address of principal executive offices) (Zip Code) Pass Through Certificates ------------------------------------------------------------------ (Title of the indenture securities) 2 Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject: The Comptroller of the Currency, Washington, D.C. Federal Reserve Bank of Boston Boston, Massachusetts Federal Deposit Insurance Corporation Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers: The trustee is so authorized. Item 2. Affiliations with obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None with respect to the trustee; none with respect to Fleet Financial Group, Inc. and its affiliates (the "affiliates"). Item 16. List of exhibits. List below all exhibits filed as a part of this statement of eligibility and qualification. 1. A copy of the Articles of Association of the trustee as now in effect. 2. A copy of the Certificate of Authority of the trustee to do Business and the Certification of Fiduciary Powers. 3. A copy of the By-laws of the trustee as now in effect. 4. Consent of the trustee required by Section 321(b) of the Act. 5. A copy of the latest Consolidated Report of Condition and Income of the trustee, published pursuant to law or the requirements of its supervising or examining authority. 3 NOTES Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee of all facts on which to base its answer to Item 2, the answer to said Item is based upon incomplete information. Said Item may, however, be considered correct unless amended by an amendment to this Form T-1. 4 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, Fleet National Bank, a national banking association organized and existing under the laws of the United States, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Hartford, and State of Connecticut, on the 21st day of May, 1997. FLEET NATIONAL BANK, Trustee By /s/ Philip G. Kane, Jr. ------------------------------------- Name: Philip G. Kane, Jr. Title: Vice President 5 EXHIBIT 1 ARTICLES OF ASSOCIATION OF FLEET NATIONAL BANK FIRST. The title of this Association, which shall carry on the business of banking under the laws of the United States, shall be "Fleet National Bank." SECOND. The main office of the Association shall be in Springfield, Hampden County Commonwealth of Massachusetts. The general business of the Association shall be conducted at its main office and its branches. THIRD. The board of directors of this Association shall consist of not less than five (5) nor more than twenty-five (25) shareholders, the exact number of directors within such minimum and maximum limits to be fixed and determined from time to time by resolution of a majority of the full board of directors or by resolution of the shareholders at any annual or special meeting thereof. Unless otherwise provided by the laws of the United States, any vacancy in the board of directors for any reason, including an increase in the number thereof, may be filled by action of the board of directors. FOURTH. The annual meeting of the shareholders for the election of directors and the transaction of whatever other business may be brought before said meeting shall be held at the main office or such other place as the board of directors may designate, on the day of each year specified therefore in the bylaws, but if no election is held on that day, it may be held on any subsequent day according to the provisions of law; and all elections shall be held according to such lawful regulations as may be prescribed by the board of directors. FIFTH. The authorized amount of capital stock of this Association shall be eight million five hundred thousand (8,500,000) shares of which three million five hundred thousand (3,500,000) shares shall be common stock with a par value of six and 25/100 dollars ($6.25) each, and of which five million (5,000,000) shares without par value shall be preferred stock. The capital stock may be increased or decreased from time to time, in accordance with the provisions of the laws of the United States. No holder of shares of the capital stock of any class of the Association shall have any pre-emptive or preferential right of subscription to any shares of any class of stock of the Association, whether now or hereafter authorized, or to any obligations convertible into stock of the Association, issued or sold, nor any right of subscription to any thereof other than such, if any, as the board of directors, in its discretion, may from time to time determine and at such price as the board of directors may from time to time fix. 6 The board of directors of the Association is authorized, subject to limitations prescribed by law and the provisions of this Article, to provide for the issuance from time to time in one or more series of any number of the preferred shares, and to establish the number of shares be included in each series, and to fix the designation, relative rights, preferences, qualifications and limitations of the shares of each such series. The authority of the board of directors with respect to each series shall include, but not be limited to, determination of the following: a. The number of shares constituting that series and the distinctive designation of that series; b. The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and whether they shall be payable in preference to, or in another relation to, the dividends payable to any other class or classes or series of stock; c. Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; d. Whether that series shall have conversion or exchange privileges, and, if so, the terms and conditions of such conversion or exchange, including provision for the adjustment of the conversion or exchange rate in such events as the board of directors shall determine; e. Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the manner of selecting shares for redemption if less than all shares are to be redeemed, the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; f. Whether that series shall be entitled to the benefit of a sinking fund to be applied to the purchase or redemption of shares of that series, and, if so, the terms and amounts of such sinking fund; g. The right of the shares of that series to the benefit of conditions and restrictions upon the creation of indebtedness of the Association or any subsidiary, upon the issue of any additional stock (including additional shares of such series or of any other series) and upon the payment of dividends or the making of other distributions on, and the purchase, redemption or other acquisition by the Association or any subsidiary of any outstanding stock of the Association; h. The right of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Association and whether such rights shall be in preference to, or in another relation to, the comparable rights of any other class or classes or series of stock; and i. Any other relative, participating, optional or other special rights, qualifications, limitations or restrictions of that series. Shares of any series of preferred stock which have been redeemed (whether through the operation of a sinking fund or otherwise) or which, if convertible or exchangeable, have been converted into or exchanged for shares of stock of any other class or classes shall have the status of authorized and unissued shares of preferred stock of the same series and may be reissued as a part of the series of which they were originally a part or may be reclassified and reissued as part of a new series of preferred stock to be created by resolution or resolutions of the board of directors or as part of any other series or preferred stock, all subject to the conditions and the restrictions adopted by the board of directors providing for the issue of any series of preferred stock and by the provisions of any applicable law. Subject to the provisions of any applicable law, or except as otherwise provided by the resolution or resolutions providing for the issue of any series of preferred stock, the holders of outstanding shares of common stock shall exclusively possess voting power for the election of directors and for all purposes, each holder of record of shares of common stock being entitled to one vote for each share of common stock standing in his name on the books of the Association. Except as otherwise provided by the resolution or resolutions providing for the issue of any series of preferred stock, after payment shall have been made to the holders of preferred stock of the full amount of dividends to which they shall be entitled pursuant to the resolution or resolutions providing for the issue of any other series of preferred stock, the holders of common stock shall be entitled, to the exclusion of the holders of preferred stock of any and all series, to receive such dividends as from time to time may be declared by the board of directors. Except as otherwise provided by the resolution or resolutions for the issue of any series of preferred stock, in the event of any liquidation, dissolution or winding up of the Association, whether voluntary or involuntary, after payment shall have been made to the holders of preferred stock of the full amount to which they shall be entitled pursuant to the resolution or resolutions providing for the issue of any series of preferred stock the holders of common stock shall be entitled, to the exclusion of the holders of preferred stock of any and all series, to share, ratable according to the number of shares of common stock held by them, in all remaining assets of the Association available for distribution to its shareholders. The number of authorized shares of any class may be increased or decreased by the affirmative vote of the holders of a majority of the stock of the Association entitled to vote. 7 SIXTH. The board of directors shall appoint one of its members president of this Association, who shall be chairman of the board, unless the board appoints another director to be the chairman. The board of directors shall have the power to appoint one or more vice presidents; and to appoint a secretary and such other officers and employees as may be required to transact the business of this Association. The board of directors shall have the power to define the duties of the officers and employees of the Association; to fix the salaries to be paid to them; to dismiss them; to require bonds from them and to fix the penalty thereof; to regulate the manner in which any increase of the capital of the Association shall be made; to manage and administer the business and affairs of the Association; to make all bylaws that it may be lawful for them to make; and generally to do and perform all acts that it may be legal for a board of directors to do and perform. SEVENTH. The board of directors shall have the power to change the location of the main office to any other place within the limits of the City of Hartford, Connecticut, without the approval of the shareholders but subject to the approval of the Comptroller of the Currency; and shall have the power to establish or change the location of any branch or branches of the Association to any other location, without the approval of the shareholders but subject to the approval of the Comptroller of the Currency. EIGHTH. The corporate existence of this Association shall continue until terminated in accordance with the laws of the United States. NINTH. The board of directors of this Association, or any three or more shareholders owning, in the aggregate, not less than ten percent (10%) of the stock of this Association, may call a special meeting of shareholders at any time. Unless otherwise provided by the laws of the United States, a notice of the time, place and purpose of every annual and special meeting of the shareholders shall be given by first class mail, postage prepaid, mailed at least ten (10) days prior to the date of such meeting to each shareholder of record at his address as shown upon the books of this Association. TENTH. (a) Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (hereinafter a "proceeding"), by reason of the fact that he or she is or was a director, officer or employee of the Association or is or was serving at the request of the Association as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, or other enterprise, including service with respect to an employee benefit plan, shall be indemnified and held harmless by the Association to the fullest extent authorized by the law of the state in which the Association's ultimate parent company is incorporated, except as provided in subsection (b). The aforesaid indemnity shall protect the indemnified person against all expense, liability and loss (including attorney's fees, judgements, fines ERISA excise taxes or penalties, and amounts paid in settlement) reasonably incurred by such person in connection with such a proceeding. Such indemnification shall continue as to a person who has ceased to be a director, officer or employee and shall inure to the benefit of his or her heirs, executors, and administrators, but shall only cover such person's period of service with the Association. The Association may, by action of its Board of Directors, grant rights to indemnification to agents of the Association and to any director, officer, employee or agent of any of its subsidiaries with the same scope and effect as the foregoing indemnification of directors and officers. (b) Restrictions on Indemnification. Notwithstanding the foregoing, (i) no person shall be indemnified hereunder by the Association against expenses, penalties, or other payments incurred in an administrative proceeding or action instituted by a federal bank regulatory agency which proceeding or action results in a final order assessing civil money penalties against that person, requiring affirmative action by that person in the form of payments to the Association, or removing or prohibiting that person from service with the Association, and any advancement of expenses to that person in that proceeding must be repaid; and (ii) no person shall be indemnified hereunder by the Association and no advancement of expenses shall be made to any person hereunder to the extent such indemnification or advancement of expenses would violate or conflict with any applicable federal statute now or hereafter in force or any applicable final regulation or interpretation now or hereafter adopted by the Office of the Comptroller of the Currency ("OCC") or the Federal Deposit Insurance Corporation ("FDIC"). The Association shall comply with any requirements imposed on it by any such statue or regulation in connection with any indemnification or advancement of expenses hereunder by the Association. With respect to proceedings to enforce a claimant's rights to indemnification, the Association shall indemnify any such claimant in connection with such a proceeding only as provided in subsection (d) hereof. (c) Advancement of Expenses. The conditional right to indemnification conferred in this section shall be a contract right and shall include the right to be paid by the Association the reasonable expenses (including attorney's fees) incurred in defending a proceeding in advance of its final disposition (an "advancement of expenses"); provided, however, that an advancement of expenses shall be made only upon (i) delivery to the Association of a binding written undertaking by or on behalf of the person receiving the advancement to repay all amounts so advanced if it is ultimately determined that such person is not entitled to be indemnified in such proceeding, including if such proceeding results in a final order assessing civil money penalties against that person, requiring affirmative action by that person in the form of payments to the Association, or removing or prohibiting that person from service with the Association, and (ii) compliance with any other actions or determinations required by applicable law, regulation or OCC or FDIC interpretation to be taken or made by the Board of Directors of the Association 8 or other persons prior to an advancement of expenses. The Association shall cease advancing expenses at any time its Board of Directors believes that any of the prerequisites for advancement of expenses are no longer being met. (d) Right of Claimant to Bring Suit. If a claim under subsection (a) of the section is not paid in full by the Association within thirty (30) days after written claim has been received by the Association, the claimant may at any time thereafter bring suit against the Association to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Association to recover an advancement of expenses pursuant to the terms of an undertaking, the claimant shall be entitled to be paid also the expense of prosecuting or defending such claim. It shall be a defense to any such action brought by the claimant to enforce a right to indemnification hereunder (other than an action brought to enforce a claim for an advancement of expenses where the required undertaking, if any, has been tendered to the Association) that the claimant has not met any applicable standard for indemnification under the law of the state in which the Association's ultimate parent company is incorporated. In any suit brought by the Association to recover an advancement of expenses pursuant to the terms of an undertaking, the Association shall be entitled to recover such expenses upon a final adjudication that the claimant has not met any applicable standard for indemnification standard for indemnification under the law of the state in which the Association's ultimate parent company is incorporated. (e) Non-Exclusivity of Rights. The rights to indemnification and the advancement of expenses conferred in this section shall not be exclusive of any other right which any person may have or hereafter acquired under any statute, agreement, vote of stockholders or disinterested directors or otherwise. (f) Insurance. The Association may purchase, maintain, and make payment or reimbursement for reasonable premiums on, insurance to protect itself and any director, officer, employee or agent of the Association or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Association would have the power to indemnify such person against such expense, liability or loss under the law of the state in which the Association's ultimate parent company is incorporated; provided however, that such insurance shall explicitly exclude insurance coverage for a final order of a federal bank regulatory agency assessing civil money penalties against an Association director, officer, employee or agent. ELEVENTH. These articles of association may be amended at any regular or special meeting of the shareholders by the affirmative vote of the holders of a majority of the stock of this Association, unless the vote of the holders of greater amount of stock is required by law, and in that case by the vote of the holders of such greater amount. The notice of any shareholders' meeting at which an amendment to the articles of association of this Association is to be considered shall be given as hereinabove set forth. I hereby certify that the articles of association of this Association, in their entirety, are listed above in items first through eleventh. Secretary/Assistant Secretary - -------------------------------------------------- Dated at , as of . --------------------------------------- -------------------- Revision of February 15, 1996 9 EXHIBIT 2 AMENDED AND RESTATED BY-LAWS OF FLEET NATIONAL BANK ARTICLE I MEETINGS OF SHAREHOLDERS Section 1. Annual Meeting. The regular annual meeting of the shareholders for the election of Directors and the transaction of any other business that may properly come before the meeting shall be held at the Main Office of the Association, or such other place as the Board of Directors may designate, on the fourth Thursday of April in each year at 1:15 o'clock in the afternoon unless some other hour of such day is fixed by the Board of Directors. If, from any cause, an election of Directors is not made on such day, the Board of Directors shall order the election to be held on some subsequent day, of which special notice shall be given in accordance with the provisions of law, and of these bylaws. Section 2. Special Meetings. Special meetings of the shareholders may be called at any time by the Board of Directors, the President, or any shareholders owning not less than twenty-five percent (25%) of the stock of the Association. Section 3. Notice of Meetings of Shareholders. Except as otherwise provided by law, notice of the time and place of annual or special meetings of the shareholders shall be mailed, postage prepaid, at least ten (10) days before the date of the meeting to each shareholder of record entitled to vote thereat at his address as shown upon the books of the Association; but any failure to mail such notice to any shareholder or any irregularity therein, shall not affect the validity of such meeting or of any of the proceedings thereat. Notice of a special meeting shall also state the purpose of the meeting. Section 4. Quorum; Adjourned Meetings. Unless otherwise provided by law, a quorum for the transaction of business at every meeting of the shareholders shall consist of not less than two-fifths (2/5) of the outstanding capital stock represented in person or by proxy; less than such quorum may adjourn the meeting to a future time. No notice need be given of an adjourned annual or special meeting of the shareholders if the adjournment be to a definite place and time. Section 5. Votes and Proxies. At every meeting of the shareholders, each share of the capital stock shall be entitled to one vote except as otherwise provided by law. A majority of the votes cast shall decide every question or matter submitted to the shareholder at any meeting, unless otherwise provided by law or by the Articles of Association or these By-laws. Share- holders may vote by proxies duly authorized in writing and filed with the Cashier, but no officer, clerk, teller or bookkeeper of the Association may act as a proxy. 10 Section 6. Nominations to Board of Directors. At any meeting of shareholders held for the election of Directors, nominations for election to the Board of Directors may be made, subject to the provisions of this section, by any share- holder of record of any outstanding class of stock of the Association entitled to vote for the election of Directors. No person other than those whose names are stated as proposed nominees in the proxy statement accompanying the notice of the meeting may be nominated as such meeting unless a shareholder shall have given to the President of the Association and to the Comptroller of the Currency, Washington, DC written notice of intention to nominate such other person mailed by certified mail or delivered not less than fourteen (14) days nor more than fifty (50) days prior to the meeting of shareholders at which such nomination is to be made; provided, however, that if less than twenty-one (21) days' notice of such meeting is given to shareholders, such notice of intention to nominate shall be mailed by certified mail or delivered to said President and said Comptroller on or before the seventh day following the day on which the notice of such meeting was mailed. Such notice of intention to nominate shall contain the following information to the extent known to the notifying shareholder: (a) the name and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the total number of shares of capital stock of the Association that will be voted for each proposed nominee; (d) the name and residence address of the notifying shareholder; and (e) the number of shares of capital stock of the Association owned by the notifying shareholder. In the event such notice is given, the proposed nominee may be nominated either by the shareholder giving such notice or by any other shareholder present at the meeting at which such nomination is to be made. Such notice may contain the names of more than one proposed nominee, and if more than one is named, any one or more of those named may be nominated. Section 7. Action Taken Without a Shareholder Meeting. Any action requiring shareholder approval or consent may be taken without a meeting and without notice of such meeting by written consent of the shareholders. ARTICLE II DIRECTORS Section 1. Number. The Board of Directors shall consist of such number of shareholders, not less than five (5) nor more than twenty-five (25), as from time to time shall be determined by a majority of the votes to which all of its shareholders are at the time entitled, or by the Board of Directors as hereinafter provided. Section 2. Mandatory Retirement for Directors. No person shall be elected a director who has attained the age of 68 and no person shall continue to serve as a director after the date of the first meeting of the stockholders of the Association held on or after the date on which such person attains the age of 68; provided, however, that any director serving on the Board as of December 15, 1995 who has attained the age of 65 on or prior to such date shall be permitted to continue to serve as a director until the date of the first meeting of the stockholders of the Association held on or after the date on which such person attains the age of 70. -2- 11 Section 3. General Powers. The Board of Directors shall exercise all the corporate powers of the Association, except as expressly limited by law, and shall have the control, management, direction and disposition of all its property and affairs. Section 4. Annual Meeting. Immediately following a meeting of shareholders held for the election of Directors, the Cashier shall notify the directors- elect who may be present of their election and they shall then hold a meeting at the Main Office of the Association, or such other place as the Board of Directors may designate, for the purpose of taking their oaths, organizing the new Board, electing officers and transacting any other business that may come before such meeting. Section 5. Regular Meeting. Regular meetings of the Board of Directors shall be held without notice at the Main Office of the Association, or such other place as the Board of Directors may designate, at such dates and times as the Board shall determine. If the day designated for a regular meeting falls on a legal holiday, the meeting shall be held on the next business day. Section 6. Special Meetings. A special meeting of the Board of Directors may be called at anytime upon the written request of the Chairman of the Board, the President, or of two Directors, stating the purpose of the meeting. Notice of the time and place shall be given not later than the day before the date of the meeting, by mailing a notice to each Director at his last known address, by delivering such notice to him personally, or by telephoning. Section 7. Quorum; Votes. A majority of the Board of Directors at the time holding office shall constitute a quorum for the transaction of all business, except when otherwise provided by law, but less than a quorum may adjourn a meeting from time to time, and the meeting may be held, as adjourned, without further notice. If a quorum is present when a vote is taken, the affirmative vote of a majority of Directors present is the act of the Board of Directors. Section 8. Action by Directors Without a Meeting. Any action requiring Director approval or consent may be taken without a meeting and without notice of such meeting by written consent of all the Directors. Section 9. Telephonic Participation in Directors' Meetings. A Director or member of a Committee of the Board of Directors may participate in a meeting of the Board or of such Committee may participate in a meeting of the Board or of such Committee by means of a conference telephone or similar communications equipment enabling all Directors participating in the meeting to hear one another, and participation in such a meeting shall constitute presence in person at such a meeting. Section 10. Vacancies. Vacancies in the Board of Directors may be filled by the remaining members of the Board at any regular or special meeting of the Board. Section 11. Interim Appointments. The Board of Directors shall, if the share- holders at any meeting for the election of Directors have determined a number of Directors less than twenty-five (25), have the power, by affirmative vote of the majority of all the Directors, to increase such number of Directors to not more than twenty-five (25) and to elect Directors to fill the resulting vacancies and to serve until the next annual meeting of shareholders or the next election of Directors; provided, however, that the number of Directors shall not be so increased by more than two (2) if the number last determined by shareholders was fifteen (15) or less, or increased by more than four (4) if the number last determined by shareholders was sixteen (16) or more. Section 12. Fees. The Board of Directors shall fix the amount and direct the payment of fees which shall be paid to each Director for attendance at any meeting of the Board of Directors or of any Committees of the Board. ARTICLE III COMMITTEES OF THE BOARD Section 1. Executive Committee. The Board of Directors shall appoint from its members an Executive Committee which shall consist of such number of persons as the Board of Directors shall determine; the Chairman of the Board and the President shall be members ex-officio of the Executive Committee with full voting power. The Chairman of the Board or the President may from time to time appoint from the Board of Directors as temporary additional members of the Executive Committee, with full voting powers, not more than two members to serve for such periods as the Chairman of the Board or the President may determine. The Board of Directors shall designate a member of the Executive Committee to serve as Chairman thereof. A meeting of the Executive Committee may be called at any time upon the written request of the Chairman of the Board, the President or the Chairman of the Executive Committee, stating the purpose of the meeting. Not less than twenty four hours' notice of said meeting shall be given to each member of the Committee personally, by telephoning, or by mail. The Chairman of the Executive Committee or, in his absence, a member of the Committee chosen by a majority of the members present shall preside at meetings of the Executive Committee. -3- 12 The Executive Committee shall possess and may exercise all the powers of the Board when the Board is not in session except such as the Board, only, by law, is authorized to exercise; it shall keep minutes of its acts and proceedings and cause same to be presented and reported at every regular meeting and at any special meeting of the Board including specifically, all its actions relating to loans and discounts. All acts done and powers and authority conferred by the Executive Committee, from time to time, within the scope of its authority, shall be deemed to be, and may be certified as being, the acts of and under the authority of the Board. Section 2. Risk Management Committee. The Board shall appoint from its members a Risk Management Committee which shall consist of such number as the Board shall determine. The Board shall designate a member of the Risk Management Committee to serve as Chairman thereof. It shall be the duty of the Risk Management Committee to (a) serve as the channel of communication with management and the Board of Directors of Fleet Financial Group, Inc. to assure that formal processes supported by management information systems are in place for the identification, evaluation and management of significant risks inherent in or associated with lending activities, the loan portfolio, asset-liability management, the investment portfolio, trust and investment advisory activities, the sale of nondeposit investment products and new products and services and such additional activities or functions as the Board may determine from time to time; (b) assure the formulation and adoption of policies approved by the Risk Management Committee or Board governing lending activities, management of the loan portfolio, the maintenance of an adequate allowance for loan and lease losses, asset-liability management, the investment portfolio, the retail sale of non-deposit investment products, new products and services and such additional activities or functions as the Board may determine from time to time (c) assure that a comprehensive independent loan review program is in place for the early detection of problem loans and review significant reports of the loan review department, management's responses to those reports and the risk attributed to unresolved issues; (d) subject to control of the Board, exercise general supervision over trust activities, the investment of trust funds, the disposition of trust investments and the acceptance of new trusts and the terms of such acceptance, and (e) perform such additional duties and exercise such additional powers of the Board as the Board may determine from time to time. Section 3. Audit Committee. The Board shall appoint from its members and Audit Committee which shall consist of such number as the Board shall determine no one of whom shall be an active officer or employee of the Association or Fleet Financial Group, Inc. or any of its affiliates. In addition, members of the Audit Committee must not (i) have served as an officer or employee of the Association or any of its affiliates at any time during the year prior to their appointment; or (ii) own, control, or have owned or controlled at any time during the year prior to appointment, ten percent (10%) or more of any outstanding class of voting securities of the Association. At least two (2) members of the Audit Committee must have significant executive, professional, educational or regulatory experience in financial, auditing, accounting, or banking matters. No member of the Audit Committee may have significant direct or indirect credit or other relationships with the Association, the termination of which would materially adversely affect the Association's financial condition or results of operations. The Board shall designate a member of the Audit Committee to serve as Chairman thereof. It shall be the duty of the Audit Committee to (a) cause a continuous audit and examination to be made on its behalf into the affairs of the Association and to review the results of such examination; (b) review significant reports of the internal auditing department, management's responses to those reports and the risk attributed to unresolved issues; (c) review the basis for the reports issued under Section 112 of The Federal Deposit Insurance Corporation Improvement Act of 1991; (d) consider, in consultation with the independent auditor and an internal auditing executive, the adequacy of the Association's internal controls, including the resolution of identified material weakness and reportable conditions; (e) review regulatory communications received from any federal or state agency with supervisory jurisdiction or other examining authority and monitor any needed corrective action by management; (f) ensure that a formal system of internal controls is in place for maintaining compliance with laws and regulations; (g) cause an audit of the Trust Department at least once during each calendar year and within 15 months of the last such audit or, in lieu thereof, adopt a continuous audit system and report to the Board each calendar year and within 15 months of the previous report on the performance of such audit function; and (h) perform such additional duties and exercise such additional powers of the Board as the Board may determine from time to time. The Audit Committee may consult with internal counsel and retain its own outside counsel without approval (prior or otherwise) from the Board or management and obligate the Association to pay the fees of such counsel. -4- 13 Section 4. Community Affairs Committee. The Board shall appoint from its members a Community Affairs Committee which shall consist of such number as the Board shall determine. The Board shall designate a member of the Community Affairs Committee to serve as Chairman thereof. It shall be the duty of the Community Affairs Committee to (a) oversee compliance by the Association with the Community Reinvestment Act of 1977, as amended, and the regulations promulgated thereunder; and (b) perform such additional duties and exercise such additional powers of the Board as the Board may determine from time to time. Section 5. Regular Meetings. Except for the Executive Committee which shall meet on an ad hoc basis as set forth in Section 1 of this Article, regular meetings of the Committees of the Board of Directors shall be held, without notice, at such time and place as the Committee or the Board of Directors may appoint and as often as the business of the Association may require. Section 6. Special Meetings. A Special Meeting of any of the Committees of the Board of Directors may be called upon the written request of the Chairman of the Board or the President, or of any two members of the respective Committee, stating the purpose of the meeting. Not less than twenty-four hours' notice of such special meeting shall be given to each member of the Committee personally, by telephoning, or by mail. Section 7. Emergency Meetings. An Emergency Meeting of any of the Committees of the Board of Directors may be called at the request of the Chairman of the Board or the President, who shall state that an emergency exists, upon not less than one hour's notice to each member of the Committee personally or by telephoning. Section 8. Action Taken Without a Committee Meeting. Any Committee of the Board of Directors may take action without a meeting and without notice of such meeting by resolution assented to in writing by all members of such Committee. Section 9. Quorum. A majority of a Committee of the Board of Directors shall constitute a quorum for the transaction of any business at any meeting of such Committee. If a quorum is not available, the Chairman of the Board or the President shall have power to make temporary appointments to a Committee of- members of the Board of Directors, to act in the place and stead of members who temporarily cannot attend any such meeting; provided, however, that any temporary appointment to the Audit Committee must meet the requirements for members of that Committee set forth in Section 3 of this Article. Section 10. Record. The committees of the Board of Directors shall keep a record of their respective meetings and proceedings which shall be presented at the regular meeting of the Board of Directors held in the calendar month next following the meetings of the Committees. If there is no regular Board of Directors meeting held in the calendar month next following the meeting of a Committee, then such Committee's records shall be presented at the next regular Board of Directors meeting held in a month subsequent to such Committee meeting. Section 11. Changes and Vacancies. The Board of Directors shall have power to change the members of any Committee at any time and to fill vacancies on any Committee; provided, however, that any newly appointed member of the Audit Committee must meet the requirements for members of that Committee set forth in Section 3 of this Article. Section 12. Other Committees. The Board of Directors may appoint, from time to time, other committees of one or more persons, for such purposes and with such powers as the Board may determine. ARTICLE IV WAIVER OF NOTICE OF MEETINGS Section 1. Waiver. Whenever notice is required to be given to any shareholder, Director, or member of a Committee of the Board of Directors, such notice may be waived in writing either before or after such meeting by any shareholder, Director or Committee member respectively, as the case may be, who may be entitled to such notice; and such notice will be deemed to be waived by attendance at any such meeting. -5- 14 ARTICLE V OFFICERS AND AGENTS Section 1. Officers. The Board shall appoint a Chairman of the Board and a President, and shall have the power to appoint one or more Executive Vice Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a Cashier, a Secretary, an Auditor, a Controller, one or more Trust Officers and- such other officers as are deemed necessary or desirable for the proper transaction of business of the Association. The Chairman of the Board and the President shall be appointed from members of the Board of Directors. Any two or more offices, except those of President and Cashier, or Secretary, may be held by the same person. The Board may, from time to time, by resolution passed by a majority of the entire Board, designate one or more officers of the Association or of an affiliate or of Fleet Financial Group, Inc. with power to appoint one or more Vice Presidents and such other officers of the Association below the level of Vice President as the officer or officers designated in such resolution deem necessary or desirable for the proper transaction of the business of the Association. Section 2. Chairman of the Board. The chairman of the Board shall preside at all meetings of the Board of Directors. Subject to definition by the Board of Directors, he shall have general executive powers and such specific powers and duties as from time to time may be conferred upon or assigned to him by the Board of Directors. Section 3. President. The President shall preside at all meetings of the Board of Directors if there be no Chairman or if the Chairman be absent. Subject to definition by the Board of Directors, he shall have general executive powers and such specific powers and duties as from time to time may be conferred upon or assigned to him by the Board of Directors. -6- 15 Section 4. Cashier and Secretary. The Cashier shall be the Secretary of the Board and of the Executive Committee, and shall keep accurate minutes of their meetings and of all meetings of the shareholders. He shall attend to the giving of all notices required by these By-laws. He shall be custodian of the corporate seal, records, documents and papers of the Association. He shall have such powers and perform such duties as pertain by law or regulation to the office of Cashier, or as are imposed by these By-laws, or as may be delegated to him from time to time by the Board of Directors, the Chairman of the Board or the President. Section 5. Auditor. The Auditor shall be the chief auditing officer of the Association. He shall continuously examine the affairs of the Association and from time to time shall report to the Board of Directors. He shall have such powers and perform such duties as are conferred upon, or assigned to him by these By-laws, or as may be delegated to him from time to time by the Board of Directors. Section 6. Officers Seriatim. The Board of Directors shall designate from time to time not less than two officers who shall in the absence or disability of the Chairman or President or both, succeed seriatim to the duties and responsibilities of the Chairman and President respectively. Section 7. Clerks and Agents. The Board of Directors may appoint, from time to time, such clerks, agents and employees as it may deem advisable for the prompt and orderly transaction of the business of the Association, define their duties, fix the salaries to be paid them and dismiss them. Subject to the authority of the Board of Directors, the Chairman of the Board or the President, or any other officer of the Association authorized by either of them may appoint and dismiss all or any clerks, agents and employees and prescribe their duties and the conditions of their employment, and from time to time fix their compensation. Section 8. Tenure. The Chairman of the Board of Directors and the President shall, except in the case of death, resignation, retirement or disqualification under these By-laws, or unless removed by the affirmative vote of at least two- thirds of all of the members of the Board of Directors, hold office for the term of one year or until their respective successors are appointed. Either of such officers appointed to fill a vacancy occurring in an unexpired term shall serve for such unexpired term of such vacancy. All other officers, clerks, agents, attorneys-in-fact and employees of the Association shall hold office during the pleasure of the Board of Directors or of the officer or committee appointing them respectively. ARTICLE VI TRUST DEPARTMENT Section 1. General Powers and Duties. All fiduciary powers of the Association shall be exercised through the Trust Department, subject to such regulations as the Comptroller of the Currency shall from time to time establish. The Trust Department shall be to placed under the management and immediate supervision of an officer or officers appointed by the Board of Directors. The duties of all officers of the Trust Department shall be to cause the policies and instructions of the Board and the Risk Management Committee with respect to the trusts under their supervision to be carried out, and to supervise the due performance of the trusts and agencies entrusted to the Association and under their supervision, in accordance with law and in accordance with the terms of such trusts and agencies. -7- 16 ARTICLE VII BRANCH OFFICES Section 1. Establishment. The Board of Directors shall have full power to establish, to discontinue, or, from time to time, to change the location of any branch office, subject to such limitations as may be provided by law. Section 2. Supervision and Control. Subject to the general supervision and control of the Board of Directors, the affairs of branch offices shall be under the immediate supervision and control of the President or of such other officer or officers, employee or employees, or other individuals as the Board of Directors may from time to time determine, with such powers and duties as the Board of Directors may confer upon or assign to him or them. ARTICLE VIII SIGNATURE POWERS Section 1. Authorization. The power of officers, employees, agents and attorneys to sign on behalf of and to affix the seal of the Association shall be prescribed by the Board of Directors or by the Executive Committee or by both; provided that the President is authorized to restrict such power of any officer, employee, agent or attorney to the business of a specific department or departments, or to a specific branch office or branch offices. Facsimile signatures may be authorized. -8- 17 ARTICLE IX STOCK CERTIFICATES AND TRANSFERS Section 1. Stock Records. The Trust Department shall have custody of the stock certificate books and stock ledgers of the Association, and shall make all transfers of stock, issue certificates thereof and disburse dividends declared thereon. Section 2. Form of Certificate. Every shareholder shall be entitled to a certificate conforming to the requirements of law and otherwise in such form as the Board of Directors may approve. The certificates shall state on the face thereof that the stock is transferable only on the books of the Association and shall be signed by such officers as may be prescribed from time to time by the Board of Directors or Executive Committee. Facsimile signatures may be authorized. Section 3. Transfers of Stock. Transfers of stock shall be made only on the books of the Association by the holder in person, or by attorney duly authorized in writing, upon surrender of the certificate therefor properly endorsed, or upon the surrender of such certificate accompanied by a properly executed written assignment of the same, or a written power of attorney to sell, assign or transfer the same or the shares represented thereby. Section 4. Lost Certificate. The Board of Directors or Executive Committee may order a new certificate to be issued in place of a certificate lost or destroyed, upon proof of such loss or destruction and upon tender to the Association by the shareholder, of a bond in such amount and with or without surety, as may be ordered, indemnifying the Association against all liability, loss, cost and damage by reason of such loss or destruction and the issuance of a new certificate. Section 5. Closing Transfer Books. The Board of Directors may close the transfer books for a period not exceeding thirty days preceding any regular or special meeting of the shareholders, or the day designated for the payment of a dividend or the allotment of rights. In lieu of closing the transfer books the Board of Directors may fix a day and hour not more than thirty days prior to the day of holding any meeting of the shareholders, or the day designated for the payment of a dividend, or the day designated for the allotment of rights, or the day when any change of conversion or exchange of capital stock is to go into effect, as the day as of which shareholders entitled to notice of and to vote at such meetings or entitled to such dividend or to such allotment of rights or to exercise the rights in respect of any such change, conversion or exchange of capital stock, shall be determined, and only such shareholders as shall be shareholders of record on the day and hour so fixed shall be entitled to notice of and to vote at such meeting or to receive payment of such dividend or to receive such allotment of rights or to exercise such rights, as the case may be. ARTICLE X THE CORPORATE SEAL Section 1. Seal. The following is an impression of the seal of the Association adopted by the Board of Directors. ARTICLE XI BUSINESS HOURS Section 1. Business Hours. The main office of this Association and each branch office thereof shall be open for business on such days, and for such hours as the Chairman, or the President, or any Executive Vice President, or such other officer as the Board of Directors shall from time to time designate, may determine as to each office to conform to local custom and convenience, provided that any one or more of the main and branch offices or certain departments thereof may be open for such hours as the President, or such other officer as the Board of Directors shall from time to time designate, may determine as to each office or department on any legal holiday on which work is not prohibited by law, and provided further that any one or more of the main and branch offices or certain departments thereof may be ordered closed or open on any day for such hours as to each office or department as the President, or such other officer as the Board of Directors shall from time to time designate, subject to applicable laws regulations, may determine when such action may be required by reason of disaster or other emergency condition. ARTICLE IX CHANGES IN BY-LAWS Section 1. Amendments. These By-laws may be amended upon vote of a majority of the entire Board of Directors at any meeting of the Board, provided ten (10) day's notice of the proposed amendment has been given to each member of the Board of Directors. No amendment may be made unless the By-law, as amended, is consistent with the requirements of law and of the Articles of Association. These By-laws may also be amended by the Association's shareholders. A true copy Attest: Secretary/Assistant Secretary - --------------------------------------- Dated at , as of . --------------------------------------- ---------------------- Revision of January 11, 1993 -9- 18 [LOGO] Exhibit 3 - ------------------------------------------------------------------------------- Comptroller of the Currency Administrator of National Banks - ------------------------------------------------------------------------------- Washington, D.C. 20219 CERTIFICATE I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify that: 1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et seq., as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and control of all records pertaining to the chartering of all National Banking Associations. 2. "Fleet National Bank," (Charter No. 1338) is a National Banking Association formed under the laws of the United States and is authorized thereunder to transact the business of banking and exercise Fiduciary Powers on the date of this Certificate. IN TESTIMONY WHEREOF, I have hereunto subscribed my name and caused my seal of office to be affixed to these presents at the Treasury Department in the City of Washington and [SEAL] District of Columbia, this 11th day of March, 1997. /s/ ---------------------- Comptroller of the Currency 19 EXHIBIT 4 CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(b) OF THE TRUST INDENTURE ACT OF 1939 The undersigned, as Trustee under an Indenture to be entered into between America West Airlines, Inc. and Fleet National Bank, Trustee, does hereby consent that, pursuant to Section 321(b) of the Trust Indenture Act of 1939, reports of examinations with respect to the undersigned by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. FLEET NATIONAL BANK, Trustee By /s/ Philip G. Kane, Jr. ------------------------------------- Name: Philip G. Kane, Jr. Title: Vice President Dated: May 21, 1997 20 [FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL LETTERHEAD] - ------------------------------------------------------------------------------- Please refer to page i, [LOGO] Table of Contents, for 1 the required disclosure of estimated burden. - ------------------------------------------------------------------------------- CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH DOMESTIC AND FOREIGN OFFICES - FFIEC 031 (961231) REPORT AT THE CLOSE OF BUSINESS DECEMBER 31, 1996 ----------- (RCRI 9999) This report is required by law: 12 U.S.C. Section 324 (State member banks); 12 U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161 (National banks). This report form is to be filed by banks with branches and consolidated subsidiaries in U.S. territories and possessions, Edge or Agreement subsidiaries, foreign branches, consolidated foreign subsidiaries, or International Banking Facilities. - ------------------------------------------------------------------------------ NOTE: The Reports of Condition and Income must be signed by an authorized officer and the Report of Condition must be attested to by not less than two directors (trustees) for State nonmember banks and three directors for State member and National banks. I, Giro S. DeRosa, Vice President - ----------------------------------------------------- Name and Title of Officer Authorized to Sign Report of the named bank do hereby declare that these Reports of Condition and Income (including the supporting schedules) have been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and are true to the best of my knowledge and belief. /s/ Giro DeRosa - ---------------------------------------------- Signature of Officer Authorized to Sign Report January 23, 1997 - ----------------- Date of Signature The Reports of Condition and Income are to be prepared in accordance with Federal regulatory authority instructions. NOTE: These instructions may in some cases differ from generally accepted accounting principles. We, the undersigned directors (trustees), attest to the correctness of this Report of Condition (including the supporting schedules) and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct. /s/ - ------------------ Director (Trustee) /s/ - ------------------ Director (Trustee) /s/ - ------------------- Director (Trustee) - ----------------------------------------------------------------------------- FOR BANKS SUBMITTING HARD COPY REPORT FORMS: STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal Reserve District Bank. STATE NONMEMBER BANKS: Return the original only in the special return address envelope provided. If express mail is used in lieu of the special return address envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114. NATIONAL BANKS: Return the original only in the special return address envelope provided. If express mail is used in lieu of the special return address envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114. - ------------------------------------------------------------------------------- FDIC Certificate Number [02499] Banks should affix the address label in ----------- this space. (RCRI 9050) Fleet National Bank --------------------------------------- Legal Title of Bank (TEXT 9010) One Monarch Place --------------------------------------- City (TEXT 9131) Springfield, MA 01102 --------------------------------------- State Abbrev. Zip Code (TEXT 9200) (TEXT 9220) 21 FFIEC 031 Consolidated Reports of Condition and Income for a Bank With Page i Domestic and Foreign Offices 2 - ------------------------------------------------------------------------------- TABLE OF CONTENTS SIGNATURE PAGE Cover REPORT OF INCOME Schedule RI--Income Statement.....................RI-1, 2, 3 Schedule RI-A--Changes in Equity Capital................RI-4 Schedule RI-B--Charge-offs and Recoveries and Changes in Allowance For Loan and Lease Losses.............RI-4, 5 Schedule RI-C--Applicable Income Taxes by Taxing Authority.............................................RI-5 Schedule RI-D--Income from International Operations.....RI-6 Schedule RI-E--Explanations..........................RI-7, 8 REPORT OF CONDITION Schedule RC--Balance Sheet...........................RC-1, 2 Schedule RC-A--Cash and Balances Due from Depository Institutions..........................................RC-3 Schedule RC-B--Securities.........................RC-3, 4, 5 Schedule RC-C--Loans and Lease Financing Receivables: Part I. Loans and Leases..........................RC-6, 7 Part II. Loans to Small Businesses and Small Farms (included in the forms for June 30 only).........................................RC-7a, 7b Schedule RC-D--Trading Assets and Liabilities (to be completed only be selected banks)..................RC-8 Schedule RC-E--Deposit Liabilities..............RC-9, 10, 11 Schedule RC-F--Other Assets............................RC-11 Schedule RC-G--Other Liabilities.......................RC-11 Schedule RC-H--Selected Balance Sheet Items for Domestic Offices.....................................RC-12 Schedule RC-I--Selected Assets and Liabilities of IBFs.................................................RC-13 Schedule RC-K--Quarterly Averages......................RC-13 Schedule RC-L--Off-Balance Sheet Items.........RC-14, 15, 16 Schedule RC-M--Memoranda...........................RC-17, 18 Schedule RC-N--Past Due and Nonaccrual Loans, Leases, and Other Assets.........................RC-19, 20 Schedule RC-O--Other Data for Deposit Insurance Assessments......................................RC-21, 22 Schedule RC-R--Regulatory Capital..................RC-23, 24 Optional Narrative Statement Concerning the Amounts Reported in the Reports of Condition and Income...........................................RC-25 Special Report (TO BE COMPLETED BY ALL BANKS) Schedule RC-J--Repricing Opportunities (sent only to and to be completed by savings banks) 22 DISCLOSURE OF ESTIMATED BURDEN The estimated average burden associated with this information collection is 32.2 hours per respondent and is estimated to vary from 15 to 230 hours per response, depending on individual circumstances. Burden estimates include the time for reviewing instructions, gathering and maintaining data in the required form, and completing the information collection, but exclude the time for compiling and maintaining business records in the normal course of a respondent's activities. Comments concerning the accuracy of this burden estimate and suggestions for reducing this burden should be directed to the Office of Information and Regulatory Affairs, Office of Management and Budget, Washington, D.C. 20503, and to one of the following: Secretary Board of Governors of the Federal Reserve System Washington, D.C. 20551 Legislative and Regulatory Analysis Division Office of the Comptroller of the Currency Washington, D.C. 20219 Assistant Executive Secretary Federal Deposit Insurance Corporation Washington, D.C. 20429 For Information or assistance, National and State nonmember banks should contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington, D.C. 20429, toll free on (800) 688-FDIC(3342), Monday through Friday between 8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their Federal Reserve District Bank. 23
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE PAGE RI-1 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] CONSOLIDATED REPORT OF INCOME FOR THE PERIOD JANUARY 1, 1996-DECEMBER 31, 1996 ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE BASIS IN THOUSANDS OF DOLLARS. SCHEDULE RI--INCOME STATEMENT I480 (- ------------------- Dollar Amounts in Thousands RIAD Bil Mil Thou - ----------------------------------------------------------------------------------------------------------------------------------- 1. Interest income: ////////////////// a. Interest and fee income on loans: ////////////////// (1) In domestic offices: ////////////////// (a) Loans secured by real estate................................................. 4011 1,092,992 1.a.(1)(a) (b) Loans to depository institutions............................................. 4019 1,482 1.a.(1)(b) (c) Loans to finance agricultural production and other loans to farmers.......... 4024 501 1.a.(1)(c) (d) Commercial and industrial loans.............................................. 4012 1,132,500 1.a.(1)(d) (e) Acceptances of other banks................................................... 4026 264 1.a.(1)(e) (f) Loans to individuals for household, family, and other personal expeditures: ////////////////// (1) Credit cards and related plans............................................ 4054 16,485 1.a.(1)(f)(1) (2) Other.................................................................... 4055 189,926 1.a.(1)(f)(2) (g) Loans to foreign governments and official institutions....................... 4056 0 1.a.(1)(g) (h) Obligations (other than securities and leases) of states and political ////////////////// subdivisions in the U.S.: ////////////////// (1) Taxable obligations...................................................... 4503 0 1.a.(1)(h)(1) (2) Tax-exempt obligations................................................... 4504 10,381 1.a.(1)(h)(2) (i) All other loans in domestic offices.......................................... 4058 147,087 1.a.(1)(i) (2) In foreign offices, Edge and Agreement subsidiaries, and IBFs.................... 4059 4,161 1.a.(2) b. Income from lease financing receivables: ////////////////// (1) Taxable leases................................................................... 4505 152,848 1.b.(1) (2) Tax-exempt leases................................................................ 4307 1,511 1.b.(2) c. Interest income on balances due from depository instituions: (1) ////////////////// (1) In domestic offices.............................................................. 4105 1,644 1.c.(1) (2) In foreign offices, Edge and Agreement subsidiaries, and IBFs.................... 4106 142 1.c.(2) d. Interest and dividend income on securities: ////////////////// (1) U.S. Treasury securities and U.S. Government agency and corporation obligations.. 4027 422,212 1.d.(1) (2) Securities issued by states and political subdivisions in the U.S.: ////////////////// (a) Taxable securities........................................................... 4506 0 1.d.(2)(a) (b) Tax-Exempt securities........................................................ 4507 6,495 1.d.(2)(b) (3) Other domestic debt securities................................................... 3657 12,976 1.d.(3) (4) Foreign debt securities.......................................................... 3658 6,621 1.d.(4) (5) Equity securities (including investments in mutual funds)........................ 3659 17,504 1.d.(5) e. Interest income from trading assets.................................................. 4069 479 1.e. ------------------
- ---------- (1) Includes interest income on time certificates of deposit not held for trading. 24
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE PAGE RI-2 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RI--CONTINUED Dollar Amounts in Thousands Year-to-date RIAD Bil Mil Thou - ------------------------------------------------------------------------------------------------------------------------------ 1. Interest income (continued) f. Interest income on federal funds sold and securities purchased under ////////////////// agreements to resell in domestic offices of the bank and of its Edge ////////////////// and Agreement subsidiaries, and in IBFs ............................. 4020 25,839 1.f. g. Total interest income (sum of items 1.a through 1.f) ................ 4107 3,244,050 1.g. 2. Interest expense: ////////////////// a. Interest on deposits: ////////////////// (1) Interest on deposits in domestic offices: ////////////////// (a) Transaction accounts (NOW accounts, ATS accounts, and ////////////////// telephone and preauthorized transfer accounts) .............. 4508 13,070 2.a.(1)(a) (b) Nontransaction accounts: ////////////////// (1) Money market deposit accounts (MMDAs) ................... 4509 257,330 2.a.(1)(b)(1) (2) Other savings deposits .................................. 4511 48,169 2.a.(1)(b)(2) (3) Time certificates of deposit of $100,000 or more ........ 4174 170,575 2.a.(1)(b)(3) (4) All other time deposits ................................. 4512 403,831 2.a.(1)(b)(4) (2) Interest on deposits in foreign offices, Edge and Agreement ////////////////// subsidiaries, and IBFs .......................................... 4172 100,766 2.a.(2) b. Expense of federal funds purchased and securities sold under ////////////////// agreements to repurchase in domestic offices of the bank and of its ////////////////// Edge and Agreement subsidiaries, and in IBFs ........................ 4180 282,599 2.b. c. Interest on demand notes issued to the U.S. Treasury, trading ////////////////// liabilities, and other borrowed money ............................... 4185 161,582 2.c. d. Interest on mortgage indebtedness and obligations under capitalized ////////////////// leases .............................................................. 4072 859 2.d. e. Interest on subordinated notes and debentures ....................... 4200 69,434 2.e. f. Total interest expense (sum of items 2.a through 2.e) ............... 4073 1,508,215 2.f. 3. Net interest income (item 1.g minus 2.f) .............................. ////////////////// RIAD 4074 1,735,835 3. 4. Provisions: ////////////////// a. Provision for loan and lease losses ................................. ////////////////// RIAD 4230 (6,834) 4.a. b. Provision for allocated transfer risk ............................... ////////////////// RIAD 4243 0 4.b. 5. Noninterest income: ////////////////// a. Income from fiduciary activities .................................... 4070 295,272 5.a. b. Service charges on deposit accounts in domestic offices ............. 4080 222,313 5.b. c. TRADING REVENUE (MUST EQUAL SCHEDULE RI, SUM OF MEMORANDUM ////////////////// ITEMS 8.a THROUGH 8.d) .............................................. A220 25,253 5.c. d. Other foreign transaction gains (losses) ............................ 4076 346 5.d. e. Not applicable ////////////////// f. Other noninterest income: ////////////////// (1) Other fee income ................................................ 5407 797,631 5.f.(1) (2) All other noninterest income* ................................... 5408 350,869 5.f.(2) g. Total noninterest income (sum of items 5.a through 5.f) ............. ////////////////// RIAD 4079 1,691,684 5.g. 6. a. Realized gains (losses) on held-to-maturity securities .............. ////////////////// RIAD 3521 52 6.a. b. Realized gains (losses) on available-for-sale securities ............ ////////////////// RIAD 3196 12,071 6.b. 7. Noninterest expense: ////////////////// a. Salaries and employee benefits ...................................... 4135 645,873 7.a. b. Expenses of premises and fixed assets (net of rental income) ////////////////// (excluding salaries and employee benefits and mortgage interest ..... 4217 211,199 7.b. c. Other noninterest expense* .......................................... 4092 1,243,839 7.c. d. Total noninterest expense (sum of items 7.a through 7.c) ............ ////////////////// RIAD 4093 2,100,911 7.d. 8. Income (loss) before income taxes and extraordinary items and other ////////////////// adjustments (item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d) ////////////////// RIAD 4301 1,345,565 8. 9. Applicable income taxes (on item 8) .................................... ////////////////// RIAD 4302 548,252 9. 10. Income (loss) before extraordinary items and other adjustments (item 8 ////////////////// minus 9) ............................................................... ////////////////// RIAD 4300 797,313 10. - ------------ *Describe on Schedule RI-E--Explanations.
4 25
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE Page RI-3 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RI--CONTINUED Year-to-date ------------ Dollar Amounts in Thousands RIAD Bil Mil Thou - --------------------------------------------------------------------------------------------- 11. Extraordinary items and other adjustments: ////////////////// a. Extraordinary items and other adjustments, ////////////////// gross of income taxes*..................................... 4310 0 11.a. b. Applicable income taxes (on item 11.a)*.................... 4315 0 11.b. c. Extraordinary items and other adjustments, ////////////////// net of income taxes (item 11.a minus 11.b)................. ////////////////// RIAD 4320 0 11.c. 12. Net income (loss) (sum of items 10 and 11.c)................... ////////////////// RIAD 4340 797,313 12. ----------------------------------------------------
I481 (- ------------ Memoranda Year-to-date ------------ Dollar Amounts in Thousands RIAD Bil Mil Thou - --------------------------------------------------------------------------------------------------------------------- 1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after ////////////////// August 7, 1986, that is not deductible for federal income tax purposes....................... 4513 2,891 M.1. 2. Income from the sale and servicing of mutual funds and annuities in domestic offices ////////////////// (included in Schedule RI, item 8)............................................................ 8431 46,475 M.2. 3.-4. Not applicable ////////////////// 5. Number of full-time equivalent employees on payroll at end of current period (round to //// Number nearest whole number)........................................................................ 4150 12,425 M.5. 6. Not applicable ////////////////// 7. If the reporting bank has restated its balance sheet as a result of applying push down //// MM DD YY accounting this calendar year, report the date of the bank's acquisition..................... 9106 00/00/00 M.7. 8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) ////////////////// (SUM OF MEMORANDUM ITEMS 8.a THROUGH 8.d MUST EQUAL SCHEDULE RI, ITEM 5.c): //// Bil Mil Thou a. Interest rate exposures.................................................................. 8757 5,738 M.8.a. b. Foreign exchange exposures............................................................... 8758 19,515 M.8.b. c. Equity security and index exposures...................................................... 8759 0 M.8.c. d. Commodity and other exposures............................................................ 8760 0 M.8.d. 9. Impact on income of off-balance sheet derivatives held for purposes other than trading: ////////////////// a. Net increase (decrease) to interest income............................................... 8761 2,698 M.9.a. b. Net (increase) decrease to interest expense.............................................. 8762 (4,902) M.9.b. c. Other (noninterest) allocations.......................................................... 8763 12 M.9.c. 10. CREDIT LOSSES ON OFF-BALANCE SHEET DERIVATIVES (SEE INSTRUCTIONS)............................ A251 0 M.10.
- ----------------- *Describe on Schedule RI-E--Explanations. 5 26
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE Page RI-4 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RI-A--CHANGES IN EQUITY CAPITAL Indicate decreases and losses in parentheses. I483 (- ----------- Dollar Amounts in Thousands RIAD Bil Mil Thou - ----------------------------------------------------------------------------------------------------------------------- 1. Total equity capital originally reported in the December 31, 1995, Reports of Condition ////////////////// and Income............................................................................... 3215 1,342,473 1. 2. Equity capital adjustments from amended Reports of Income, net*.......................... 3216 0 2. 3. Amended balance end of previous calendar year (sum of items 1 and 2)..................... 3217 1,342,473 3. 4. Net income (loss) (must equal Schedule RI, item 12)...................................... 4340 797,313 4. 5. Sale, conversion, acquisition, or retirement of capital stock, net....................... 4346 0 5. 6. Changes incident to business combinations, net........................................... 4356 4,161,079 6. 7. LESS: Cash dividends declared on preferred stock......................................... 4470 11,688 7. 8. LESS: Cash dividends declared on common stock............................................ 4460 761,473 8. 9. Cumulative effect of changes in accounting principles from prior years* (see instructions ////////////////// for this schedule)....................................................................... 4411 0 9. 10. Corrections of material accounting errors from prior years* (see instructions for this schedule)................................................................................ 4412 0 10. 11. Change in net unrealized holding gains (losses) on available-for-sale securities......... 8433 (4,870) 11. 12. Foreign currency translation adjustments................................................. 4414 0 12. 13. Other transactions with parent holding company* (not included in items 5,7, or 8 above).. 4415 (1,003,722) 13. 14. Total equity capital end of current period (sum of items 3 through 13) (must equal ////////////////// Schedule RC, item 28).................................................................... 3210 4,519,112 14. -------------------
- --------------- *Describe on Schedule RI-E--Explanations.
SCHEDULE RI-B--CHARGE-OFFS AND RECOVERIES AND CHANGES IN ALLOWANCE FOR LOAN AND LEASE LOSSES PART I. CHARGE-OFFS AND RECOVERIES ON LOANS AND LEASES PART I EXCLUDES CHARGE-OFFS AND RECOVERIES THROUGH THE ALLOCATED TRANSFER RISK RESERVE. I486 (- -------- (Column A) (Column B) Charge-offs Recoveries ---------------------------------------- Calendar year-to-date ---------------------------------------- Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou - -------------------------------------------------------------------------------------------------------------------- 1. Loans secured by real estate: ////////////////// ////////////////// a. To U.S. addressees (domicile)................................... 4651 65,946 4661 16,055 1.a. b. To non-U.S. addressees (domicile)............................... 4652 0 4662 0 1.b. 2. Loans to depository institutions and acceptances of other banks: ////////////////// ////////////////// a. To U.S. banks and other U.S. depository institutions............ 4653 0 4663 0 2.a. b. To foreign banks................................................ 4654 0 4664 0 2.b. 3. Loans to finance agricultural production and other loans to farmers. 4655 69 4665 105 3. 4. Commercial and industrial loans: ////////////////// ////////////////// a. To U.S. addressees (domicile)................................... 4645 73,869 4617 43,048 4.a. b. To non-U.S. addressees (domicile)............................... 4646 0 4618 102 4.b. 5. Loans to individuals for household, family, and other personal ////////////////// ////////////////// expenditures: ////////////////// ////////////////// a. Credit cards and related plans.................................. 4656 2,356 4666 1,468 5.a. b. Other (includes single payment, installment, and all student loans).............................................................. 4657 29,089 4667 5,303 5.b. 6. Loans to foreign governments and official institutions.............. 4643 0 4627 0 6. 7. All other loans..................................................... 4644 5,253 4628 965 7. 8. Lease financing receivables: ////////////////// ////////////////// a. Of U.S. addressees (domicile)................................... 4658 12,926 4668 4,622 8.a. b. Of non-U.S. addressees (domicile)............................... 4659 0 4669 0 8.b. 9. Total (sum of items 1 through 8).................................... 4635 189,508 4605 71,668 9.
6 27
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE Page RI-5 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RI-B--CONTINUED PART I. CONTINUED (Column A) (Column B) Charge-offs Recoveries ------------------------------------- Calendar-year-to-date ------------------------------------- Memoranda Dollar Amounts in Thousands RIAD BIL MIL THOU RIAD BIL MIL THOU - ------------------------------------------------------------------------------------------------------------------- 1-3. Not applicable ////////////////// ////////////////// 4. Loans to finance commercial real estate, construction, and land ////////////////// ////////////////// development activities (NOT SECURED BY REAL ESTATE) included in ////////////////// ////////////////// Schedule RI-B, part I, items 4 and 7, above.......................... 5409 714 5410 1,374 M.4. 5. Loans secured by real estate in domestic offices (included in ////////////////// ////////////////// Schedule RI-B, part I, item 1, above): ////////////////// ////////////////// a. Construction and land development................................. 3582 266 3583 337 M.5.a. b. Secured by farmland............................................... 3584 145 3585 304 M.5.b. c. Secured by 1-4 family residential properties: ////////////////// ////////////////// (1) Revolving, open-end loans secured by 1-4 family residential ////////////////// ////////////////// properties and extended under lines of credit................. 5411 4,428 5412 619 M.5.c.(1) (2) All other loans secured by 1-4 family residential properties.. 5413 31,124 5414 3,602 M.5.c.(2) d. Secured by multifamily (5 or more) residential properties.......... 3588 5,579 3589 590 M.5.d. e. Secured by nonfarm nonresidential properties...................... 3590 24,404 3591 10,603 M.5.e. --------------------------------------
PART II. CHANGES IN ALLOWANCE FOR LOAN AND LEASE LOSSES Dollar Amounts in Thousands RIAD BIL MIL THOU - ------------------------------------------------------------------------------------------------------------------- 1. Balance originally reported in the December 31, 1995, Reports of Condition and Income....... 3124 266,943 1. 2. Recoveries (must equal part I, item 9, column B above)...................................... 4605 71,668 2. 3. LESS: Charge-offs (must equal part I, item 9, column A above)................................ 4635 189,508 3. 4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)...................... 4230 (6,834) 4. 5. Adjustments* (see instructions for this schedule)........................................... 4815 634,542 5. 6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, ////////////////// item 4.b)................................................................................... 3123 776,811 6. ------------------ - ------------ *Describe on Schedule RI-E--Explanations.
SCHEDULE RI-C--APPLICABLE INCOME TAXES BY TAXING AUTHORITY SCHEDULE RI-C IS TO BE REPORTED WITH THE DECEMBER REPORT OF INCOME. I489 ----------------- Dollar Amounts in Thousands RIAD BIL MIL THOU - ------------------------------------------------------------------------------------------------------------------- 1. Federal................................................................................... 4780 461,184 1. 2. State and local........................................................................... 4790 87,068 2. 3. Foreign................................................................................... 4795 0 3. 4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b)........ 4770 548,252 4. 5. Deferred portion of item 4............................................ RIAD 4772 274,648 ////////////////// 5. ------------------
7 28
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE PAGE RI-6 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RI-D--INCOME FROM INTERNATIONAL OPERATIONS FOR ALL BANKS WITH FOREIGN OFFICES, EDGE OR AGREEMENT SUBSIDIARIES, OR IBFs WHERE INTERNATIONAL OPERATIONS ACCOUNT FOR MORE THAN 10 PERCENT OF TOTAL REVENUES, TOTAL ASSETS, OR NET INCOME. PART I. ESTIMATED INCOME FROM INTERNATIONAL OPERATIONS I492 ------------------- Year-to-date ------------------- Dollar Amounts in Thousands RIAD Bil Mil Thou - ----------------------------------------------------------------------------------------------------------------------------------- 1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, ////////////////// and IBFs ////////////////// a. Interest income booked............................................................... 4837 N/A 1.a. b. Interest expense booked.............................................................. 4038 N/A 1.b. c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and ////////////////// IBFs (item 1.a minus 1.b)............................................................ 4839 N/A 1.c. 2. Adjustments for booking location of international operations: ////////////////// a. Net interest income attributable to international operations booked at domestic ////////////////// offices.............................................................................. 4840 N/A 2.a. b. Net interest income attributable to domestic business booked at foreign offices...... 4841 N/A 2.b. c. Net booking location adjustment (item 2.a minus 2.b)................................. 4842 N/A 2.c. 3. Noninterest income and expense attributable to international operations: ////////////////// a. Noninterest income attributable to international operations.......................... 4097 N/A 3.a. b. Provision for loan and lease losses attributable to international operations......... 4235 N/A 3.b. c. Other noninterest expense attributable to international operations................... 4239 N/A 3.c. d. Net noninterest income (expense) attributable to international operations (item 3.a ////////////////// minus 3.b and 3.c).................................................................. 4843 N/A 3.d. 4. Estimated pretax income attributable to international operations before capital ////////////////// allocation adjustment (sum of items 1.c, 2.c, and 3.d)................................. 4844 N/A 4. 5. Adjustment to pretax income for internal allocations to international operations to ////////////////// reflect the effects of equity capital on overall bank funding costs.................... 4845 N/A 5. 6. Estimated pretax income attributable to international operations after ////////////////// capital allocation adjustment (sum of items 4 and 5)................................... 4846 N/A 6. 7. Income taxes attributable to income from international operations as estimated in ////////////////// item 6................................................................................. 4797 N/A 7. 8. Estimated net income attributable to international operations (item 6 minus 7)......... 4341 N/A 8.
memoranda Dollar Amounts in Thousands RIAD Bil Mil Thou - ----------------------------------------------------------------------------------------------------------------------------------- 1. Intracompany interest income included in item 1.a above................................ 4847 N/A M.1. 2. Intracompany interest expense included in item 1.b above............................... 4848 N/A M.2.
PART II. SUPPLEMENTARY DETAILS ON INCOME FROM INTERNATIONAL OPERATIONS REQUIRED BY THE DEPARTMENTS OF COMMERCE AND TREASURY FOR PURPOSES OF THE U.S. INTERNATIONAL ACCOUNTS AND THE U.S. NATIONAL INCOME AND PRODUCT ACCOUNTS
Year-to-date ------------------- Dollar Amounts in Thousands RIAD Bil Mil Thou - ----------------------------------------------------------------------------------------------------------------------------------- 1. Interest income booked at IBFs......................................................... 4849 N/A 1. 2. Interest expense booked at IBFs........................................................ 4850 N/A 2. 3. Noninterest income attributable to international operations booked at domestic ////////////////// offices (excluding IBFs): ////////////////// a. Gains (losses) and extraordinary items.............................................. 5491 N/A 3.a. b. Fees and other noninterest income................................................... 5492 N/A 3.b. 4. Provision for loan and lease losses attributable to international operations booked at ////////////////// domestic offices (excluding IBFs)...................................................... 4852 N/A 4. 5. Other noninterest expense attributable to international operations booked at domestic ////////////////// offices (excluding IBFs)............................................................... 4853 N/A 5.
8 29
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE PAGE RI-7 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RI-E--EXPLANATIONS SCHEDULE RI-E IS TO BE COMPLETED EACH QUARTER ON A CALENDER YEAR-TO-DATE BASIS. Detail all adjustments in Schedule RI-A and RI-B, all extraordinary items and other adjustments in Schedule RI, and all significant items of other noninterest income and other noninterest expense in Schedule RI. (See instructions for details.) I495 (- ------------------- Year-to-date ------------------- Dollar Amounts in Thousands RIAD Bil Mil Thou - ---------------------------------------------------------------------------------------------------------------------------------- 1. All other noninterest income (from Schedule RI, item 5.f.(2)) ////////////////// Report amounts that exceed 10% of Schedule RI, item 5.f.(2): ////////////////// a. Net gains on other real estate owned................................................ 5415 0 1.a. b. Net gains on sales of loans......................................................... 5416 0 1.b. c. Net gains on sales of premises and fixed assets..................................... 5417 0 1.c. Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, ////////////////// item 5.f.(2): ////////////////// d. TEXT 4461 INCOME ON MORTGAGES HELD FOR RESALE 4461 147,813 1.d. e. TEXT 4462 GAIN FROM BRANCH DIVESTITURES 4462 77,976 1.e. f. TEXT 4463 4463 1.f. 2. Other noninterest expense (from Schedule RI, item 7.c): ////////////////// a. Amortization expense of intangible assets........................................... 4531 278,276 2.a. Report amounts that exceed 10% of Schedule RI, item 7.c: ////////////////// b. Net losses on other real estate owned............................................... 5418 0 2.b. c. Net losses on sales of loans........................................................ 5419 0 2.c. d. Net losses on sales of premises and fixed assets.................................... 5420 0 2.d. Itemize and describe the three largest other amounts that exceed 10% of Schedule RI, ////////////////// item 7.c: ////////////////// e. TEXT 4464 INTERCOMPANY CORPORATE SUPPORT FUNCTION CHARGES 4464 296,172 2.e. f. TEXT 4467 INTERCOMPANY DATA PROCESSING & PROGRAMMING CHARGES 4467 315,897 2.f. g. TEXT 4468 4468 2.g. 3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and applicable ////////////////// income tax effect (from Schedule RI, item 11.b) (itemize and describe all extraordinary ////////////////// items and other adjustments): ////////////////// a. (1) TEXT 4469 4469 3.a.(1) (2) Applicable income tax effect RIAD 4486 ////////////////// 3.a.(2) b. (1) TEXT 4487 4487 3.b.(1) (2) Applicable income tax effect RIAD 4488 ////////////////// 3.b.(2) c. (1) TEXT 4489 4489 3.c.(1) (2) Applicable income tax effect RIAD 4491 ////////////////// 3.c.(2) 4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, item 2) ////////////////// (itemize and describe all adjustments): ////////////////// a. TEXT 4492 4492 4.a. b. TEXT 4493 4493 4.b. 5. Cumulative effect of changes in accounting principles from prior years (from Schedule ////////////////// RI-A, item 9) (itemize and describe all changes in accounting principles): ////////////////// a. TEXT 4494 4494 5.a. b. TEXT 4495 4495 5.b. 6. Corrections of material accounting errors from prior years (from Schedule RI-A, item 10) ////////////////// (itemize and describe all corrections): ////////////////// a. TEXT 4496 4496 6.a. b. TEXT 4497 4497 6.b.
9 30
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE PAGE RI-8 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RI-E--CONTINUED ------------------- Year-to-date ------------------- Dollar Amounts in Thousands RIAD Bil Mil Thou - ----------------------------------------------------------------------------------------------------------------------------------- 7. Other transactions with parent holding company (from Schedule RI-A, item 13) ////////////////// (itemize and describe all such transactions): ////////////////// a. TEXT 4498 FLEET NATIONAL BANK SURPLUS DISTRIBUTION TO FFG .......................... 4498 (1,003,722) 7.a. b. TEXT 4499 ........................................................................... 4499 7.b. 8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, item 5) ////////////////// (itemize and describe all adjustments): ////////////////// a. TEXT 4521 12/31/95 ENDING BALANCE OF POOLED ENTITIES ............................... 4521 636,497 8.a. b. TEXT 4522 DIVESTED ALLOWANCE RELATED TO SOLD LOANS ................................. 4522 (1,955) 8.b. 9. Other explanations (the space below is provided for the bank to briefly describe, at its ------------------- option, any other significant items affecting the Report of Income): I498 | I499 <- No comment [X] (RIAD 4769) ------------------- Other explanations (please type or print clearly): (TEXT 4769)
10 31
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE PAGE RC-1 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 1996 All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount outstanding as of the last business day of the quarter. SCHEDULE RC -- BALANCE SHEET C400 ------------------ Dollar Amounts in Thousands RCFD Bil Mil Thou - ----------------------------------------------------------------------------------------------------------------------------------- ASSETS ////////////////// 1. Cash and balances due from depository institutions (from Schedule RC-A): ////////////////// a. Noninterest-bearing balances and currency and coin (1) ........................... 0081 3,923,408 1.a. b. Interest-bearing balances(2) ..................................................... 0071 68,691 1.b. 2. Securities: ////////////////// a. Held-to-maturity securities (from Schedule RC-B, column A) ....................... 1754 261,390 2.a. b. Available-for-sale securities (from Schedule RC-B, column D) ..................... 1773 4,958,338 2.b. 3. Federal funds sold and securities purchased under agreements to resell in domestic ////////////////// offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: ////////////////// a. Federal funds sold .............................................................. 0276 25,709 3.a. b. Securities purchased under agreements to resell .................................. 0277 0 3.b. 4. Loans and lease financing receivables: ////////////////// a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 31,260,436 ////////////////// 4.a. b. LESS: Allowance for loan and lease losses ................... RCFD 3123 776,811 ////////////////// 4.b. c. LESS: Allocated transfer risk reserve ....................... RCFD 3128 0 ////////////////// 4.c. d. Loans and leases, net of unearned income, ////////////////// allowance, and reserve (item 4.a minus 4.b and 4.c) .............................. 2125 30,483,625 4.d. 5. Trading assets (from Schedule RC-D) ................................................. 3545 73,333 5. 6. Premises and fixed assets (including capitalized leases) ............................ 2145 536,686 6. 7. Other real estate owned (from Schedule RC-M) ........................................ 2145 18,911 7. 8. Investments in unconsolidated subsidiaries and associated companies ////////////////// (from Schedule RC-M) ................................................................ 2130 0 8. 9. Customers' liability to this bank on acceptances outstanding......................... 2155 6,380 9. 10. Intangible assets (from Schedule RC-M) .............................................. 2143 2,316,633 10. 11. Other assets (from Schedule RC-F) ................................................... 2160 3,907,689 11. 12. Total assets (sum of items 1 through 11) ............................................ 2170 46,580,793 12. ------------------
- ------------ (1) Includes cash items in process of collection and unposted debits. (2) Includes time certificates of deposit not held for trading. 11 32
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE PAGE RC-2 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC--CONTINUED ----------------------- Dollar Amounts in Thousands ///////// Bil Mil Thou - ------------------------------------------------------------------------------------------------------------------------------- LIABILITIES /////////////////////// 13. Deposits: /////////////////////// a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, /////////////////////// part I) ........................................................................... RCON 2200 32,792,158 13.a. (1) Noninterest-bearing(1) .............................. RCON 6631 10,359,674 /////////////////////// 13.a.(1) (2) Interest-bearing .................................... RCON 6636 22,432,484 /////////////////////// 13.a.(2) b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from /////////////////////// Schedule RC-E, part II ............................................................ RCFN 2200 2,414,427 13.b. (1) Noninterest-bearing ................................. RCFN 6631 51,133 /////////////////////// 13.b.(1) (2) Interest-bearing .................................... RCFN 6636 2,363,294 /////////////////////// 13.b.(2) 14. Federal funds purchased and securities sold under agreements to repurchase in domestic /////////////////////// offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: /////////////////////// a. Federal funds purchased ........................................................... RCFD 0278 2,999,129 14.a. b. Securities sold under agreements to repurchase .................................... RCFD 0279 119,013 14.b. 15. a. Demand notes issued to the U.S. Treasury .......................................... RCON 2840 2,393 15.a. b. Trading liabilities (from Schedule RC-D) .......................................... RCFD 3548 60,855 15.b. 16. Other borrowed money: /////////////////////// a. WITH A REMAINING MATURITY OF ONE YEAR OR LESS ..................................... RCFD 2332 304,551 16.a. b. WITH A REMAINING MATURITY OF MORE THAN ONE YEAR ................................... RCFD 2333 631,435 16.b. 17. Mortgage indebtedness and obligations under capitalized leases ....................... RCFD 2910 11,267 17. 18. Bank's liability on acceptances executed and outstanding ............................. RCFD 2920 6,380 18. 19. Subordinated notes and debentures .................................................... RCFD 3200 1,213,219 19. 20. Other liabilities (from Schedule RC-G) ............................................... RCFD 2930 1,506,854 20. 21. Total liabilities (sum of items 13 through 20) ....................................... RCFD 2948 42,061,681 21. /////////////////////// 22. Limited-life preferred stock and related surplus ..................................... RCFD 3282 0 22. EQUITY CAPITAL /////////////////////// 23. Perpetual preferred stock and related surplus ........................................ RCFD 3838 125,000 23. 24. Common stock ......................................................................... RCFD 3230 19,487 24. 25. Surplus (exclude all surplus related to preferred stock) ............................. RCFD 3839 2,551,927 25. 26. a. Undivided profits and capital reserves ............................................ RCFD 3632 1,813,664 26.a. b. Net unrealized holding gains (losses) on available-for-sale securities ............ RCFD 8434 9,034 26.b. 27. Cumulative foreign currency translation adjustments .................................. RCFD 3284 0 27. 28. Total equity capital (sum of items 23 through 27) .................................... RCFD 3210 4,519,112 28. 29. Total liabilities, limited-life preferred stock, and equity capital /////////////////////// (sum of items 21, 22, and 28)......................................................... RCFD 3300 46,580,793 29. Memorandum TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION. 1. Indicate in the box at the right the number of the statement below that best describes the Number most comprehensive level of auditing work performed for the bank by independent external --------------------- auditors as of any date during 1995 .................................................. RCFD 6724 N/A M.1. ---------------------
1 - Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the bank 2 - Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately) 3 - Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public accounting firm (may be required by state chartering authority) 4 - Directors' examination of the bank performed by other external auditors (may be required by state chartering authority) 5 - Review of the bank's financial statements by external auditors 6 - Compilation of the bank's financial statements by external auditors 7 - Other audit procedures (excluding tax preparation work) 8 - No external audit work - ------------ (1) Includes total demand deposits and noninterest-bearing time and savings deposits. 12 33
Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address : ONE MONARCH PLACE Page RC-3 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-A--CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS Exclude assets held for trading. -------- C405 (- -------------------------------------- (Column A) (Column B) Consolidated Domestic Bank Offices -------------------------------------- Dollar Amounts in Thousands RCFD BIL MIL THOU RCFD BIL MIL THOU - --------------------------------------------------------------------------------------------------------------------- 1. Cash items in process of collection, unposted debits, and currency and ////////////////// ////////////////// coin ................................................................... 0022 3,548,380 ////////////////// 1. a. Cash items in process of collection and unposted debits.............. ////////////////// 0020 2,693,954 1.a. b. Currency and coin ................................................... ////////////////// 0080 854,426 1.b. 2. Balances due from depository institutions in the U.S.................... ////////////////// 0082 87,601 2. a. U.S. branches and agencies of foreign banks (including their IBFs)... 0083 0 ////////////////// 2.a. b. Other commercial banks in the U.S. and other depository ////////////////// ////////////////// institutions in the U.S. (including their IBFs)...................... 0085 87,676 ////////////////// 2.b. 3. Balances due from banks in foreign countries and foreign central banks.. ////////////////// 0070 12,440 3. a. Foreign branches of other U.S. banks................................. 0073 208 ////////////////// 3.a. b. Other banks in foreign countries and foreign central banks........... 0074 12,491 ////////////////// 3.b. 4. Balances due from Federal Reserve Banks................................. 0090 343,344 0090 343,344 4. 5. Total (sum of items 1 through 4) (total of column A must equal ////////////////// ////////////////// Schedule RC, sum of items 1.a and 1.b).................................. 0010 3,992,099 0010 3,991,765 5. -------------------------------------- ----------------- Memorandum Dollar Amounts in Thousands RCON BIL MIL THOU - --------------------------------------------------------------------------------------------------------------------- 1. Non interest-bearing balances due from commercial banks in the U.S. (included in item 2, ////////////////// column B above) ............................................................................ 0050 71,678 M.1. ------------------ SCHEDULE RC-B--SECURITIES Exclude assets held for trading. -------- C410 (- ------------------------------------------------------------------------------ Held-to-maturity Available-for-sale ------------------------------------------------------------------------------ (Column A) (Column B) (Column C) (Column D) Amortized Cost Amortized Cost Amortized Cost Amortized Cost ------------------------------------------------------------------------------ Dollar Amounts in Thousands RCFD BIL MIL THOU RCFD BIL MIL THOU RCFD BIL MIL THOU RCFD BIL MIL THOU - --------------------------------------------------------------------------------------------------------------------- 1. U.S. Treasury securities......... 0211 250 0213 250 1286 715,535 1287 718,580 1. 2. U.S. Government agency ////////////////// ////////////////// ////////////////// ////////////////// and corporation obligations ////////////////// ////////////////// ////////////////// ////////////////// (exclude mortgage-backed ////////////////// ////////////////// ////////////////// ////////////////// securities): ////////////////// ////////////////// ////////////////// ////////////////// a. Issued by U.S. Govern- ////////////////// ////////////////// ////////////////// ////////////////// ment agencies(2).............. 1289 0 1290 0 1291 0 1293 0 2.a. b. Issued by U.S. ////////////////// ////////////////// ////////////////// ////////////////// Government-sponsored ////////////////// ////////////////// ////////////////// ////////////////// agencies(3)................... 1294 0 1295 0 1297 500 1298 500 2.b. ------------------------------------------------------------------------------ - ------------ (1) Includes equity securities without readily determinable fair values at historical cost in item 6.c, column D. (2) Includes Small Business Administration "Guaranteed Loan Pool Certificates," U.S. Maritime Administration obligations, and Export-Import Bank participation certificates. (3) Includes obligations (other than mortgage-backed securities) issued by the Farm Credit System, the Federal Home Loan Bank System, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, the Financing Corporation, Resolution Funding Corporation, the Student Loan Marketing Association, and the Tennessee Valley Authority.
13 34
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE PAGE RC-4 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-B--Continued Held-to-maturity Available-for-sale --------------------------------------- --------------------------------------- (Column A) (Column B) (Column C) (Column D) Amortized Cost Fair Value Amortized Cost Fair Value(1) ------------------ ------------------ ------------------ ------------------ Dollar Amounts in Thousands RFCD Bil Mil Thou RFCD Bil Mil Thou RFCD Bil Mil Thou RFCD Bil Mil Thou - --------------------------------------------------------------------------------------------------------------------------------- 3. Securities issued by states ////////////////// ////////////////// ////////////////// ////////////////// and political subdivisions in the ////////////////// ////////////////// ////////////////// ////////////////// U.S.: ////////////////// ////////////////// ////////////////// ////////////////// a. General obligations........... 1676 151,418 1677 151,394 1678 0 1679 0 3.a. b. Revenue obligations........... 1681 12,415 1686 12,419 1690 0 1691 0 3.b. c. Industrial development ////////////////// ////////////////// ////////////////// ////////////////// and similar obligations....... 1694 0 1695 0 1696 0 1697 0 3.c. 4. Mortage-backed ////////////////// ////////////////// ////////////////// ////////////////// securities (MBS): ////////////////// ////////////////// ////////////////// ////////////////// a. Pass-through securities ////////////////// ////////////////// ////////////////// ////////////////// (1) Guaranteed by ////////////////// ////////////////// ////////////////// ////////////////// GNMA..................... 1698 0 1699 0 1701 792,519 1702 790,901 4.a.(1) (2) Issued by FNMA ////////////////// ////////////////// ////////////////// ////////////////// and FHLMC................ 1703 0 1705 0 1706 3,163,278 1707 3,176,341 4.a.(2) (3) Other pass-through ////////////////// ////////////////// ////////////////// ////////////////// securities............... 1709 0 1710 0 1711 1 1713 1 4.a.(3) b. Other mortgage-backed ////////////////// ////////////////// ////////////////// ////////////////// securities (include CMOs, ////////////////// ////////////////// ////////////////// ////////////////// REMICs, and stripped ////////////////// ////////////////// ////////////////// ////////////////// MBS): ////////////////// ////////////////// ////////////////// ////////////////// (1.) Issued or guaranteed ////////////////// ////////////////// ////////////////// ////////////////// by FNMA, FHLMC ////////////////// ////////////////// ////////////////// ////////////////// or GNMA................. 1714 0 1715 0 1716 0 1717 0 4.b.(1) (2.) Collateralized ////////////////// ////////////////// ////////////////// ////////////////// by MBS issued or ////////////////// ////////////////// ////////////////// ////////////////// guaranteed by FNMA, ////////////////// ////////////////// ////////////////// ////////////////// FHLMC, or GNMA.......... 1718 0 1719 0 1731 0 1732 0 4.b.(2) (3.) All other mortgage- ////////////////// ////////////////// ////////////////// ////////////////// backed securities....... 1733 0 1734 0 1735 453 1736 453 4.b.(3) 5. Other debt securities: ////////////////// ////////////////// ////////////////// ////////////////// a. Other domestic debt ////////////////// ////////////////// ////////////////// ////////////////// securities................... 1737 0 1738 0 1739 629 1741 621 5.a. b. Foreign debt ////////////////// ////////////////// ////////////////// ////////////////// securities................... 1742 97,307 1743 87,332 1744 0 1746 0 5.b. 6. Equity securities: ////////////////// ////////////////// ////////////////// ////////////////// a. Investments in mutual ////////////////// ////////////////// ////////////////// ////////////////// funds........................ ////////////////// ////////////////// 1747 52,843 1748 52,843 6.a. b. Other equity securities ////////////////// ////////////////// ////////////////// ////////////////// with readily determinable ////////////////// ////////////////// ////////////////// ////////////////// fair values.................. ////////////////// ////////////////// 1749 0 1751 0 6.b. c. All other equity ////////////////// ////////////////// ////////////////// ////////////////// securities(1)................ ////////////////// ////////////////// 1752 218,098 1753 218,098 6.c. 7. Total (sum of items 1 ////////////////// ////////////////// ////////////////// ////////////////// through 6) (total of ////////////////// ////////////////// ////////////////// ////////////////// column A must equal ////////////////// ////////////////// ////////////////// ////////////////// Schedule RC, item 2.a) ////////////////// ////////////////// ////////////////// ////////////////// (total of column D must ////////////////// ////////////////// ////////////////// ////////////////// equal Schedule RC, ////////////////// ////////////////// ////////////////// ////////////////// item 2.b)....................... 1754 261,390 1771 251,395 1772 4,943,856 1773 4,958,338 7. ----------------------------------------------------------------------------------
- ----------- (1) Includes equity securities without readily determinable fair values at historical cost in item 6.c, column D. 14 35
Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address : ONE MONARCH PLACE Page RC-5 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-B--CONTINUED -------- C412 (- ------------------ Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou - ----------------------------------------------------------------------------------------------------------------------- 1. Pledged securities(2).......................................................................... 0416 2,436,831 M.1. 2. Maturity and repricing data for debt securities(2), (3), (4) (excluding those in ////////////////// nonaccrual status): ////////////////// a. Fixed rate debt securities with a remaining maturity of: ////////////////// (1) Three months or less.................................................................... 0343 44,985 M.2.a.(1) (2) Over three months through 12 months..................................................... 0344 105,214 M.2.a.(2) (3) Over one year through five years........................................................ 0345 1,418,544 M.2.a.(3) (4) Over five years ........................................................................ 0346 2,274,468 M.2.a.(4) (5) Total fixed rate debt securities (sum of Memorandum items 2.a(1) through 2.a.(4)........ 0347 3,843,211 M.2.a.(5) b. Floating rate debt securities with a repricing frequency of: ////////////////// (1) Quarterly or more frequently............................................................ 4544 302,855 M.2.b.(1) (2) Annually or more frequently, but less frequently than quarterly......................... 4545 802,642 M.2.b.(2) (3) Every five years or more frequently, but less frequently than annually.................. 4551 79 M.2.b.(3) (4) Less frequently than every five years................................................... 4552 0 M.2.b.(4) (5) Total floating rate debt securities (sum of Memorandum items 2.b.(1) through 2.b.(4))... 4553 1,105,576 M.2.b.(5) c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal total ////////////////// debt securities from Schedule RC-B, sum of items 1 through 5, columns A and D, minus ////////////////// nonaccrual debt securities included in Schedule RC-N, item 9, column C)..................... 0393 4,948,787 M.2.c. 3. Not applicable ////////////////// 4. Held-to-maturity debt securities restructured and in compliance with modified terms (included ////////////////// in Schedule RC-B, items 3 through 5, column A, above).......................................... 5365 0 M.4. 5. Not applicable ////////////////// 6. Floating rate debt securities with a remaining maturity of one year or less(2), (4) (included in ////////////////// Memorandum items 2.b.(1) through 2.b.(4) above)................................................. 5519 4,000 M.6. 7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or ////////////////// trading securities during the calendar year-to-date (report the amortized cost at date of sale ////////////////// or transfer)................................................................................... ////////////////// 8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale ////////////////// accounts in Schedule RC-B, item 4.b): ////////////////// a. Amortized cost.............................................................................. 8780 0 M.8.a. b. Fair value.................................................................................. 8781 0 M.8.b. 9. Structured notes (included in the held-to-maturity and available-for-sale account in ////////////////// Schedule RC-B, items 2, 3, and 5): ////////////////// a. Amortized cost.............................................................................. 8782 0 M.9.a. b. Fair value.................................................................................. 8783 0 M.9.b. - ---------------- (2) Includes held-to-maturity securities at amortized cost and available-for-sale securities at fair value. (3) Exclude equity securities, e.g., investments in mutual funds, Federal Reserve stock, common stock, and preferred stock. (4) Memorandum items 2 and 6 are not applicable to savings banks that must complete supplemental Schedule RC-J.
15 36
Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address : ONE MONARCH PLACE Page RC-6 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-C--LOANS AND LEASE FINANCING RECEIVABLES PART I. LOANS AND LEASES Do not deduct the allowance for loan and lease losses from amounts ------------ reported in this schedule. Report total loans and leases, net of unearned C415 (- income. Exclude assets held for trading. -------------------------------------- (Column A) (Column B) Consolidated Domestic Bank Offices -------------------------------------- Dollar Amounts in Thousands RCFD Bil Mil Thou RFCD Bil Mil Thou - ---------------------------------------------------------------------------------------------------------------------- 1. Loans secured by real estate............................................ 1410 11,606,306 ////////////////// 1. a. Construction and land development.................................... ////////////////// 1415 599,823 1.a. b. Secured by farmland (including farm residential and other ////////////////// ////////////////// improvements)........................................................ ////////////////// 1420 1,990 1.b. c. Secured by 1-4 family residential properties: ////////////////// ////////////////// (1) Revolving, open-end loans secured by 1-4 family residential ////////////////// ////////////////// properties and extended under lines of credit.................... ////////////////// 1797 1,906,776 1.c.(1) (2) All other loans secured by 1-4 family residential properties: ////////////////// ////////////////// (a) Secured by first liens....................................... ////////////////// 5367 4,239,378 1.c.(2)(a) (b) Secured by junior liens...................................... ////////////////// 5368 616,562 1.c.(2)(b) d. Secured by multifamily (5 or more) residential properties............ ////////////////// 1460 473,710 1.d. e. Secured by nonfarm nonresidential properties......................... ////////////////// 1480 3,768,067 1.e. 2. Loans to depository institutions: ////////////////// ////////////////// a. To commercial banks in the U.S. ..................................... ////////////////// 1505 76,227 2.a. (1) To U.S. branches and agencies of foreign banks................... 1506 0 ////////////////// 2.a.(1) (2) To other commercial banks in the U.S. ........................... 1507 76,227 ////////////////// 2.a.(2) b. To other depository institutions in the U.S. ........................ 1517 13,345 1517 13,345 2.b. c. To banks in foreign countries........................................ ////////////////// 1510 928 2.c. (1) To foreign branches of other U.S. banks.......................... 1513 160 ////////////////// 2.c.(1) (2) To other banks in foreign countries.............................. 1516 768 ////////////////// 2.c.(2) 3. Loans to finance agricultural production and other loans to farmers..... 1590 4,351 1590 4,351 3. 4. Commercial and industrial loans: ////////////////// ////////////////// a. To U.S. addressees (domicile)........................................ 1763 12,626,132 1763 12,574,435 4.a. b. To non-U.S. addressees (domicile).................................... 1764 78,513 1764 31,092 4.b. 5. Acceptances of other banks: ////////////////// ////////////////// a. Of U.S. banks........................................................ 1756 0 1756 0 5.a. b. Of foreign banks..................................................... 1757 0 1757 0 5.b. 6. Loans to individuals for household, family, and other personal ////////////////// ////////////////// expenditures (i.e., consumer loans) (includes purchased paper).......... ////////////////// 1975 2,101,041 6. a. Credit cards and related plans (includes check credit and other ////////////////// ////////////////// revolving credit plans).............................................. 2008 94,750 ////////////////// 6.a. b. Other (includes single payment, installment, and all student loans).. 2011 2,006,291 ////////////////// 6.b. 7. Loans to foreign governments and official institutions (including ////////////////// ////////////////// foreign central banks).................................................. 2081 0 2081 0 7. 8. Obligations (other than securities and leases) of states and political ////////////////// ////////////////// subdivisions in the U.S. (includes nonrated industrial development ////////////////// ////////////////// obligations)............................................................ 2107 149,176 2107 149,176 8. 9. Other loans ............................................................ 1563 2,018,484 ////////////////// 9. a. Loans for purchasing or carrying securities (secured and unsecured).. ////////////////// 1545 179,603 9.a. b. All other loans (exclude consumer loans)............................. ////////////////// 1564 1,838,881 9.b. 10. Lease financing receivables (net of unearned income).................... ////////////////// 2165 2,585,933 10. a. Of U.S. addressees (domicile) ....................................... 2182 2,585,933 ////////////////// 10.a. b. Of non-U.S. addressees (domicile).................................... 2183 0 ////////////////// 10.b. 11. LESS: Any unearned income on loans reflected in items 1-9 above......... 2123 0 2123 0 11. 12. Total loans and leases, net of unearned income (sum of items 1 ////////////////// ////////////////// through 10 minus item 11) (total of column A must equal ////////////////// ////////////////// Schedule RC, item 4.a) ................................................. 2122 31,260,436 2122 31,161,318 12. --------------------------------------
16 37
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE PAGE RC-7 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-C--CONTINUED PART I. CONTINUED (Column A) (Column B) Consolidated Domestic Bank Offices Memoranda ------------------ ------------------ Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou - ---------------------------------------------------------------------------------------------------------------------------- 1. Commercial paper included in Schedule RC-C, part I, above........................ 1496 0 1496 0 M.1. 2. Loans and leases restructured and in compliance with modified terms ////////////////// ////////////////// (included in Schedule RC-C, part I, above and not reported as past due ////////////////// ////////////////// or nonaccrual in Schedule RC-N, Memorandum item 1): ////////////////// ////////////////// a. Loans secured by real estate: ////////////////// ////////////////// (1) To U.S. addressees (domicile)............................................. 1687 1,681 M.2.a.(1) (2) To non-U.S. addressees (domicile)......................................... 1689 0 M.2.a.(2) b. All other loans and lease financing receivable (exclude loans to ////////////////// individuals for household, family, and other personal expenditures)........... 8691 0 M.2.b. c. Commercial and industrial loans to and lease financing receivables ////////////////// of non-U.S. addressees (domicile) included in Memorandum item 2.b ////////////////// above......................................................................... 8692 0 M.2.c. 3. Maturity and repricing data for loans and leases(1) (excluding those in ////////////////// nonaccrual status): ////////////////// a. Fixed rate loans with a remaining maturity of: ////////////////// (1) Three months or less...................................................... 0348 690,294 M.3.a.(1) (2) Over three months through 12 months....................................... 0349 566,523 M.3.a.(2) (3) Over one year through five years.......................................... 0356 2,658,468 M.3.a.(3) (4) Over five years........................................................... 0357 5,501,645 M.3.a.(4) (5) Total fixed rate loans and leases (sum of Memorandum ////////////////// items 3.a.(1) through 3.a.(4))............................................ 0358 9,416,930 M.3.a.(5) b. Floating rate loans with a repricing frequency of: ////////////////// (1) Quarterly or more frequently.............................................. 4554 17,235,629 M.3.b.(1) (2) Annually or more frequently, but less frequently than quarterly........... 4555 3,186,865 M.3.b.(2) (3) Every five years or more frequently, but less frequently than ////////////////// annually.................................................................. 4561 977,978 M.3.b.(3) (4) Less frequently than every five years..................................... 4564 129,282 M.3.b.(4) (5) Total floating rate loans (sum of Memorandum items 3.b.(1) ////////////////// through 3.b.(4)........................................................... 4567 21,529,754 M.3.b.(5) c. Total loans and leases (sum of Memorandum items 3.a.(5) and ////////////////// 3.b.(5)) (must equal the sum of total loans and leases, net, from ////////////////// Schedule RC-C, part I, item 12, plus unearned income from ////////////////// Schedule RC-C, part I, item 11, minus total nonaccrual loans and ////////////////// leases from Schedule RC-N, sum of items 1 through 8, column C)................ 1479 30,946,684 M.3.c. d. FLOATING RATE LOANS WITH A REMAINING MATURITY OF ONE YEAR OR LESS ////////////////// (INCLUDED IN MEMORANDUM ITEMS 3.b.(1) THROUGH 3.b.(4) ABOVE).................. A246 0 M.3.d. 4. Loans to finance commercial real estate, construction, and land ////////////////// development activities (NOT SECURED BY REAL ESTATE) included in ////////////////// Schedule RC-C, part I, items 4 and 9, column A, page RC-6(2)..................... 2746 335,734 M.4. 5. Loans and leases held for sale (included in Schedule RC-C, part I, ////////////////// above)........................................................................... 5369 0 M.5. 6. Adjustable rate closed-end loans secured by first liens on 1-4 family ////////////////// residential properties (included in Schedule RC-C, part I, item 1.c.(2)(a), ////////////////// RCON Bil Mil Thou column B, page RC-6)............................................................. ////////////////// 5370 1,841,822 M.6.
(1) Memorandum item 3 is not applicable to savings banks that must complete supplemental Schedule RC-J. (2) Exclude loans secured by real estate that are included in RC-C, part I, item 1, column A. 17 38
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE PAGE RC-8 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-D--TRADING ASSETS AND LIABILITIES Schedule RC-D is to be completed only by banks with $1 billion or more in total assets or with $2 billion or more in par/notional amount of off-balance sheet derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e, columns A through D). --------- C420 (- ---------------------- Dollar Amounts in Thousands //////// Bil Mil Thou - ----------------------------------------------------------------------------------------------------------------------------------- ASSETS ////////////////////// 1. U.S. Treasury securities in domestic offices............................................. RCON 3531 0 1. 2. U.S. Government agency and corporation obligations in domestic offices (exclude mortgage- ////////////////////// backed securities)....................................................................... RCON 3532 0 2. 3. Securities issued by states and political subdivisions in the U.S. in domestic offices... RCON 3533 0 3. 4. Mortgage-backed securities (MBS) in domestic offices: ////////////////////// a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA.................. RCON 3534 0 4.a. b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA ////////////////////// (include CMOs, REMICs, and stripped MBS).............................................. RCON 3535 0 4.b. c. All other mortgage-backed securities.................................................. RCON 3536 0 4.c. 5. Other debt securities in domestic offices................................................ RCON 3537 0 5. 6. Certificates of deposit in domestic offices.............................................. RCON 3538 0 6. 7. Commercial paper in domestic offices..................................................... RCON 3539 0 7. 8. Bankers acceptances in domestic offices.................................................. RCON 3540 0 8. 9. Other trading assets in domestic offices................................................. RCON 3541 0 9. 10. Trading assets in foreign offices........................................................ RCFN 3542 0 10. 11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity ////////////////////// contracts: ////////////////////// a. In domestic offices................................................................... RCON 3543 64,043 11.a. b. In foreign offices.................................................................... RCFN 3544 9,290 11.b. 12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5)........ RCFD 3545 73,333 12.
LIABILITIES //////// Bil Mil Thou ---------------------- 13. Liability for short positions............................................................ RFCD 3546 0 13. 14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and ////////////////////// equity contracts......................................................................... RFCD 3547 60,855 14. 15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b)... RCFD 3548 60,855 15.
18 39
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: One Monarch Place Page RC-9 City, State Zip: Springfield, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-E--DEPOSIT LIABILITIES PART I. DEPOSITS IN DOMESTIC OFFICES -------------- C425 -------------- Nontransaction Transactions Accounts Accounts --------------------------------------------------------------- (Column A) (Column B) (Column C) Total transaction Memo: Total Total accounts (including demand deposits nontransaction total demand (included in accounts deposits) column A) (including MMDAs) ---------------------------------------------------------------- Dollar Amounts in Thousands RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou - --------------------------------------------------------------------------------------------------------------------------- Deposits of: ////////////////// ////////////////// ////////////////// 1. Individuals, partnerships, and corporations..... 2201 8,925,633 2240 8,417,538 2346 21,118,482 1. 2. U.S. Government................................. 2202 170,644 2280 170,617 2520 5,680 2. 3. States and political subdivisions in the U.S.... 2203 531,934 2290 508,362 2530 777,806 3. 4. Commercial banks in the U.S..................... 2206 836,406 2310 836,406 2550 397 4. 5. Other depository institutions in the U.S........ 2207 223,383 2312 223,383 2349 2,868 5. 6. Banks in foreign countries...................... 2213 23,850 2320 23,850 2236 0 6. 7. Foreign governments and official institutions ////////////////// ////////////////// ////////////////// (including foreign central banks)............... 2216 0 2300 0 2377 0 7. 8. Certified and official checks................... 2330 175,075 2330 175,075 ////////////////// 8. 9. Total (sum of items 1 through 8) (sum of columns ////////////////// ////////////////// ////////////////// A and C must equal Schedule RC, item 13.a....... 2215 10,886,925 2210 10,355,231 2385 21,905,233 9. ----------------------------------------------------------------
Memoranda Dollar Amounts in Thousands RCON Bil Mil Thou - ---------------------------------------------------------------------------------------------------------------------- 1. Selected components of total deposits (i.e., sum of item 9, columns A and C): ////////////////// a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts.................... 6835 2,607,397 M.1.a. b. Total brokered deposits................................................................ 2365 1,415,235 M.1.b. c. Fully insured brokered deposits (included in Memorandum item 1.b above): ////////////////// (1) Issued in denominations of less than $100,,000.................................... 2343 2,240 M.1.c.(1) (2) Issued EITHER in denominations of $100,000 OR in denominations greater than ////////////////// $100,000 and participated out by the broker in shares of $100,000 or less......... 2344 1,412,995 M.1.c.(2) D. MATURITY DATA FOR BROKERED DEPOSITS: ////////////////// (1) BROKERED DEPOSITS ISSUED IN DENOMINATIONS OF LESS THAN $100,000 WITH A REMAINING ////////////////// MATURITY OF ONE YEAR OR LESS (INCLUDED IN MEMORANDUM ITEM 1.C.(1) ABOVE).......... A243 20 M.1.d.(1) (2) BROKERED DEPOSITS ISSUED IN DENOMINATIONS OF $100,000 OR MORE WITH A REMAINING ////////////////// MATURITY OF ONE YEAR OR LESS (INCLUDED IN MEMORANDUM ITEM 1.B ABOVE).............. A244 584,547 M.1.d.(2) e. Preferred deposits (uninsured deposits of states and political subdivisions in the ////////////////// U.S. reported in item 3 above which are secured or collateralized as required under ////////////////// state law)............................................................................. 5590 346,573 M.1.e. 2. Components of total nontransaction accounts (sum of Memorandum items 2.a through 2.d ////////////////// must equal item 9, column C above): ////////////////// a. Savings deposits: ////////////////// (1) Money market deposit accounts (MMDAs)............................................. 6810 10,252,364 M.2.a.(1) (2) Other savings deposits (excludes MMDAs).......................................... 0352 2,397,861 M.2.a.(2) b. Total time deposits of less than $100,000.............................................. 6648 6,781,917 M.2.b. c. Time certificates of deposit of $100,000 or more....................................... 6645 2,473,091 M.2.c. d. Open-account time deposits of $100,000 or more......................................... 6646 0 M.2.d. 3. All NOW accounts (included in column A above).............................................. 2398 531,694 M.3. 4. Not applicable
19 40
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK 25-0590 FFIEC 031 Address: ONE MONARCH PLACE PAGE RC-10 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-E--CONTINUED PART I. CONTINUED Memoranda (continued) ------------------ Dollar Amounts in Thousands RCON Bil Mil Thou - ------------------------------------------------------------------------------------------------------------------ 5. Maturity and repricing data for time deposits of less than $100,000 (sum of ////////////////// Memorandum items 5.a.(1) through 5.b.(3) must equal Memorandum item 2.b above):(1) ////////////////// a. Fixed rate time deposits of less than $100,000 with a remaining maturity of: ////////////////// (1) Three months or less .............................................................. A225 1,722,551 M.5.a.(1) (2) Over three months through 12 months ............................................... A226 3,024,143 M.5.a.(2) (3) Over one year ..................................................................... A227 1,975,207 M.5.a.(3) b. Floating rate time deposits of less than $100,000 with a repricing frequency of: ////////////////// (1) Quarterly or more frequently ...................................................... A228 60,016 M.5.b.(1) (2) Annually or more frequently, but less frequently than quarterly ................... A229 0 M.5.b.(2) (3) Les frequently than annually ...................................................... A230 0 M.5.b.(3) c. Floating rate time deposits of less than $100,000 with a remaining maturity of ////////////////// one year or less (included in Memorandum items 5.b.(1) through 5.b.(3) above) ......... A231 39,531 M.5.c. 6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time certificates ////////////////// of deposit of $100,000 or more and open-account time deposits of $100,000 or more) ////////////////// (sum of Memorandum items 6.a.(1) through 6.b.(4) must equal the sum of Memorandum ////////////////// items 2.c and 2.d above): (1) ////////////////// a. Fixed rate time deposits of $100,000 or more with a remaining maturity of: ////////////////// (1) Three months or less .............................................................. A232 720,549 M.6.a.(1) (2) Over three months through 12 months ............................................... A233 695,947 M.6.a.(2) (3) Over one year through five years .................................................. A234 1,014,722 M.6.a.(3) (4) Over five years ................................................................... A235 8,868 M.6.a.(4) b. Floating rate time deposits of $100,000 or more with a repricing frequency of: ////////////////// (1) Quarterly or more frequently ...................................................... A236 33,005 M.6.b.(1) (2) Annually or more frequently, but less frequently than quarterly ................... A237 0 M.6.b.(2) (3) Every five years or more frequently, but less frequently than annually ............ A238 0 M.6.b.(3) (4) Less frequently than every five years ............................................. A239 0 M.6.b.(4) c. Floating rate time deposits of $100,000 or more with a remaining maturity of ////////////////// one year or less (included in Memorandum items 6.b.(1) through 6.b.(4) above).......... A240 1,896 M.6.c. ------------------
- ------------ (1) Memorandum items 5 and 6 are not applicable to savings banks that must complete supplemental Schedule RC-J. 20 41
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE Page RC-11 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-E--CONTINUED PART II. DEPOSITS IN FOREIGN OFFICES (INCLUDING EDGE AND AGREEMENT SUBSIDIARIES AND IBFS) ------------------ Dollar Amounts in Thousands RCFN Bil Mil Thou - --------------------------------------------------------------------------------------------------------------- Deposits of: ////////////////// 1. Individuals, partnerships, and corporations.......................................... 2621 2,410,097 1. 2. U.S. banks (including IBFs and foreign branches of U.S. banks)....................... 2623 0 2. 3. Foreign banks (including U.S. branches and agencies of foreign banks, including their IBFs).......................................................................... 2625 0 3. 4. Foreign governments and official institutions (including foreign central banks)...... 2650 0 4. 5. Certified and official checks........................................................ 2330 0 5. 6. All other deposits................................................................... 2668 4,330 6. 7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b)................. 2200 2,414,427 7.
------------------ Memorandum Dollar Amounts in Thousands RCFN Bil Mil Thou - --------------------------------------------------------------------------------------------------------------- 1. TIME DEPOSITS WITH A REMAINING MATURITY OF ONE YEAR OR LESS (INCLUDED IN PART II, ////////////////// ITEM 7 ABOVE)........................................................................ A245 2,414,425 M.1.
SCHEDULE RC-F--OTHER ASSETS
--------- C430 ----------------------- Dollar Amounts in Thousands ////////// Bil Mil Thou - -------------------------------------------------------------------------------------------------------------------- 1. Income earned, not collected on loans................................................ RCFD 2164 243,319 1. 2. Net deferred tax assets (1).......................................................... RCFD 2148 0 2. 3. Excess residential mortgage servicing fees receivable................................ RCFD 5371 173,148 3. 4. Other (itemize and describe amounts that exceed 25% of this item).................... RCFD 2168 3,491,222 4. --------- -------------------- a. TEXT 3549 MORTGAGE HELD FOR RESALE RCFD 3549 1,517,133 /////////////////////// 4.a. ------------------------------------------------------------- b. TEXT 3550 RCFD 3550 /////////////////////// 4.b. ------------------------------------------------------------- c. TEXT 3551 RCFD 3551 /////////////////////// 4.c. ------------------------------------------------------------- 5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11)................... RCFD 2160 3,907,689 5. -----------------------
------------------------- Memorandum Dollar Amounts in Thousands //////////// Bil Mil Thou - --------------------------------------------------------------------------------------------------------------- 1. Deferred tax assets disallowed for regulatory capital purposes.................. RFCD 5610 0 M.1.
SCHEDULE RC-G--OTHER LIABILITIES
----------- C435 ------------------------ Dollar Amounts in thousands ////////// Bil Mil Thou - --------------------------------------------------------------------------------------------------------------------- 1. a. Interest accrued and unpaid on deposits in domestic offices (2).................... RCON 3645 50,636 1.a. b. Other expenses accrued and unpaid (includes accrued income taxes payable)......... RCFD 3646 509,357 1.b. 2. Net deferred tax liabilities(1)....................................................... RCFD 3049 434,426 2. 3. Minority interest in consolidated subsidiaries........................................ RCFD 3000 0 3. 4. Other (itemize and describe amounts that exceed 25% of this item)..................... RCFD 2938 512,435 4. --------- a. TEXT 3552 RCFD 3552 /////////////////////// 4.a. ------------------------------------------------------------- b. TEXT 3553 RCFD 3553 /////////////////////// 4.b. ------------------------------------------------------------- c. TEXT 3554 RCFD 3554 /////////////////////// 4.c. ------------------------------------------------------------- 5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20).................... RCFD 2930 1,506,854 5.
- ---------------- (1) See discussion of deferred income taxes in Glossary entry on "income taxes." (2) For savings banks, include "dividends" accrued and unpaid on deposits. 21 42
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE Page RC-12 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] --------------- SCHEDULE RC-H--SELECTED BALANCE SHEET ITEMS FOR DOMESTIC OFFICES C440 ------------------ Domestic Offices ------------------ Dollar Amounts in Thousands RCON Bil Mil Thou - --------------------------------------------------------------------------------------------------------------- 1. Customers' liability to this bank on acceptances outstanding......................... 2155 6,380 1. 2. Bank's liability on acceptances executed and outstanding............................. 2920 6,380 2. 3. Federal funds sold and securities purchased under agreements to resell............... 1350 25,709 3. 4. Federal funds purchased and securities sold under agreements to repurchase........... 2800 3,118,142 4. 5. Other borrowed money................................................................. 3190 935,986 5. EITHER ////////////////// 6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs.......... 2163 N/A 6. OR ////////////////// 7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs............ 2941 2,311,663 7. 8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, ////////////////// and IBFs)............................................................................ 2192 46,468,505 8. 9. Total liabilities (excludes net due to foreign offices, Edge and Agreement ////////////////// subsidiaries, and IBFs).............................................................. 3129 39,637,730 9. ITEMS 10-17 INCLUDE HELD-TO-MATURITY AND AVAILABLE-FOR-SALE SECURITIES IN DOMESTIC OFFICES.
------------------ RCON Bil Mil Thou ------------------ 10. U.S. Treasury securities............................................................. 1779 718,830 10. 11. U.S. Government agency and corporation obligations (exclude mortgage-backed ////////////////// securities).......................................................................... 1785 500 11. 12. Securities issued by states and political subdivisions in the U.S.................... 1786 163,833 12. 13. Mortgage-backed securities (MBS): ////////////////// a. Pass-through securities: ////////////////// (1) Issued or guaranteed by FNMA, FHLMC, OR GNMA................................ 1787 3,967,242 13.a.(1) (2) Other pass-through securities............................................... 1869 1 13.a.(2) b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): ////////////////// (1) Issued or guaranteed by FNMA, FHLMC, or GNMA................................ 1877 0 13.b.(1) (2) All other mortgage-backed securities........................................ 2253 453 13.b.(2) 14. Other domestic debt securities....................................................... 3159 621 14. 15. Foreign debt securities.............................................................. 3160 97,307 15. 16. Equity securities: ////////////////// a. Investments in mutual funds...................................................... 3161 52,843 16.a. b. Other equity securities with readily determinable fair values.................... 3162 0 16.b. c. All other equity securities...................................................... 3169 218,098 16.c. 17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) 3170 5,219,728 17.
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
------------------ Dollar Amounts in Thousands RCON Bil Mil Thou - --------------------------------------------------------------------------------------------------------------- EITHER ////////////////// 1. Net due from the IBF of the domestic offices of the reporting bank................... 3051 0 M.1. OR ////////////////// 2. Net due to the IBF of the domestic offices of the reporting bank..................... 3059 N/A M.2.
22 43
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: One Monarch Place Page RC-13 City, State Zip: Springfield, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-I--SELECTED ASSETS AND LIABILITIES OF IBFs C445 ------------------ Dollar Amounts in Thousands RCFN Bil Mil Thou - --------------------------------------------------------------------------------------------------------------- 1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12)........ 2133 0 1. 2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, ////////////////// item 12, column A)................................................................... 2076 0 2. 3. IBF commercial and industrial loans (component of Schedule RC-C, part I, ////////////////// item 4, column A).................................................................... 2077 0 3. 4. Total IBF liabilities (component of Schedule RC, item 21)............................ 2898 0 4. 5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule ////////////////// RC-E, part II, items 2 and 3)........................................................ 2379 0 5. 6. Other IBF deposit liabilities (component of Schedule RC-E, part II, ////////////////// items 1,4,5, and 6................................................................... 2381 0 6.
SCHEDULE RC-K--QUARTERLY AVERAGES (1) C455 ------------------ Dollar Amounts in Thousands ///////// Bil Mil Thou - --------------------------------------------------------------------------------------------------------------- ASSETS /////////////////////// 1. Interest-bearing balances due from depository institutions...................... RCFD 3381 28,972 1. 2. U.S. Treasury securities and U.S. Government agency and corporation obligations (2)................................................................. RCFD 3382 5,849,801 2. 3. Securities issued by states and political subdivisions in the U.S. (2).......... RCFD 3383 171,480 3. 4. a. Other debt securities (2)................................................... RCFD 3647 98,635 4.a. b. Equity securities (3) (includes investments in mutual funds and Federal /////////////////////// Reserve stock).................................................................. RCFD 3648 290,211 4.b. 5. Federal funds sold and securities purchased under agreements to resell in /////////////////////// domestic offices of the bank and of its Edge and Agreement subsidiaries, and in /////////////////////// IBFs............................................................................ RCFD 3365 34,073 5. 6. Loans: a. Loans in domestic offices: (1) Total loans............................................................ RCON 3360 28,772,871 6.a.(1) (2) Loans secured by real estate........................................... RCON 3385 11,782,561 6.a.(2) (3) Loans to finance agricultural production and other loans to /////////////////////// farmers................................................................ RCON 3386 4,568 6.a.(3) (4) Commercial and industrial loans........................................ RCON 3387 12,208,378 6.a.(4) (5) Loans to individuals for household, family, and other personal /////////////////////// expenditures........................................................... RCON 3388 2,106,517 6.a.(5) b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs... RCFN 3360 93,116 6.b. 7. Trading assets.................................................................. RCFD 3401 70,398 7. 8. Lease financing receivables (net of unearned income)............................ RCFD 3484 2,414,362 8. 9. Total assets(4)................................................................. RCFD 3368 47,043,625 9. LIABILITIES 10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS /////////////////////// accounts, and telephone and preauthorized transfer accounts) (exclude demand /////////////////////// deposits)....................................................................... RCON 3485 554,831 10. 11. Nontransaction accounts in domestic offices: /////////////////////// a. Money market deposit accounts (MMDAs)....................................... RCON 3486 10,212,141 11.a. b. Other savings deposits...................................................... RCON 3487 2,477,260 11.b. c. Time certificates of deposit of $100,000 or more............................ RCON 3345 2,533,067 11.c. d. All other time deposits..................................................... RCON 3469 6,982,619 11.d. 12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, /////////////////////// and IBFs........................................................................ RCFN 3404 2,117,139 12. 13. Federal funds purchased and securities sold under agreements to repurchase in /////////////////////// domestic offices of the bank and of its Edge and Agreement subsidiaries, and in /////////////////////// IBFs............................................................................ RCFD 3353 4,817,518 13. 14. Other borrowed money............................................................ RCFD 3355 985,125 14. - --------------- (1) For all items, banks have the option of reporting either (1) an average of daily figures for the quarter, or (2) an average of weekly figures (i.e., the Wednesday of each week of the quarter). (2) Quarterly averages for all debt securities should be based on amortized cost. (3) Quarterly averages for all equity securities should be based on historical cost. (4) The quarterly average for total assets should reflect all debt securities (not held for trading) at amortized cost, equity securities with readily determinable fair values at the lower of cost or fair value, and equity securities without readily determinable fair values at historical cost.
23 44
Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address : ONE MONARCH PLACE Page RC-14 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-L--OFF BALANCE SHEET ITEMS Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk. C460 Dollar Amounts in Thousands RCFD BIL MIL THOU - ----------------------------------------------------------------------------------------------------------------------- 1. Unused commitments: ////////////////// a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home equity ////////////////// lines....................................................................................... 3814 2,159,101 1.a. b. Credit card lines........................................................................... 3815 37,038 1.b. c. Commercial real estate, construction, and land development: ////////////////// (1) Commitments to fund loans secured by real estate........................................ 3816 538,163 1.c.(1) (2) Commitments to fund loans not secured by real estate.................................... 6550 513,346 1.c.(2) d. Securities underwriting..................................................................... 3817 0 1.d. e. Other unused commitments.................................................................... 3818 20,572,462 1.e. 2. Financial standby letters of credit and foreign office guarantees.............................. 3819 2,322,445 2. -------------------- a. Amount of financial standby letters of credit conveyed to others RCFD 3820 89,650 ////////////////// 2.a. -------------------- 3. Performance standby letters of credit and foreign office guarantees............................ 3821 179,230 3. -------------------- a. Amount of performance standby letters of credit conveyed to others RCFD 3822 6,004 ////////////////// 3.a. -------------------- 4. Commercial and similar letters of credit....................................................... 3411 137,503 4. 5. Participations in acceptances (as described in the instructions) conveyed to others by the ////////////////// reporting bank................................................................................. 3428 112 5. 6. Participations in acceptances (as described in the instructions) acquired by the reporting ////////////////// (nonaccepting) bank............................................................................ 3429 12,837 6. 7. Securities borrowed............................................................................ 3432 0 7. 8. Securities lent (including customers' securities lent where the customer is indemnified against ////////////////// loss by the reporting bank).................................................................... 3433 965,792 8. 9. Loans transferred (i.e., sold or swapped) with recourse that have been treated as sold for ////////////////// Call Report purposes: ////////////////// a. FNMA and FHLMC residential mortgage loan pools: ////////////////// (1) Outstanding principal balance of mortgages transferred as or the report date............ 3650 298,423 9.a.(1) (2) Amount of recourse exposure on these mortgages as of the report date.................... 3651 298,423 9.a.(2) b. Private (nongovernment-issued or guaranteed) residential mortgage loan pools: ////////////////// (1) Outstanding principal balance of mortgages transferred as of the report date............ 3652 289,942 9.b.(1) (2) Amount of recourse exposure on these mortgages as of the report date.................... 3653 289,942 9.b.(2) c. Farmer Mac agricultural mortgage loan pools: ////////////////// (1) Outstanding principal balance of mortgages transferred as of the report date............ 3654 0 9.c.(1) (2) Amount of recourse exposure on these mortgages as of the report date.................... 3655 0 9.c.(2) d. Small business obligations transferred with recourse under Section 208 of the ////////////////// Riegle Community Development and Regulatory improvement Act of 1994: ////////////////// (1) Outstanding principal balance of small business obligations transferred ////////////////// as of the report date................................................................... A249 0 9.d.(1) (2) Amount of retained recourse on these obligations as of the report date.................. A250 0 9.d.(2) 10. When-issued securities: ////////////////// a. Gross commitments to purchase............................................................... 3434 0 10.a b. Gross commitments to sell................................................................... 3435 0 10.b. 11. Spot foreign exchange contracts................................................................ 8765 487,442 11. 12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize and ////////////////// describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") 3430 0 12. ------------------------------------------------------------------------------------------- ////////////////// a. TEXT 3555 ........................................................ RCFD 3555 ////////////////// 12.a. b. TEXT 3556 ........................................................ RCFD 3556 ////////////////// 12.b. c. TEXT 3557 ........................................................ RCFD 3557 ////////////////// 12.c. d. TEXT 3558 ........................................................ RCFD 3558 ////////////////// 12.d. ---------------------------------------------------------------------------------------------------------------
24 45
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE PAGE RC-15 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-L--CONTINUED Dollar Amounts in Thousands RCFD Bil Mil Thou - ---------------------------------------------------------------------------------------------------------------------- 13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and ////////////////// describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") 5591 0 13. --------- ------------------------------ ////////////////// a. TEXT 5592 RCFD 5592 ////////////////// 13.a. b. TEXT 5593 RCFD 5593 ////////////////// 13.b. c. TEXT 5594 RCFD 5594 ////////////////// 13.c. d. TEXT 5595 RCFD 5595 ////////////////// 13.d. -------------------------------------------------------------------------------------------------------------- C461 <- ----------------- ----------------- ----------------- ------------------ (Column A) (Column B) (Column C) (Column D) Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and - ---------------------------------------- Contracts Contracts Contracts Other Contracts Off-balance Sheet Derivatives ----------------- ----------------- ----------------- ------------------ Position Indicators Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou ---------------------------------------- ----------------- ----------------- ----------------- ------------------ C> 14. Gross amounts (e.g., notional ///////////////// ///////////////// ///////////////// ///////////////// amounts) (for each column, sum of ///////////////// ///////////////// ///////////////// ///////////////// items 14.a through 14.e must equal ///////////////// ///////////////// ///////////////// ///////////////// sum of items 15, 16.a, and 16.b): ///////////////// ///////////////// ///////////////// ///////////////// ----------------- ----------------- ----------------- ----------------- a. Futures contracts ................ 0 0 0 39,037 14.a ----------------- ----------------- ----------------- ----------------- RCFD 8693 RCFD 8694 RCFD 8695 RCFD 8696 ----------------- ----------------- ----------------- ----------------- b. Forward contracts ................ 2,684,800 2,284,466 0 45,604 14.b ----------------- ----------------- ----------------- ----------------- RCFD 8697 RCFD 8698 RCFD 8699 RCFD 8700 ----------------- ----------------- ----------------- ----------------- c. Exchange-traded option contracts: ///////////////// ///////////////// ///////////////// ///////////////// ----------------- ----------------- ----------------- ----------------- (1) Written options .............. 225,000 0 0 0 14.c.(1) ----------------- ----------------- ----------------- ----------------- RCFD 8701 RCFD 8702 RCFD 8703 RCFD 8704 ----------------- ----------------- ----------------- ----------------- (2) Purchased options ............ 1,276,400 0 0 1,245 14.c.(2) ----------------- ----------------- ----------------- ----------------- RCFD 8705 RCFD 8706 RCFD 8707 RCFD 8708 ----------------- ----------------- ----------------- ----------------- d. Over-the-counter option contracts: ///////////////// ///////////////// ///////////////// ///////////////// ----------------- ----------------- ----------------- ----------------- (1) Written options .............. 5,051,792 5,200 0 0 14.d.(1) ----------------- ----------------- ----------------- ----------------- RCFD 8709 RCFD 8710 RCFD 8711 RCFD 8712 ----------------- ----------------- ----------------- ----------------- (2) Purchased options ............ 19,427,829 5,200 0 0 14.d.(2) ----------------- ----------------- ----------------- ----------------- RCFD 8713 RCFD 8714 RCFD 8715 RCFD 8716 ----------------- ----------------- ----------------- ----------------- e. Swaps ............................ 24,549,614 0 0 0 14.e ----------------- ----------------- ----------------- ----------------- RCFD 3450 RCFD 3826 RCFD 8719 RCFD 8720 ----------------- ----------------- ----------------- ----------------- 15. Total gross notional amount of ///////////////// ///////////////// ///////////////// ///////////////// derivative contracts held for trading. 5,289,505 2,294,866 0 l,245 15 ----------------- ----------------- ----------------- ----------------- RCFD A126 RCFD A127 RCFD 8723 RCFD 8724 ----------------- ----------------- ----------------- ----------------- l6. Total gross notional amount of ///////////////// ///////////////// ///////////////// ///////////////// derivative contracts held for ///////////////// ///////////////// ///////////////// ///////////////// purposes other than trading: ///////////////// ///////////////// ///////////////// ///////////////// ----------------- ----------------- ----------------- ----------------- a. Contracts marked to market ...... 4,239,800 0 0 39,037 16.a. ----------------- ----------------- ----------------- ----------------- RCFD 8725 RCFD 8726 RCFD 8727 RCFD 8728 ----------------- ----------------- ----------------- ----------------- b. Contracts not marked to market .. 43,686,130 0 0 45,604 16.b. ----------------- ----------------- ----------------- ----------------- RCFD 8729 RCFD 8730 RCFD 8731 RCFD 8732 ----------------- ----------------- ----------------- -----------------
25 46
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE PAGE RC-16 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-L--CONTINUED (Column A) (Column B) (Column C) (Column D) Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and Off-balance Sheet Derivatives Contracts Contracts Contracts Other Contracts Position Indicators ------------------ ------------------ ------------------ ------------------ RFCD Bil Mil Thou RFCD Bil Mil Thou RFCD Bil Mil Thou RFCD Bil Mil Thou - ------------------------------------------------------------------------------------------------------------------------ 17. Gross fair values of ////////////////// ////////////////// ////////////////// ////////////////// derivative contracts: ////////////////// ////////////////// ////////////////// ////////////////// a. Contracts held for ////////////////// ////////////////// ////////////////// ////////////////// trading: ////////////////// ////////////////// ////////////////// ////////////////// (1) Gross positive ////////////////// ////////////////// ////////////////// ////////////////// fair value................ 8733 31,626 8734 41,468 8736 0 8736 59 17.a.(1) (2) Gross negative ////////////////// ////////////////// ////////////////// ////////////////// fair value................ 8737 22,099 8738 38,756 8739 0 8740 0 17.a.(2) b. Contracts held for ////////////////// ////////////////// ////////////////// ////////////////// purposes other than ////////////////// ////////////////// ////////////////// ////////////////// trading that are marked ////////////////// ////////////////// ////////////////// ////////////////// to market: ////////////////// ////////////////// ////////////////// ////////////////// (1) Gross positive ////////////////// ////////////////// ////////////////// ////////////////// fair value................ 8741 2,258 8742 0 8743 0 8744 1,698 17.b.(1) (2) Gross negative ////////////////// ////////////////// ////////////////// ////////////////// fair value................ 8745 1,417 8746 0 8747 0 8748 0 17.b.(2) c. Contracts held for ////////////////// ////////////////// ////////////////// ////////////////// purposes other than ////////////////// ////////////////// ////////////////// ////////////////// trading that are not ////////////////// ////////////////// ////////////////// ////////////////// marked to market: ////////////////// ////////////////// ////////////////// ////////////////// (1) Gross positive ////////////////// ////////////////// ////////////////// ////////////////// fair value................ 8749 165,643 8750 0 8751 0 8752 169 17.c.(1) (2) Gross negative ////////////////// ////////////////// ////////////////// ////////////////// fair value................ 8737 76,308 8754 0 8755 0 8756 0 17.c.(2) ---------------------------------------------------------------------------------
Memoranda Dollar Amounts in Thousands RFCD Bil Mil Thou - ------------------------------------------------------------------------------------------------------------------------ 1.-2. Not applicable ////////////////// 3. Unused commitments with an original maturity exceeding one year that are reported in ////////////////// Schedule RC-L, items 1.a through 1.e, above (report only the unused portions of commitments ////////////////// that are fee paid or otherwise legally binding).................................................. 3833 18,552,873 M.3. a. Participations in commitments with an original maturity ////////////////// exceeding one year to be conveyed to others......................... RCFD 3834 | 1,789,549 ////////////////// M.3.a. 4. To be completed only by banks with $1 billion or more in total assets: ////////////////// Standby letters of credit and foreign office guarantees (both financial and performance) issued ////////////////// to non-U.S. addresses (domicile) included in Schedule RC-L, items 2 and 3, above................. 3377 360,019 M.4. 5. Installment loans to individuals for household, family, and other personal expenditures that ////////////////// have been securitized and sold without recourse (with servicing retained), amounts outstanding ////////////////// by type of loan: ////////////////// a. Loans to purchase private passenger automobiles (TO BE COMPLETED FOR THE ////////////////// SEPTEMBER REPORT ONLY)........................................................................ 2741 N/A M.5.a. b. Credit cards and related plans (TO BE COMPLETED QUARTERLY).................................... 2742 0 M.5.b. c. All other consumer installment credit (including mobile home loans)(TO BE COMPLETED FOR THE ////////////////// SEPTEMBER REPORT ONLY)........................................................................ 2743 N/A M.5.c.
26 47
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE PAGE RC-17 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-M--MEMORANDA -------- C465 (- ------------------ Dollar Amounts in Thousands RFCD Bil Mil Thou - ------------------------------------------------------------------------------------------------------------------------- 1. Extensions of credit by the reporting bank to its executive officers, directors, principal ////////////////// shareholders, and their related interests as of the report date: ////////////////// a. Aggregate amount of all extensions of credit to all executive officers, directors, principal ////////////////// shareholders, and their related interests...................................................... 6164 552,349 1.a. b. Number of executive officers, directors, and principal shareholders to whom the amount of ////////////////// all extensions of credit by the reporting bank (including extensions of credit to ////////////////// related interests) equals or exceeds the lesser of $500,000 or 5 percent Number ////////////////// of total capital as defined for this purpose in agency regulations. RFCD 6165 | 20 ////////////////// 1.b. 2. Federal funds sold and securities purchased under agreements to resell with U.S. branches ////////////////// and agencies of FOREIGN BANKS(1) (included in Schedule RC, items 3.a and 3.b)..................... 3405 0 2. 3. Not applicable. ////////////////// 4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others ////////////////// (include both retained servicing and purchased servicing): ////////////////// a. Mortgages serviced under a GNMA contract....................................................... 5500 25,732,152 4.a. b. Mortgages services under a FHLMC contract: ////////////////// (1) Serviced with recourse to servicer......................................................... 5501 48,720 4.b.(1) (2) Serviced without recourse to servicer...................................................... 5502 34,857,978 4.b.(2) c. Mortgages serviced under a FNMA contract: ////////////////// (1) Serviced under a regular option contract................................................... 5503 249,703 4.c.(1) (2) Serviced under a special option contract................................................... 5504 41,105,444 4.c.(2) d. Mortgages serviced under other servicing contracts............................................. 5505 11,267,486 4.d. 5. To be completed only by banks with $1 billion or more in total assets: ////////////////// Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must ////////////////// equal Schedule RC, item 9): ////////////////// a. U.S. addresses (domicile)...................................................................... 2103 6,244 5.a. b. Non-U.S. addresses (domicile).................................................................. 2104 136 5.b. 6. Intangible assets: ////////////////// a. Mortgage servicing rights...................................................................... 3164 1,563,176 6.a. b. Other identifiable intangible assets ////////////////// (1) Purchased credit card relationships........................................................ 5506 0 6.b.(1) (2) All other identifiable intangible assets................................................... 5507 105,984 6.b.(2) c. Goodwill....................................................................................... 3163 647,473 6.c. d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10)......................... 2143 2,316,633 6.d. e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or ////////////////// are otherwise qualifying for regulatory capital purposes....................................... 6442 0 6.e. 7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to ////////////////// redeem the debt................................................................................... 3295 75,000 7.
- ----------------- (1) Do not report federal funds sold and securities purchased under agreements to resell with other commercial banks in the U.S. in this time. 27 48
Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address : ONE MONARCH PLACE Page RC-18 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-M--CONTINUED ------------------ Dollar Amounts in Thousands BIL MIL THOU - ----------------------------------------------------------------------------------------------------------------------- 8. a. Other real estate owned: ///////////////////////// (1) Direct and indirect investments in real estate ventures......................... RCFD 5372 0 8.a.(1) (2) All other real estate owned: ///////////////////////// (a) Construction and land development in domestic offices........................ RCON 5508 332 8.a.(2)(a) (b) Farmland in domestic offices................................................. RCON 5509 0 8.a.(2)(b) (c) 1-4 family residential properties in domestic offices........................ RCON 5510 9,789 8.a.(2)(c) (d) Multifamily (5 or more) residential properties in domestic offices........... RCON 5511 347 8.a.(2)(d) (e) Nonfarm nonresidential properties in domestic offices........................ RCON 5512 8,443 8.a.(2)(e) (f) In foreign offices........................................................... RCFN 5513 0 8.a.(2)(f) (3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7)........ RCFD 2150 18,911 8.a.(3) b. Investments in unconsolidated subsidiaries and associated companies: ///////////////////////// (1) Direct and indirect investments in real estate ventures.......................... RCFD 5374 0 8.b.(1) (2) All other investments in unconsolidated subsidiaries and associated companies.... RCFD 5375 0 8.b.(2) (3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8)........ RCFD 2130 0 8.b.(3) c. TOTAL ASSETS of unconsolidated subsidiaries and associated companies................. RCFD 5376 0 8.c. 9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, ///////////////////////// item 23, "Perpetual preferred stock and related surplus"................................ RCFD 3778 125,000 9. 10. Mutual fund and annuity sales in domestic offices during the quarter (include ///////////////////////// proprietary, private label, and third party products): ///////////////////////// a. Money market funds................................................................... RCON 6441 204,326 10.a. b. Equity securities funds.............................................................. RCON 8427 116,418 10.b. c. Debt securities funds................................................................ RCON 8428 12,837 10.c. d. Other mutual funds................................................................... RCON 8429 0 10.d. e. Annuities............................................................................ RCON 8430 103,868 10.e. f. Sales of proprietary mutual funds and annuities (included in items 10.a. through ///////////////////////// 10.e. above)......................................................................... RCON 8784 302,177 10.f. ------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Memorandum Dollar Amounts in Thousands RCFD Bil Mil Thou - ----------------------------------------------------------------------------------------------------------------------- 1. Interbank holdings of capital instruments (TO BE COMPLETED FOR THE DECEMBER REPORT ONLY): ////////////////// a. Reciprocal holdings of banking organizations' capital instruments........................... 3836 0 M.1.a. b. Nonreciprocal holdings of banking organizations' capital instruments........................ 3837 0 M.1.b. - ----------------------------------------------------------------------------------------------------------------------------------
28 49
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE PAGE RC-19 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-N--PAST DUE AND NONACCRUAL LOANS, LEASES, AND OTHER ASSETS The FFIEC regards the information reported in all of Memorandum item 1, in items 1 through 10, column A, and in Memorandum items 2 through 4, column A, as confidential. -------- C470 ------------------------------------------------------------ (Column A) (Column B) (Column C) Past due Past due 90 Nonaccrual 30 through 89 days or more days and still and still accruing accruing ------------------ ------------------ ------------------ Dollar Amounts in Thousands RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou - ------------------------------------------------------------------------------------------------------------------------ 1. Loans secured by real estate: ////////////////// ////////////////// ////////////////// a. To U.S. addressees (domicile) .................... 1245 1246 65,607 1247 215,496 1.a. b. To non-U.S. addressees (domicile) ................ 1248 1249 0 1250 0 1.b. 2. Loans to depository institutions and acceptances ////////////////// ////////////////// ////////////////// of other banks: ////////////////// ////////////////// ////////////////// a. To U.S. banks and other U.S. depository ////////////////// ////////////////// ////////////////// institutions ..................................... 5377 5378 0 5379 0 2.a. b. To foreign banks ................................. 5380 5381 0 5382 0 2.b. 3. Loans to finance agricultural production and ////////////////// ////////////////// ////////////////// other loans to farmers ............................... 1594 1597 0 1583 625 3. 4. Commercial and industrial loans: ////////////////// ////////////////// ////////////////// a. To U.S. addressees (domicile) .................... 1251 1252 12,042 1253 76,393 4.a. b. To non-U.S. addressees (domicile) ................ 1254 1255 0 1256 0 4.b. 5. Loans to individuals for household, family, and ////////////////// ////////////////// ////////////////// other personal expenditures: ////////////////// ////////////////// ////////////////// a. Credit cards and related plans ................... 5383 5384 1,574 5385 370 5.a. b. Other (includes single payment, installment, ////////////////// ////////////////// ////////////////// and all student loans) ........................... 5386 5387 24,812 5388 7,184 5.b. 6. Loans to foreign governments and official ////////////////// ////////////////// ////////////////// institutions ......................................... 5389 5390 0 5391 0 6. 7. All other loans ...................................... 5459 5460 11,122 5461 9,921 7. 8. Lease financing receivables: ////////////////// ////////////////// ////////////////// a. Of U.S. addressees (domicile) .................... 1257 1258 21 1259 3,763 8.a b. Of non-U.S. addressees (domicile) ................ 1271 1272 0 1791 0 8.b. 9. Debt securities and other assets (exclude other ////////////////// ////////////////// ////////////////// real estate owned and other repossessed assets) ...... 3506 3506 0 3507 32,566 9. - --------------------------------------------------------------------------------------------------------------------------------- Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in items 1 through 8. ------------------ ------------------ ------------------ RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou 10. Loans and leases reported in items 1 ------------------------------------------------------------ through 8 above which are wholly or partially ////////////////// ////////////////// ////////////////// guaranteed by the U.S. Government .................... 5612 5613 17,347 5614 14,395 10. a. Guaranteed portion of loans and leases ////////////////// ////////////////// ////////////////// included in item 10 above ........................ 5615 5616 17,056 5617 11,954 10.a.
29 50
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE PAGE RC-20 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RI-N--CONTINUED -------- C473 ------------------------------------------------------------ (Column A) (Column B) (Column C) Past due Past due 90 Nonaccrual 30 through 89 days or more and still and still accruing accruing Memoranda ------------------ ------------------ ------------------ Dollar Amounts in Thousands RFCD Bil Mil Thou RFCD Bil Mil Thou RFCD Bil Mil Thou - ------------------------------------------------------------------------------------------------------------------------ 1. Restructured loans and leases included in ////////////////// ////////////////// ////////////////// Schedule RC-N, items 1 through 8, above (and not ////////////////// ////////////////// ////////////////// reported in Schedule RC-C, part I, Memorandum ////////////////// ////////////////// ////////////////// item 2)................................................ 1658 1659 1661 M.1. 2. Loans to finance commercial real estate, ////////////////// ////////////////// ////////////////// construction, and land development activities ////////////////// ////////////////// ////////////////// (NOT SECURED BY REAL ESTATE) included in ////////////////// ////////////////// ////////////////// Schedule RC-N, items 4 and 7 above..................... 6558 6559 105 6560 1,919 M.2. 3. Loans secured by real estate in domestic offices RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou (included in Schedule RC-N, item 1, above): ////////////////// ////////////////// ////////////////// a. Construction and land development................... 2759 2769 0 3492 19,990 M.3.a. b. Secured by farmland................................. 3493 3494 0 3495 144 M.3.b. c. Secured by 1-4 family residential properties: ////////////////// ////////////////// ////////////////// (1) Revolving, open-end loans secured by ////////////////// ////////////////// ////////////////// 1-4 family residential properties and ////////////////// ////////////////// ////////////////// extended under lines of credit.................. 5398 5399 5,009 5400 10,700 M.3.c.(1) (2) All other loans secured by 1-4 residential ////////////////// ////////////////// ////////////////// properties...................................... 5401 5402 49,978 5403 100,900 M.3.c.(2) d. Secured by multifamily (5 or more) residential ////////////////// ////////////////// ////////////////// properties.......................................... 3499 3500 934 3501 9,456 M.3.d. e. Secured by nonfarm nonresidential properties........ 3502 3503 9,886 3504 74,306 M.3.e.
--------------------------------------- (Column A) (Column B) Past due 30 Past due 90 through 89 days days or more --------------------------------------- RFCD Bil Mil Thou RFCD Bil Mil Thou --------------------------------------- 4. Interest rate, foreign exchange rate, and other ////////////////// ////////////////// commodity and equity contracts: ////////////////// ////////////////// a. Book value of amounts carried as assets............. 3522 3528 0 M.4.a. b. Replacement cost of contracts with a ////////////////// ////////////////// positive replacement cost........................... 3529 3530 0 M.4.b.
30 51
Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address : ONE MONARCH PLACE Page RC-21 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-O--OTHER DATA FOR DEPOSIT INSURANCE ASSESSMENTS -------- C475 (- ------------------ Dollar Amounts in Thousands RCON Bil Mil Thou - ----------------------------------------------------------------------------------------------------------------------- 1. Unposted debits (see instructions): ////////////////// a. Actual amount of all unposted debits........................................................ 0030 0 1.a OR ////////////////// b. Separate amount of unposted debits: ////////////////// (1) Actual amount of unposted debits to demand deposits..................................... 0031 N/A 1.b.(1) (2) Actual amount of unposted debits to time and savings deposits(1)........................ 0032 N/A 1.b.(2) 2. Unposted credits (see instructions): ////////////////// a. Actual amount of all unposted credits....................................................... 3510 0 2.a. OR ////////////////// b. Separate amount of unposted credits: ////////////////// (1) Actual amount of unposted credits to demand deposits.................................... 3512 N/A 2.b.(1) (2) Actual amount of unposted credits to time and savings deposits(1)....................... 3514 N/A 2.b.(2) 3. Uninvested trust funds (cash) held in bank's own trust department (not included in total ////////////////// deposits in domestic offices).................................................................. 3520 142,277 3. 4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in Puerto ////////////////// Rico and U.S. territories and possessions (not included in total deposits): ////////////////// a. Demand deposits of consolidated subsidiaries................................................ 2211 196,951 4.a. b. Time and savings deposits(1) of consolidated subsidiaries................................... 2351 15,807 4.b. c. Interest accrued and unpaid on deposits of consolidated subsidiaries........................ 5514 0 4.c. 5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: ////////////////// a. Demand deposits in insured branches (included in Schedule RC-E, Part II).................... 2229 0 5.a. b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II)....... 2383 0 5.b. c. Interest accrued and unpaid on deposits in insured branches ////////////////// (included in Schedule RC-G, item 1.b)....................................................... 5515 0 5.c. ------------------ ------------------ Item 6 is not applicable to state nonmember banks that have not been authorized by the ////////////////// Federal Reserve to act as pass-through correspondents. ////////////////// 6. Reserve balances actually passed through to the Federal Reserve by the reporting bank on ////////////////// behalf of its respondent depository institutions that are also reflected as deposit liabilities ////////////////// of the reporting bank: ////////////////// a. Amount reflected in demand deposits (included in Schedule RC-E, Part I, item 4 or 5, ////////////////// column B)................................................................................... 2314 0 6.a. b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, ////////////////// item 4 or 5, column A or C, but not column B)............................................... 2315 0 6.b. 7. Unamortized premiums and discounts on time and savings deposits:(1) ////////////////// a. Unamortized premiums........................................................................ 5516 748 7.a. b. Unamortized discounts....................................................................... 5517 0 7.b. ------------------ - ----------------------------------------------------------------------------------------------------------------------- 8. TO BE COMPLETED BY BANKS WITH "OAKAR DEPOSITS." ------------------ Total "Adjusted Attributable Deposits" of all institutions acquired under Section 5(d)(3) of ////////////////// the Federal Deposit Insurance Act (from most recent FDIC Oakar Transaction Worksheet(s))....... 5518 1,395,996 8. ------------------ - ----------------------------------------------------------------------------------------------------------------------- ------------------ 9. Deposits in lifeline accounts.................................................................. 5596 ///////////// 9. 10. Benefit-responsive "Depository Institution Investment Contracts" (included in total ////////////////// deposits in domestic offices).................................................................. 8432 0 10. - ---------------- (1) For FDIC insurance assessment purposes, "time and savings deposits" consists of nontransaction accounts and all transaction accounts other than demand deposits.
31 52
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE PAGE RC-22 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-O--CONTINUED ------------------- Dollar Amounts in Thousands RCON Bil Mil Thou - ----------------------------------------------------------------------------------------------------------------------------------- 11. Adjustments to demand deposits in domestic offices reported in Schedule RC-E for ////////////////// certain reciprocal demand balances: ////////////////// a. Amount by which demand deposits will be reduced if reciprocal demand balances ////////////////// between the reporting bank and savings associations were reported on a net basis ////////////////// rather than a gross basis in Schedule RC-E........................................ 8785 0 11.a. b. Amount by which demand deposits would be increased if reciprocal demand balances ////////////////// between the reporting bank and U.S. branches and agencies of foreign banks were ////////////////// reported on a gross basis rather than a net basis in Schedule RC-E................ A181 0 11.b. c. Amount by which demand deposits would be reduced if cash items in process of ////////////////// collection were included in the calculation of net reciprocal demand balances ////////////////// between the reporting bank and the domestic offices of U.S. banks and savings ////////////////// associations in Schedule RC-E..................................................... A182 0 11.c. -------------------
------------------- Dollar Amounts in Thousands RCON Bil Mil Thou - ----------------------------------------------------------------------------------------------------------------------------------- 1. Total deposits in domestic offices of the bank (sum of Memorandum items 1.a.(1) and ////////////////// 1.b.(1) must equal Schedule RC, item 13.a): ////////////////// a. Deposit accounts of $100,000 or less: ////////////////// (1) Amount of deposit accounts of $100,000 or less.................................. 2702 18,219,759 M.1.a.(1) (2) Number of deposit accounts of $100,000 or less (TO BE Number ////////////////// COMPLETED FOR THE JUNE REPORT ONLY)........................... RCON 3779 N/A ////////////////// M.1.a.(2) b. Deposit accounts of more than $100,000: ////////////////// (1) Amount of deposit accounts of more than $100,000................................ 2710 14,572,399 M.1.b.(1) Number ////////////////// (2) Number of deposit accounts of more than $100,000 ............. RCON 2772 28,722 ////////////////// M.1.b.(2) 2. Estimated amount of uninsured deposits in domestic offices of the bank: a. An estimate of your bank's uninsured deposits can be determined by multiplying the number of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(2) above by $100,000 and subtracting the result from the amount of deposit accounts of more than $100,000 reported in Memorandum item 1.b.(1) above. Indicate in the appropriate box at the right whether your bank has a method or procedure for determining a better estimate of uninsured deposits than the YES NO estimate described above.............................................................. 6861 /// X M.2.a. b. If the box marked YES has been checked, report the estimate of uninsured deposits RCON Bil Mil Thou determined by using your bank's method or procedure................................. 5597 N/A M.2.b.
- ------------------------------------------------------------------------------- Person to whom questions about the Reports of Condition and Income should be directed: C477 PAMELA S. FLYNN, VICE PRESIDENT (401) 278-5194 - ------------------------------- ---------------------- Name and Title (TEXT 8901) Area code/phone number/extension (TEXT 8902) 32 53
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: ONE MONARCH PLACE PAGE RC-23 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-R--REGULATORY CAPITAL This schedule must be completed by all banks as follows: Banks that reported total assets of $1 billion or more in Schedule RC, item 12, for June 30, 1995, must complete items 2 through 9 and Memoranda items 1 and 2. BANKS WITH ASSETS OF LESS THAN $1 BILLION MUST COMPLETE ITEMS 1 THROUGH 3 BELOW OR SCHEDULE RC-R IN ITS ENTIRETY, DEPENDING ON THEIR RESPONSE TO ITEM 1 BELOW. --------------- C480 1. TEST FOR DETERMINING THE EXTENT TO WHICH SCHEDULE RC-R MUST BE COMPLETED. TO BE -------------------------------- COMPLETED ONLY BY BANKS WITH TOTAL ASSETS OF LESS THAN $1 BILLION. Indicate in the YES NO appropriate box at the right whether the bank has total capital greater than or -------------------------------- equal to eight percent of adjusted total assets............................................ RCFD 6056 //// 1. --------------------------------
For purposes of this test, adjusted total assets equals total assets less cash, U.S. Treasuries, U.S. Government agency obligations, and 80 percent of U.S. Government-sponsored agency obligations plus the allowance for loan and lease losses and selected off-balance sheet items as reported on Schedule RC-L (see instructions). If the box marked YES has been checked, then the bank only has to complete items 2 and 3 below. If the box marked NO has been checked, the bank must complete the remainder of this schedule. A NO response to item 1 does not necessarily mean that the bank's actual risk-based capital ratio is less than eight percent or that the bank is not in compliance with the risk-based capital guidelines. - ------------------------------------------------------------------- NOTE: ALL BANKS ARE REQUIRED TO COMPLETE ITEMS 2 AND 3 BELOW. SEE OPTIONAL WORKSHEET FOR ITEMS 3.a THROUGH 3.f. ----------------------------------------- - ----------------------------------------------------------------------------- (Column A) (Column B) Dollar Amounts in Thousands Subordinated Debt(1) Other - ----------------------------------------------------------------------------- and Intermediate Limited-Life 2. Subordinated debt(1) and other limited-life capital instruments (original Term Preferred Stock Capital Instruments weighted average maturity of at least five years) with a remaining ----------------------------------------- maturity of: RCFD Bil Mil Thou RCFD Bil Mil Thou ----------------------------------------- a. One year or less....................................................... 3780 25,737 3786 0 2.a. b. Over one year through two years........................................ 3781 737 3787 0 2.b. c. Over two years through three years..................................... 3782 10,745 3788 0 2.c. d. Over three years through four years.................................... 3783 0 3789 0 2.d. e. Over four years through five years..................................... 3784 341,000 3790 0 2.e. f. Over five years........................................................ 3785 760,000 3791 0 2.f. 3. AMOUNTS USED IN CALCULATING REGULATORY CAPITAL RATIOS (REPORT AMOUNTS ////////////////// DETERMINED BY THE BANK FOR ITS OWN INTERNAL REGULATORY CAPITAL ANALYSES ////////////////// CONSISTENT WITH APPLICABLE CAPITAL STANDARDS): ------------------------- RCFD Bil Mil Thou ------------------------- a. TIER 1 CAPITAL................................................................................ 8274 3,756,621 3.a. b. TIER 2 CAPITAL................................................................................ 8275 1,688,820 3.b. c. TOTAL RISK-BASED CAPITAL...................................................................... 3792 5,445,441 3.c. d. EXCESS ALLOWANCE FOR LOAN AND LEASE LOSSES.................................................... A222 200,236 3.d. e. RISK-WEIGHTED ASSETS (NET OF ALL DEDUCTIONS, INCLUDING EXCESS ALLOWANCE)...................... A223 45,925,732 3.e. f. "AVERAGE TOTAL ASSETS" (NET OF ALL ASSETS DEDUCTED FROM TIER 1 CAPITAL)(2).................... A224 46,290,168 3.f. ------------------
----------------------------------------- (Column A) (Column B) ITEMS 4-9 AND MEMORANDA ITEMS 1 AND 2 ARE TO BE COMPLETED Assets Credit Equiv- BY BANKS THAT ANSWERED NO TO ITEM 1 ABOVE AND Recorded alent Amount BY BANKS WITH TOTAL ASSETS OF $1 BILLION OR MORE. on the of Off-Balance Balance Sheet Sheet Items(3) ----------------------------------------- RCFD Bil Mil Thou RCFD Bil Mil Thou ----------------------------------------- 4. Assets and credit equivalent amounts of off-balance sheet items assigned to the Zero percent risk category: ////////////////// ////////////////// a. Assets recorded on the balance sheet: ////////////////// ////////////////// (1) Securities issued by, other claims on, and claims unconditionally ////////////////// ////////////////// guaranteed by, the U.S. Government and its agencies and ////////////////// ////////////////// other OECD central governments..................................... 3794 1,519,575 ////////////////// 4.a.(1) (2) All other.......................................................... 3795 1,316,143 ////////////////// 4.a.(2) b. Credit equivalent amount of off-balance sheet items.................... ////////////////// 3796 1,079,527 4.b
- ------------- (1) Exclude mandatory convertible debt reported in Schedule RC-M, item 7. (2) Do not deduct excess allowance for loan and lease losses. (3) Do not report in column B the risk-weighted amount of assets reported in column A. 33 54
Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address : ONE MONARCH PLACE Page RC-24 City, State Zip: SPRINGFIELD, MA 01102 FDIC Certificate No.: [0][2][4][9][9] SCHEDULE RC-R--CONTINUED (Column A) (Column B) Assets Credit Equiv- Recorded alent Amount on the of Off-Balance Balance Sheet Sheet Items(1) -------------------------------------- Dollar Amounts in Thousands RCFD BIL MIL THOU RCFD BIL MIL THOU - ---------------------------------------------------------------------------------------------------------------------- 5. Assets and credit equivalent amounts of off-balance sheet items ////////////////// ////////////////// assigned to the 20 percent risk category: ////////////////// ////////////////// a. Assets recorded on the balance sheet: ////////////////// ////////////////// (1) Claims conditionally guaranteed by the U.S. Government and ////////////////// ////////////////// its agencies and other OECD central governments.................... 3798 726,530 ////////////////// 5.a.(1) (2) Claims collateralized by securities issued by the U.S. Government ////////////////// ////////////////// and its agencies and other OECD central governments; by ////////////////// ////////////////// securities issued by U.S. Government-sponsored agencies; and ////////////////// ////////////////// by cash on deposit................................................. 3799 0 ////////////////// 5.a.(2) (3) All other.......................................................... 3800 7,055,416 ////////////////// 5.a.(3) b. Credit equivalent amount of off-balance sheet items.................... ////////////////// 3801 1,058,252 5.b. 6. Assets and credit equivalent amounts of off-balance sheet items ////////////////// ////////////////// assigned to the 50 percent risk category: ////////////////// ////////////////// a. Assets recorded on the balance sheet................................... 3802 5,371,795 ////////////////// 6.a. b. Credit equivalent amount of off-balance sheet items.................... ////////////////// 3803 866,687 6.b. 7. Assets and credit equivalent amounts of off-balance sheet items ////////////////// ////////////////// assigned to the 100 percent risk category: ////////////////// ////////////////// a. Assets recorded on the balance sheet................................... 3804 31,276,374 ////////////////// 7.a. b. Credit equivalent amount of off-balance sheet items.................... ////////////////// 3805 10,715,771 7.b. 8. On-balance sheet asset values excluded from the calculation of the ////////////////// ////////////////// risk-based capital ratio (2).............................................. 3806 91,771 ////////////////// 8. 9. Total assets recorded on the balance sheet (sum of ////////////////// ////////////////// items 4.a, 5.a, 6.a, 7.a, and 8, column A) (must equal Schedule RC, ////////////////// ////////////////// item 12 plus items 4.b and 4.c)........................................... 3807 47,357,604 ////////////////// 9. --------------------------------------
Memoranda ------------------ Dollar Amounts in Thousands RCFD Bil Mil Thou - ---------------------------------------------------------------------------------------------------------------------- 1. Current credit exposure across all off-balance sheet derivative contracts covered by the ////////////////// risk-based capital standards.................................................................. 8764 236,389 M.1. ------------------ ---------------------------------------------------------------------- With a remaining maturity of ---------------------------------------------------------------------- (Column A) (Column B) (Column C) One year or less Over one year Over five years through five years 2. Notional principal amounts of ---------------------------------------------------------------------- off-balance sheet derivative contracts(3): RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou ---------------------------------------------------------------------- a. Interest rate contracts................ 3809 7,502,891 8766 33,994,382 8767 779,970 M.2.a. b. Foreign exchange contracts............. 3812 1,366,429 8769 84,993 8770 0 M.2.b. c. Gold contracts......................... 8771 33,478 8772 0 8773 0 M.2.c. d. Other precious metals contracts........ 8774 13,371 8775 0 8776 0 M.2.d. e. Other commodity contracts.............. 8777 0 8778 0 8779 0 M.2.e. f. Equity derivative contracts............ A000 0 A001 0 A002 0 M.2.f. ---------------------------------------------------------------------- - ----------------- (1) Do not report in column B the risk-weighted amount of assets reported in column A. (2) Include the difference between the fair value and the amortized cost of available-for-sale securities in item 8 and report the amortized cost of these securities in items 4 through 7 above. Item 8 also includes on-balance sheet asset values (or portions thereof) of off-balance sheet interest rate, foreign exchange rate, and commodity contracts and those contracts (e.g., futures contracts) not subject to risk-based capital. Exclude from item 8 margin accounts and accrued receivables not included in the calculation of credit equivalent amounts of off-balance sheet derivatives as well as any portion of the allowance for loan and lease losses in excess of the amount that may be included in Tier 2 capital. (3) Exclude foreign exchange contracts with an original maturity of 14 days or less and all futures contracts.
34 55 Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031 Address: One Monarch Place Page RC-25 City, State Zip: Springfield, MA 01102 FDIC Certificate No.: [0][2][4][9][9]
OPTIONAL NARRATIVE STATEMENT CONCERNING THE AMOUNTS REPORTED IN THE REPORTS OF CONDITION AND INCOME at close of business on December 31, 1996 Fleet National Bank Springfield , Massachusetts - ----------------------------------------------------------------------------- Legal Title of Bank City State The management of the reporting bank may, if it wishes, submit a brief narrative statement on the amounts reported in the Reports of Condition and Income. This optional statement will be made available to the public, along with the publicly available data in the Reports of Condition and Income, in response to any request for individual bank report data. However, the information reported in column A and in all of Memorandum item 1 of Schedule RC-N is regarded as confidential and will not be released to the public. BANKS CHOOSING TO SUBMIT THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE STATEMENT DOES NOT CONTAIN THE NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK CUSTOMERS, REFERENCES TO THE AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN SCHEDULE RC-N, OR ANY OTHER INFORMATION THAT THEY ARE NOT WILLING TO HAVE MADE PUBLIC OR THAT WOULD COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks choosing not to make a statement may check the "No comment" box below and should make no entries of any kind in the space provided for the narrative statement; i.e., DO NOT enter in this space such phrases as "No statement," "Not applicable," "N/A," "No comment," and "None." The optional statement must be entered on this sheet. The statement should not exceed 100 words. Further, regardless of the number of words, the statement must not exceed 750 characters, including punctuation, indentation, and standard spacing between words and sentences. If any submission should exceed 750 characters, as defined, it will be truncated at 750 characters with no notice to the submitting bank and the truncated statement will appear as the bank's statement both on agency computerized records and in computer-file releases to the public. All information furnished by the bank in the narrative statement must be accurate and not misleading. Appropriate efforts shall be taken by the submitting bank to ensure the statement's accuracy. The statement must be signed, in the space provided below, by a senior officer of the bank who thereby attests to its accuracy. If, subsequent to the original submission, material changes are submitted for the data reported in the Reports of Condition and Income, the existing narrative statement will be deleted from the files, and from disclosure; the bank, at its option, may replace it with a statement, under signature, appropriate to the amended data. The optional narrative statement will appear in agency records and in release to the public exactly as submitted (or amended as described in the preceding paragraph) by the management of the bank (except for the truncation of statements exceeding the 750-character limit described above). THE STATEMENT WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE REPORTING BANK. - -------------------------------------------------------------------------------- No comment [X] (RCON 6979) C471 C472 --- ------------ BANK MANAGEMENT STATEMENT (please type or print clearly): (TEXT 6980) /s/ Jan 23, 1997 ------------------------ ------------------------ Signature of Executive Date of Signature Officer of Bank 35 -----END PRIVACY-ENHANCED MESSAGE-----