Document:

Exhibit 10.2

 

SECOND AMENDMENT TO THIRD AMENDED AND RESTATED
CREDIT AGREEMENT

SECOND
AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of November
8, 2005 (this “Amendment”), to the Third Amended and Restated Credit
Agreement, dated as of June 30, 2005 (as amended, supplemented or otherwise
modified from time to time, the “Credit Agreement”), by and among
General Electric Capital Corporation, as Agent (in such capacity, “Agent”),
Inverness Medical Innovations, Inc. (“Innovations”), Wampole
Laboratories, LLC and Inverness Medical (UK) Holdings Limited, as borrowers (“Borrowers”),
the other Credit Parties signatory thereto, Merrill Lynch Capital, a division
of Merrill Lynch Business Financial Services Inc., as documentation agent,
co-syndication agent and lender, UBS Securities LLC, as co-syndication agent,
and the lenders signatory thereto from time to time (collectively, the “Lenders”).

W I  T  N  E  S  S
E  T  H

WHEREAS,
Agent and Requisite Lenders have agreed to amend the Credit Agreement in the manner,
and on the terms and conditions, provided for herein.

NOW
THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

1.             Definitions. Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Credit Agreement.

2.             Amendment to Credit Agreement. Clause (a) of Annex F to
the Credit Agreement is hereby amended as of the Effective Date (as hereinafter
defined) by deleting the ratio set forth opposite “September 30, 2005” in its
entirety and replacing it with “.68:1.00”.

3.             Remedies. This Amendment shall constitute a Loan Document. The
breach by any Credit Party of any representation, warranty, covenant or
agreement in this Amendment shall constitute an immediate Event of Default
hereunder and under the other Loan Documents.

4.             Representations and Warranties. To induce Agent and Requisite Lenders
to enter into this Amendment, the Credit Parties hereby, jointly and severally,
represent and warrant that:

(a)           The execution, delivery and performance by each Credit
Party of this Amendment and the performance of the Credit Agreement, as amended
by this Amendment (the “Amended Credit Agreement”): (i) are within
such Person’s corporate, company or partnership power; (ii) have been (or
will be prior to execution thereof) duly authorized by all necessary corporate,
limited liability company or limited partnership action; (iii) do not
contravene any provision of such Person’s charter, bylaws or equivalent
constitutive documents or partnership or operating agreement, as applicable;
(iv) do not violate any law or regulation, or any order or decree of any
court or Governmental Authority; (v) do not conflict with or result in the
breach or termination of, constitute a default under or accelerate or permit
the acceleration of

 

1

 

any performance required by, any indenture, mortgage,
deed of trust, lease, agreement or other instrument to which such Person is a
party or by which such Person or any of its property is bound; (vi) do not
result in the creation or imposition of any Lien upon any of the property of
such Person, other than a Lien in favor of Agent; and (vii) do not require
the consent or approval of any Governmental Authority or any other Person
except those which will have been duly obtained, made or complied with prior to
the Effective Date.

(b)           This Amendment has been duly executed and delivered by
or on behalf of each of the Credit Parties.

(c)           This Amendment, the Amended Credit Agreement and each
of the other Loan Documents constitutes a legal, valid and binding obligation
of each of the Credit Parties, enforceable against each of them in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency,
fraudulent conveyance or transfer or other laws affecting creditors’ rights
generally or by equitable principals of general applicability.

(d)           No Default or Event of Default has occurred and is
continuing or would result after giving effect to the provisions of this
Amendment.

(e)           No action, claim or proceeding is now pending or, to
the knowledge of any Credit Party, threatened against such Credit Party, at
law, in equity or otherwise, before any court, board, commission, agency or
instrumentality of any foreign, federal, state, or local government or of any
agency or subdivision thereof, or before any arbitrator or panel of
arbitrators, which (i) challenges any Credit Party’s right or power to
enter into or perform any of its obligations under this Amendment or any other
Loan Document to which it is or will be, a party, or the validity or
enforceability of this Amendment, the Amended Credit Agreement or any Loan
Document or any action taken thereunder, or (ii) has a reasonable risk of
being determined adversely to any Credit Party and that, if so determined,
could reasonably be expected to have a Material Adverse Effect after giving
effect to this Amendment.

(f)            The representations and warranties of the Credit
Parties contained in the Amended Credit Agreement and each other Loan Document
shall, after giving effect hereto, be true and correct on and as of (i) the
date hereof, and (ii) the Effective Date, in each case, with the same effect as
if such representations and warranties had been made on and as of such date,
except that any such representation or warranty which is expressly made only as
of a specified date need be true only as of such date.

5.             No Amendments/Waivers/Consents. Except as expressly provided herein (a)
the Credit Agreement and the other Loan Documents shall be unmodified and shall
continue to be in full force and effect in accordance with their terms, and (b)
this Amendment shall not be deemed a waiver of any term or condition of any
Loan Document and shall not be deemed to prejudice any right or rights which
Agent or any Lender may now have or may have in the future under or in
connection with any Loan Document or any of the instruments or agreements referred
to therein, as the same may be amended from time to time.

6.             Affirmation of Obligations. Each of the Credit Parties hereby
acknowledges, agrees and affirms (a) its obligations under the Credit Agreement
and the other

 

2

 

Loan Documents, including, without limitation, its
guaranty obligations thereunder, (b) that such guaranty shall apply to the
Obligations in accordance with the terms thereof, (c) the grant of the security
interest in all of its assets pursuant to the Loan Documents and (d) that such
liens and security interests created and granted are valid and continuing and
secure the Obligations in accordance with the terms thereof.

7.             Outstanding Indebtedness; Waiver of Claims. Each of Borrowers and the other Credit
Parties hereby acknowledges and agrees that as of November 8, 2005, (a) the
outstanding balance of the European Revolving Loan is $25,000,000, (b) the
outstanding balance of the US Revolving Loan is $56,000,000, (c) the
outstanding balance of the US Term Loan is $0, and (d) the outstanding balance
of European Term Loan is $0. Borrowers and each other Credit Party hereby
waive, release, remise and forever discharge Agent, Lenders and each other
Indemnified Person from any and all claims, suits, actions, investigations,
proceedings or demands arising out of or in connection with the Credit
Agreement (collectively, “Claims”), whether based in contract, tort,
implied or express warranty, strict liability, criminal or civil statute or
common law of any kind or character, known or unknown, which any Borrower or
any other Credit Party ever had, now has or might hereafter have against Agent
or Lenders which relates, directly or indirectly, to any acts or omissions of
Agent, Lenders or any other Indemnified Person on or prior to the Effective
Date, provided, that no Borrower nor any other Credit Party waives any
Claim solely to the extent such Claim relates to Agent’s or any Lender’s gross
negligence or willful misconduct.

8.             Fees and Expenses. Borrowers hereby reconfirm their obligations
pursuant to Section 11.3 of the Credit Agreement to pay and reimburse
Agent for all reasonable costs and expenses (including, without limitation,
reasonable fees of counsel) incurred in connection with the negotiation, preparation,
execution and delivery of this Amendment and all other documents and
instruments delivered in connection herewith..

9.             Effectiveness. Upon satisfaction in full in the judgment of Agent
of each of the following conditions, this Amendment shall be deemed effective
as of September 30, 2005 (the “Effective Date”):

(a)           Amendment. Agent shall have received signature pages to this
Amendment, duly executed and delivered by Agent, Requisite Lenders, and each of
the Credit Parties.

(b)           Payment of Fees and Expenses. Borrowers shall have paid to Agent all
costs, fees and expenses owing in connection with this Amendment and the other
Loan Documents and due to Agent (including, without limitation, reasonable
legal fees and expenses).

(c)           Representations and Warranties. The representations and warranties of
or on behalf of each of the Credit Parties in this Amendment shall be true and
correct on and as of the date hereof and the Effective Date.

(d)           Compliance Certificate. Borrowers shall have delivered to Agent and each
Lender a Compliance Certificate evidencing compliance with each of the
Financial Covenants for the period ended September 30, 2005, after giving
effect to this Amendment.

 

3

 

10.           GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

11.           Counterparts. This Amendment may be executed by the parties hereto
on any number of separate counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.

 

4

 

IN
WITNESS WHEREOF, this Amendment has been duly executed as of the date first
written above.

	
   

  	
  BORROWERS

  
	
   

  	
   

  
	
   

  	
  WAMPOLE
  LABORATORIES, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Duane L.
  James

  
	
   

  	
  Name:

  	
  Duane L. James

  
	
   

  	
  Title:

  	
  Treasurer

  

 

	
   

  	
  INVERNESS
  MEDICAL (UK) HOLDINGS LIMITED

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Scott

  
	
   

  	
  Name:

  	
  David Scott

  
	
   

  	
  Title:

  	
  Chairman

  

 

 

 

	
   

  	
  AGENT
  AND LENDERS

  
	
   

  	
   

  
	
   

  	
  GENERAL ELECTRIC
  CAPITAL

  
	
   

  	
  CORPORATION, as
  Agent and Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ illegible

  
	
   

  	
   

  	
  Duly Authorized
  Signatory

  
	
   

  	
   

  
	
   

  	
  MERRILL LYNCH
  CAPITAL, a division of Merrill Lynch Business Financial Services Inc., as a
  Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ illegible

  
	
   

  	
   

  	
  Duly Authorized
  Signatory

  
	
   

  	
   

  
	
   

  	
  UBS AG, CAYMAN
  ISLANDS BRANCH, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard L.
  Tavrow

  
	
   

  	
   

  	
  Duly Authorized
  Signatory

  
	
   

  	
   

  	
  Director

  Banking Products

  Services, US

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Irja R. Otsa

  
	
   

  	
   

  	
  Duly Authorized
  Signatory

  
	
   

  	
   

  	
  Associate
  Director

  Banking Products

  Services, US

  

 

 

The
following Persons are signatories to this Amendment in their capacity as Credit
Parties and not as Borrowers.

	
   

  	
  APPLIED BIOTECH,
  INC.

  
	
   

  	
  ADVANTAGE
  DIAGNOSTICS CORPORATION

  
	
   

  	
  FOREFRONT
  DIAGNOSTICS, INC.

  
	
   

  	
  INVERNESS
  MEDICAL INTERNATIONAL HOLDING CORP.

  
	
   

  	
  INVERNESS
  MEDICAL INTERNATIONAL HOLDING CORP. II

  
	
   

  	
  INVERNESS
  MEDICAL, INC.

  
	
   

  	
  INNOVATIONS
  RESEARCH, LLC

  
	
   

  	
  ISCHEMIA
  TECHNOLOGIES, INC.

  
	
   

  	
  IVC INDUSTRIES,
  INC.

  
	
   

  	
  MORPHEUS
  ACQUISITION CORP.

  
	
   

  	
  OSTEX
  INTERNATIONAL, INC.

  
	
   

  	
  SELFCARE
  TECHNOLOGY, INC.

  
	
   

  	
  UNIPATH ONLINE,
  INC.

  
	
   

  	
  BINAX, INC.

  
	
   

  	
  INVERNESS
  MEDICAL — BIOSTAR, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Duane L.
  James

  
	
   

  	
  Name:

  	
  Duane L. James

  
	
   

  	
  Title:

  	
  Treasurer,
  Treasurer, Treasurer, Treasurer, Treasurer, Treasurer, Treasurer, Treasurer, Treasurer,
  Treasurer, Treasurer, Treasurer, Treasurer, Vice President, Treasurer, respectively

  

 

 

	
   

  	
  CAMBRIDGE
  DIAGNOSTICS IRELAND LIMITED

  
	
   

  	
  DMD, DIENSTLEISTUNGEN & VERTRIEB FÜR MEDIZIN UND
  DIAGNOSTIK GMBH

  
	
   

  	
  INVERNESS
  MEDICAL CANADA, INC.

  
	
   

  	
  INVERNESS
  MEDICAL EURASIA LIMITED

  
	
   

  	
  INVERNESS
  MEDICAL FRANCE SAS

  
	
   

  	
  INVERNESS
  MEDICAL GERMANY GMBH

  
	
   

  	
  ORGENICS INTERNATIONAL
  HOLDINGS BV

  
	
   

  	
  SCANDINAVIAN
  MICRO BIODEVICES APS

  
	
   

  	
  STIRLING MEDICAL
  INNOVATIONS LIMITED

  
	
   

  	
  INVERNESS
  MEDICAL SWITZERLAND GMBH

  
	
   

  	
  UNIPATH
  DIAGNOSTICS GMBH

  
	
   

  	
  VIVA DIAGNOSTIKA
  - DIAGNOSTISCHE PRODUKTE GMBH

  
	
   

  	
  INVERNESS
  MEDICAL JAPAN, LTD.

  
	
   

  	
  INVERNESS
  MEDICAL INNOVATIONS, INC.

  
	
   

  	
  INVERNESS
  MEDICAL IBERICA, S.A.

  
	
   

  	
  BOSWELL
  INVESTMENTS, S.L.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Duane L.
  James

  
	
   

  	
  Name:

  	
  Duane L. James

  
	
   

  	
  Title:

  	
  Authorized
  Person, Authorized Person, Authorized Person, Authorized Person, Authorized
  Person, Authorized Person, Authorized Person, Authorized Person, Authorized
  Person, Authorized Person, Authorized Person, Authorized Person, Authorized
  Person, Authorized Person, Treasurer, Authorized Person, Authorized Person
  respectively

  
	
   

  	
   

  	
   

  
	
   

  	
  INVERNESS
  MEDICAL INVESTMENTS, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jay McNamara

  
	
   

  	
  Name:

  	
  Jay McNamara

  
	
   

  	
  Title:

  	
  Assistant
  Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  INVERNESS
  MEDICAL CANADA, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Doug
  Schaffer

  
	
   

  	
  Name:

  	
  Doug Shaffer

  
	
   

  	
  Title:

  	
  President

  

 

 

	
   

  	
  UNIPATH LIMITED

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Scott

  
	
   

  	
  Name:

  	
  David Scott

  
	
   

  	
  Title:

  	
  ChairmanExhibit 10.1

 

LOAN AGREEMENT

(CIT Loan)

 

Dated as of September 21, 2005

 

 

Among

 

 

SKYWEST AIRLINES, INC.,

Borrower,

 

 

SKYWEST, INC.,

Guarantor, and

 

 

C.I.T. LEASING CORPORATION

Lender, and

 

C.I.T. LEASING CORPORATION,

as Security Trustee

 

 

Four Bombardier Regional Jet Model CL-600-2B19
Aircraft

U.S. Registration Numbers: N698BR, N699BR, N709BR and N710BR

Corresponding Manufacturer’s Serial Numbers:  7799, 7801, 7850, 7852

 

 

 

TABLE OF CONTENTS

 

	
  SECTION 1.

  	
  Certain Definitions;
  Participation in Borrower’s Cost of the Aircraft

  	
   

  
	
  SECTION 2.

  	
  Borrower’s Notice of
  Delivery Date; Closing

  	
   

  
	
  SECTION 4.

  	
  Conditions

  	
   

  
	
  SECTION 5.

  	
  Guarantor’s Representations, Warranties and Covenants

  	
   

  
	
  SECTION 6.

  	
  Borrower’s Representations, Warranties and
  Indemnities

  	
   

  
	
  SECTION 7.

  	
  Representations, Warranties and Covenants

  	
   

  
	
  SECTION 8.

  	
  Certain Covenants of Borrower

  	
   

  
	
  SECTION 9.

  	
  Notices; Consent to Jurisdiction

  	
   

  
	
  SECTION 10.

  	
  Miscellaneous

  	
   

  
	
  SECTION 11.

  	
  Transaction Costs

  	
   

  

 

i

 

LOAN AGREEMENT

(CIT Loan)

 

THIS
LOAN AGREEMENT (CIT Loan), dated as of September 21, 2005 (this “Agreement”),
is among (i) SkyWest Airlines, Inc., a Utah corporation (“Borrower”),
(ii) SkyWest, Inc., a Utah corporation (“Guarantor”), (iii) C.I.T.
Leasing Corporation, a Delaware corporation in its capacity as Lender (the “Lender”),
and (iv) C.I.T. Leasing Corporation, a Delaware corporation in its capacity as
security trustee (“Security Trustee”).

 

W I  T
N  E  S  S  E  T  H :

 

WHEREAS,
Borrower desires to enter into a credit facility with Lender and to pledge as
security therefor certain Bombardier Regional Jet Model CL-600-2B19 aircraft,
four of which are the subject of this Agreement;

 

WHEREAS,
concurrently with the execution and delivery of this Agreement, Borrower and
Security Trustee are entering into that certain Aircraft Mortgage and Security
Agreement dated as of the date first set forth above (the “Mortgage”),
pursuant to which Borrower issues to Lender one or more Notes as evidence of
Borrower’s indebtedness to Lender, and Borrower shall execute and deliver an
initial Mortgage Supplement dated the Closing Date covering each Aircraft,
supplementing the Mortgage;

 

WHEREAS,
concurrently with the execution and delivery of this Agreement, Guarantor is
issuing that certain Guaranty dated as of the date first set forth above,
pursuant to which Guarantor will guarantee the obligations of Borrower under the
Operative Documents;

 

NOW,
THEREFORE, in consideration of the mutual agreements herein contained, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

 

SECTION
1.                                Commitment to Advance, and to Borrow.

 

(a)                                  The following terms shall have the following
meanings for all purposes of this Agreement:

 

(i)                                     unless otherwise expressly indicated, all
references herein to Sections or other subdivisions refer to the corresponding
sections and other subdivisions of this Agreement;

 

(ii)                                  the terms “hereof,” “herein,” “hereby,”
“hereto,” “hereunder,” “hereinafter” and “herewith”
refer to this Agreement; and

 

(iii)                               the terms defined on Schedule II attached
hereto shall have the respective meanings set forth on Schedule II attached
hereto.

 

(iv)                              all terms used herein and not otherwise
defined shall have the respective meanings set forth in Appendix A to the
Mortgage.

 

Each
of the Schedules and Exhibits hereto are hereby incorporated herein by this
reference.

 

(b)                                 Subject to the terms and conditions of this
Agreement, Lender agrees to make the Loan to Borrower on a date to be
designated pursuant to Section 2 hereof, which loan is to be evidenced

 

 

by
one or more Notes in an aggregate original amount equal to $60,000,000 and is to
be secured by the Mortgage.

 

SECTION
2.                                Borrower’s Notice of Closing Date; Closing.

 

(a)                                  Borrower agrees to give Lender and Security
Trustee at one Business Day’s written notice of the Closing Date, which date
shall be a date not later than September 30, 2005 and which notice shall
confirm the Loan.  The making of the Loan
by the Lender in the manner required by this Section 2 shall constitute
a waiver of such notices.

 

(b)                                 Subject to the terms and conditions of this
Agreement, Lender will make available the Loan by appropriate transfer of
immediately available funds at or before 2:00 p.m., New York City time, on the
Scheduled Closing Date (as defined in paragraph (d) below), to the account of
Borrower specified on Schedule I hereto or as otherwise agreed to by the
parties

 

(c)                                  Subject to the terms and conditions of this
Agreement, simultaneously with funding of the Loan on the Closing Date pursuant
to this Section 2, Borrower shall execute and deliver to Lender a Note payable
to Lender or its nominee in the principal amount of the Loan.

 

(d)                                 If for any reason the consummation of the
transactions contemplated hereby (the “Closing”) is not consummated on
or before September 26, 2005 (such date being herein called the “Scheduled
Closing Date”) the Lender may, by telephonic notice given by 5:00 P.M., New
York City time, on the Scheduled Closing Date, to Borrower and Security
Trustee, designate a delayed date for such closing (the “Delayed Closing
Date”), not later than September 30, 2005.

 

(e)                                  The Closing shall take place commencing at
12:00 noon New York City time, on the Closing Date, at the offices of Parr
Waddoups Brown Gee & Loveless, 185 South State Street, Suite 1300, Salt
Lake City, Utah 84111, or at such other time and place as the parties hereto shall
specify, but in no event later than September 30, 2005.

 

SECTION
3.                                [intentionally omitted]

 

SECTION 4.                                Conditions.

 

(a)                                  Conditions Precedent to Making the Loan.  It
is agreed that the obligation of Lender to make available the Loan is subject
to the satisfaction prior to or on the Closing Date of the following conditions
precedent, provided that it shall not be a condition precedent to the
obligations of Lender that any document be produced or action taken that is to
be produced or taken by Lender or by a Person within Lender’s control; and provided,
further, that paragraph (ix)(1) (insofar as it relates to Lender) below
shall not be a condition precedent to the obligation of Lender:

 

(i)                                     Lender shall have received due notice
pursuant to Section 2 hereof (or shall have waived such notice either in
writing or as provided in Section 2).

 

(ii)                                  No change shall have occurred after the date
of the execution and delivery of this Agreement in applicable law or
regulations thereunder or interpretations thereof by appropriate regulatory
authorities that, in the opinion of Lender, would make it a violation of law or
regulations for (x) Borrower, Guarantor, Security Trustee or Lender to execute,
deliver and perform the Operative Documents to which any of them is a party or
(y) Lender to make the Loan available.

 

(iii)                               [intentionally omitted]

 

2

 

(iv)                              Each of the Operative Documents shall have
been duly authorized, executed and delivered by the respective party or parties
thereto, shall each be satisfactory in form and substance to Lender and shall
be in full force and effect and executed counterparts shall have been delivered
to Borrower, Guarantor, Security Trustee and Lender, and their respective
counsel, provided that the Lender shall receive an executed original of
the Note.

 

(v)                                 A Uniform Commercial Code financing statement
naming Borrower as debtor and the Security Trustee as secured party in respect
of the security interests created by or pursuant to the Mortgage shall have
been executed and delivered by Borrower, and such financing statement shall
have been duly filed in Utah, and any additional Uniform Commercial Code
financing statements deemed necessary or advisable by Lender shall have been
executed and delivered by Borrower and duly filed.

 

(vi)                              Lender and Security Trustee shall have
received the following, in each case in form and substance satisfactory to it:

 

(1)                                  a copy of the Articles of Incorporation of
each of Borrower and Guarantor, certified by the Director of the Division of
Corporations and Commercial Code (or comparable governmental authority) of the
State of Utah, and a copy of the Bylaws and resolutions of the board of
directors of each of Borrower and Guarantor, in each case certified by the
Secretary or an Assistant Secretary of Borrower and Guarantor, respectively,
duly authorizing the execution, delivery and performance by Borrower and
Guarantor, as the case may be, of each of the Operative Documents to which
Borrower or Guarantor, respectively, is a party, and an incumbency certificate
as to the Person or Persons authorized to execute and deliver such documents on
its behalf and including specimens of the signatures of such Person or Persons;

 

(2)                                  [intentionally omitted] and

 

(3)                                  such other documents and evidence with
respect to Borrower or Guarantor as Lender or its special counsel may
reasonably request in order to establish the authority of such parties to
consummate the transactions contemplated by this Agreement and the taking of
all corporate proceedings in connection therewith.

 

(vii)               All appropriate action required to have been
taken prior to the Closing Date by the FAA, or any governmental or political
agency, subdivision or instrumentality of the United States or Canada in
connection with the transactions contemplated by this Agreement shall have been
taken, and all orders, permits, waivers, authorizations, exemptions and
approvals of such entities required to be in effect on the Closing Date in
connection with the transactions contemplated by this Agreement shall have been
issued, and all such orders, permits, waivers, authorizations, exemptions and
approvals shall be in full force and effect on the Closing Date.

 

(viii)            On the Closing Date, the following statements
shall be true, and Lender shall have received evidence satisfactory to it to
the effect that:

 

(1)                                  Borrower has good and marketable title to the
Aircraft free and clear of Liens other than the mortgage and security interest
created by the Mortgage and other Permitted Liens described in Section
4.01(a)(ii) and (iii) of the Mortgage;

 

(2)                                  the Aircraft is duly registered with the FAA
in the name of the Borrower;

 

3

 

(3)                                  Borrower has authority to operate such
Aircraft;

 

(4)                                  the Mortgage and the Mortgage Supplement have
been duly filed with the FAA for recordation;

 

(5)                                  Security Trustee on behalf of Lender is
entitled to the protection of Section 1110 of the Bankruptcy Code in connection
with its right to take possession of the Aircraft in the event of a case under
Chapter 11 of the Bankruptcy Code in which Borrower is a debtor; and

 

(6)                                  the Aircraft has an FAA airworthiness
certificate.

 

(ix)                                On the Closing Date:

 

(1)                                  the representations and warranties of
Borrower, Guarantor, Security Trustee and Lender contained herein and in the
other Operative Documents to which Borrower, Guarantor, Security Trustee or
Lender, as the case may be, is a party shall be true and accurate as though
made on and as of such date except to the extent that such representations and
warranties relate solely to a date other than the Closing Date (in which case
such representations and warranties shall have been true and accurate on and as
of such date), and Lender shall have received a certificate of a Responsible Officer
of each of Borrower and Guarantor to such effect; and

 

(2)                                  no event shall have occurred and be
continuing, or is reasonably likely to result from the consummation of the
transactions contemplated by the Operative Documents, which constitutes a
Default or an Event of Default; and

 

(3)                                  there will have been no material adverse
change in Borrower’s or Guarantor’s, business, assets, operations or financial
condition since June 30, 2005 (it being understood that a termination of the
codesharing agreement with either United Air Lines or Delta Air Lines would
constitute a material adverse change but that the filing for bankruptcy
protection by Delta Air Lines would not constitute a material adverse change).

 

(x)                                   Lender shall have received an opinion
addressed to Lender and Security Trustee from Parr Waddoups Brown Gee &
Loveless, special Utah counsel for Borrower and Guarantor, substantially in the
form of Exhibit A-1 hereto.

 

 

(xi)                                [intentionally omitted]

 

 

(xii)                             Lender shall have received an opinion
addressed to Lender, Borrower and Guarantor, from Daugherty, Fowler, Peregrin
& Haught, FAA counsel to Borrower, substantially in the form of Exhibit
A-2 hereto.

 

(xiii)                          [intentionally omitted]

 

(xiv)                         Lender and Security Trustee shall have
received a certificate signed by a Responsible Officer of Borrower, dated the
Closing Date, addressed to Lender and Security Trustee certifying (to the
knowledge of Borrower and, with respect to any item not relating directly to
Borrower

 

4

 

or
Guarantor, without any investigation by Borrower whatsoever) as to the
fulfillment of all conditions in this Section 4(a).

 

(xv)                            Lender shall have received an independent
insurance broker’s report, and certificates of insurance, in form and substance
reasonably satisfactory to Lender, as to the due compliance with the terms of
Section 4.01(e) of the Mortgage relating to insurance with respect to the
Aircraft.

 

(xvi)                         On the Closing Date no Event of Loss (or
event which with the passage of time is reasonably likely to become an Event of
Loss) with respect to the Airframe or any Engine shall have occurred.

 

(xvii)                      No action or proceeding shall have been
instituted nor shall governmental action be threatened before any court or
Governmental Authority, nor shall any order, judgment or decree have been
issued or proposed to be issued by any court or Governmental Authority at the
time of the Closing Date to set aside, restrain, enjoin or prevent the
completion and consummation of this Agreement or the transactions contemplated
hereby.

 

(xviii)                   All proceedings taken in connection with the
transactions contemplated hereby and the other Operative Documents and all
documents and papers relating thereto shall be satisfactory to Lender and its
counsel, and Lender and its counsel shall have received copies of such
documents and papers as Lender or its counsel may reasonably request in
connection therewith or as a basis for such counsel’s closing opinion, all in
form and substance satisfactory to Lender and its counsel.

 

(b)                                 Conditions Precedent to the Obligations of
Borrower and Guarantor.  It is agreed that the obligations of (1)
Borrower to enter into the Operative Documents to which it is to be a party and
(2) Guarantor to enter into the Guaranty and the other Operative Documents to
which it is to be a party, are all subject to the fulfillment to the
satisfaction of Borrower and Guarantor prior to or on the Closing Date of the
following conditions precedent:

 

(i)                                     The conditions specified in Section
4(a)(ii), 4(a)(vii), 4(a)(ix)(1) and 4(a)(xvii) hereof
shall have been satisfied, unless such nonsatisfaction is the result of action
or inaction by Borrower or Guarantor, as the case may be.

 

(ii)                                  Those documents described in Section
4(a)(iv) shall have been duly authorized, executed and delivered by the
respective party or parties thereto (other than Borrower and Guarantor) in the
manner specified in such section, shall each be satisfactory in form and
substance to Borrower and Guarantor, shall be in full force and effect on the
Closing Date, and an executed counterpart of each thereof (other than the Note)
shall have been delivered to Borrower and Guarantor or their counsel.

 

(iii)                               Borrower and Guarantor shall have received
the documents described in Section 4(a)(vi)(2), each certified as
provided therein, in form and substance satisfactory to Borrower and Guarantor,
together with such other documents and evidence with respect to Lender and
Security Trustee as Borrower, Guarantor or their counsel may reasonably request
in order to establish the consummation of the transactions contemplated by this
Agreement, the taking of all corporate or other similar proceedings in
connection therewith and compliance with the conditions herein set forth.

 

(iv)                              The representations and warranties of
Security Trustee and Lender contained in Section 7 hereof shall be true
and accurate as of the Closing Date as though made on and as of such date
except to the extent that such representations and warranties relate solely to
an earlier date (in

 

5

 

which
event such representations and warranties shall have been true and accurate on
and as of such earlier date).

 

(v)                                 Borrower and Guarantor shall have received
the opinions described in 4(a)(xii), in each case addressed to Borrower
and Guarantor, and dated the Closing Date.

 

(vi)                              No change shall have occurred after the date
of the execution and delivery of this Agreement in applicable law, regulations
thereunder or interpretations thereof by appropriate regulatory authorities, or
any other matter that, in the opinion of Borrower or Guarantor, would make it a
violation of law or regulations for Borrower or Guarantor to enter into any
transaction contemplated by the Operative Documents.

 

(vii)                           [intentionally omitted]

 

(viii)                        [intentionally omitted]

 

(c)                                  Direction by each of the parties hereto to
FAA counsel to file the documents referred to in Section 4(a)(viii)(4)
hereof shall constitute, as to such party, confirmation by such party that the
conditions to closing applicable to such party have been satisfied or waived to
its satisfaction.

 

SECTION
4.                                [intentionally omitted]

 

SECTION 5.                                Guarantor’s Representations, Warranties and
Covenants.  Guarantor represents, warrants and covenants
to Security Trustee and Lender that as of the Closing Date:

 

(a)                                  Guarantor is a corporation duly organized and
validly existing in good standing pursuant to the laws of the State of Utah; is
duly qualified to do business as a foreign corporation in each jurisdiction in
which its operations or the nature of its business requires such qualification,
except where the failure to be so qualified would not have a material adverse
effect on its ability to perform its obligations hereunder and under the
Guaranty; has the corporate power and authority to carry on its business as
presently conducted and to enter into and perform its obligations hereunder and
under the Guaranty; and its Internal Revenue Service employer identification
number is correctly set forth on Schedule I hereto;

 

(b)                                 the execution, delivery and performance by
Guarantor of this Agreement and the Guaranty have been duly authorized by all
necessary corporate action on the part of Guarantor, do not require any
stockholder approval, or approval or consent of any trustee or holders of any
indebtedness or obligations of Guarantor, and do not contravene the provisions
of, or constitute a default under or results in the creation of any Lien (other
than Permitted Liens) upon the property of Guarantor under, its Articles of Incorporation
or Bylaws, any law, rule, regulation, judgment or court order binding on the
Guarantor or any of its properties, or any indenture, mortgage, contract or
other agreement to which Guarantor is a party or by which it or any of its
properties may be bound or affected;

 

(c)                                  the execution and delivery by Guarantor of
this Agreement and the Guaranty and the performance by Guarantor of its
obligations thereunder do not require the consent or approval or authorization
of, the giving of notice to, or the registration with, or the taking of any
other action under any applicable law or regulation in respect of any
Governmental Authority;

 

(d)                                 each of this Agreement and the Guaranty has
been duly authorized, executed and delivered by Guarantor and constitutes legal,
valid and binding obligations of Guarantor enforceable against Guarantor in
accordance with the terms thereof, except as such enforceability may be limited
by

 

6

 

applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws of
general application relating to creditors’ rights generally and by general
equitable principles (regardless of whether the issue of enforceability is
considered in a proceeding in equity or at law);

 

(e)                                  except with respect to matters described in “Part
II OTHER INFORMATION Item 1:  Legal
Proceedings” of Guarantor’s Form 10-Q filed for the period ending June 30, 2005
and, except for any bankruptcy proceedings relating to Delta that involve
Lessee’s codeshare agreement with Delta, there are no pending or, to the
knowledge of Guarantor, threatened actions or proceedings before any court or
administrative agency to which Guarantor or its Affiliates is a party which
individually (or in the aggregate in the case of any group of related lawsuits)
are reasonably likely to have a material adverse effect on the Guarantor’s
financial condition or the ability of Guarantor to perform its obligations
hereunder or under the Guaranty;

 

(f)                                    true and correct copies of the financial
statements of Guarantor as of December 31, 2004, March 31, 2005 and June 30,
2005 have been delivered to Lender and such financial statements have been, in
the case of the December 31, 2004 financial statements, audited by independent
certified public accountants and have, in each case, been prepared in
accordance with generally accepted accounting principles consistently applied
with financial statements of prior years, are correct and complete and fairly
present the financial condition and operating results of Guarantor as of such
date (subject, in the case of the March 31, 2005 and June 30, 2005 financial
statements, to normal year-end audit adjustments) and since December 31, 2004,
March 31, 2005 and June 30, 2005 respectively, there has been no material
adverse change in such condition or operations, except for such matters timely
disclosed in any subsequent quarterly report on Form 10-Q or interim report on
Form 8-K filed with the Securities and Exchange Commission (the “SEC”)
prior to the Closing Date and furnished to Lender;

 

(g)                                 Guarantor will furnish to Lender:

 

(i)                                     within 60 days after the end of each of the
first three quarterly periods of each fiscal year of Guarantor, Guarantor’s
quarterly report on Form 10-Q (or such other form as may be required by the
SEC) for such quarter as filed with the SEC or, if Guarantor is not subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended,
copies (each of which shall be prepared in accordance with generally accepted
accounting principles) of (A) a consolidated balance sheet of Guarantor as of
the end of such quarter, setting forth in comparative form the amount for the
end of the corresponding period of the preceding fiscal year, and (B)
consolidated statements of income, stockholders’ equity and cash flows of
Guarantor for such quarterly period, setting forth in comparative form the
amount for the corresponding period of the preceding fiscal year;

 

(ii)                                  within 120 days after the end of each fiscal
year of Guarantor, Guarantor’s annual report on Form 10-K (or such other form
containing the same information as may be required by the SEC) for such year as
filed with the SEC, or if Guarantor is not subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended, duplicate
copies (each of which shall be prepared in accordance with generally accepted
accounting principles) of (A) a consolidated balance sheet of Guarantor as of
the end of such year, and (B) consolidated statements of income, stockholders’
equity and cash flows of Guarantor for such year, setting forth in each case in
comparative form the figures for the previous fiscal year and in all cases
accompanied by a favorable auditor’s report of a firm of independent certified
public accountants of recognized national standing;

 

(iii)                               promptly upon their becoming available, one
copy of each proxy statement sent by Guarantor to its shareholders generally,
and of each regular or periodic report and of any prospectus (in the form in
which it becomes effective) filed by Guarantor with the SEC or any successor
agency; and

 

7

 

(iv)                              such other further public information
concerning the Guarantor’s or Borrower’s financial condition, operations or
business as Lender reasonably requests; and

 

(h)                                 intentionally omitted;

 

(i)                                     Guarantor covenants that it will not
consolidate with or merge with or into any other corporation or other Person or
convey, transfer or lease all or substantially all of its assets as an entirety
(whether in one transaction or a series of related transactions) to any Person
unless:

 

(i)                                     the corporation or other Person formed by
such consolidation or with or into which Guarantor is merged or the Person
which acquires by conveyance, transfer or lease all or substantially all of the
assets of Guarantor as an entirety (the “Successor”) shall, after giving effect
to such merger, consolidation, conveyance, transfer or lease, have a Tangible
Net Worth at least equal to the lesser of (1) Guarantor’s Tangible Net Worth
immediately prior to such consolidation, merger, conveyance, transfer or lease
and (2) the greater of (x) Guarantor’s Tangible Net Worth as of June 30, 2005
and (y) 60% of Guarantor’s Tangible Net Worth immediately prior to such
consolidation, merger, conveyance, transfer or lease;

 

(ii)                                  the Successor executes and delivers to Lender
and Security Trustee a duly authorized, valid, binding and enforceable
agreement in form and substance reasonably satisfactory to Security Trustee and
Lender containing an assumption by such Person of the obligations of Guarantor
under the Guaranty and the other Operative Documents to which Guarantor is a
party;

 

(iii)                               immediately after giving effect to such
transaction, no Default or Event of Default has occurred or is continuing; and

 

(iv)                              Guarantor shall (1) at least 30 days prior to
such consolidation, merger, conveyance, transfer or lease, give written notice
of such transaction to Lender and (2) have delivered to Lender (A) a
certificate signed by a Responsible Officer of Guarantor stating that such
consolidation, merger, conveyance, transfer or lease and the assumption
agreement mentioned in clause (ii) above comply with the terms set forth herein
and that all conditions precedent herein provided for relating to such
transaction have been complied with and (B) an opinion of counsel (such counsel
selected by Guarantor and reasonably acceptable to Lender) reasonably
satisfactory to Lender that the assumption agreement mentioned in clause (ii)
above is, subject to reasonable assumptions, qualifications and exceptions, the
duly authorized, valid and binding agreement of Successor enforceable against
Successor in accordance with the terms thereof.

 

Upon
any consolidation or merger, or any conveyance, transfer or lease of all or
substantially all of the assets of Guarantor as an entirety in accordance with
this Section 5(i), Successor shall succeed to, and be substituted for,
and may exercise every right and power of, Guarantor under this Agreement and
the other Operative Documents to which it is a party with the same effect as if
such Successor had been named as Guarantor herein.  No such consolidation, merger, conveyance,
transfer or lease of all or substantially all of the assets of Guarantor as an
entirety shall have the effect of releasing Guarantor or any Person which shall
theretofore have become a Successor in the manner prescribed in this Section
5(i) from its liability in respect of any Operative Document to which it is a
party.  Guarantor or Borrower shall pay
all reasonable costs and expenses, including reasonable attorney’s fees of
Security Trustee and Lender in connection with verification of the foregoing
conditions. For avoidance of doubt, matters involving the consolidation or
merger, or any conveyance, transfer or lease of all or substantially all of the
assets of Borrower are governed solely by Section 7(e) hereof.

 

8

 

SECTION 6.                                Borrower’s Representations, Warranties and
Indemnities.

 

(a)                                  In General.  Borrower represents and
warrants as of the Closing Date and covenants to Lender that:

 

(i)                                     Borrower is a corporation duly organized and
validly existing in good standing pursuant to the laws of the State of Utah; is
duly qualified to do business as a foreign corporation in good standing in all
jurisdictions in which its operations or the nature of its business require
such qualification; is a Citizen of the United States and a Certificated Air
Carrier; holds all licenses, certificates, permits and franchises from the
appropriate agencies of the United States of America and/or all other
Governmental Authorities having jurisdiction necessary to authorize Borrower to
engage in air transport and to carry on scheduled passenger service as
presently conducted and each such license, certificate, permit and franchise is
in full force and effect; is a registered organization (as such term is defined
in Article 9a of the Utah Uniform Commercial Code—Secured Transactions)
organized under the laws of the State of Utah and the full and correct legal
name, type of organization, organizational number, jurisdiction of
organization, and mailing address of the Borrower as of the Closing Date are
correctly set forth in Schedule I hereof; covenants and agrees that it will not
change such status or its name without 30 days’ prior written notice to
Security Trustee; and further covenants and agrees to provide for the filing of
such amended or new Uniform Commercial Code financing statements in the
appropriate filing or recording office as may be necessary to protect the
perfection and/or priority of the interest intended to be covered hereunder and
under the Mortgage; has the corporate power and authority to carry-on its
business as presently conducted and to enter into and perform its obligations
under the Borrower Documents; and its Internal Revenue Service employer
identification number is correctly set forth on Schedule I hereto;

 

(ii)                                  the execution, delivery and performance by
Borrower of the Borrower Documents will, on the Closing Date, have been duly
authorized by all necessary corporate action on the part of Borrower, do not
require any stockholder approval, or approval or consent of any trustee or
holders of any indebtedness or obligations of Borrower except such as have been
duly obtained or by the Closing Date will have been duly obtained, and
(assuming the correctness of the representations, warranties and covenants of
Lender in Section 7 hereof including, but not limited to,
representations relating to ERISA and the Securities Act) none of such Borrower
Documents contravenes any law, judgment, government rule, regulation or order
binding on Borrower or the Articles of Incorporation or Bylaws of Borrower or
contravenes the provisions of, or constitutes a default under, or results in the
creation of any Lien (other than the mortgage and security interest created by
the Mortgage) upon the property of Borrower under its Articles of Incorporation
or Bylaws or any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, credit agreement, contract or other agreement or
instrument to which Borrower is a party or by which it or any of its properties
may be bound or affected;

 

(iii)                               neither the execution and delivery by
Borrower of the Borrower Documents nor the performance by Borrower of its
obligations thereunder require the consent, approval or authorization of, the
giving of notice to, or the registration with, or the taking of any other
action under any applicable law or regulation in respect of any Governmental Authority,
except for (A) the orders, permits, waivers, exemptions, authorizations,
requirements, regulations and approvals of the regulatory authorities having
jurisdiction over the operation of the Aircraft by Borrower, which orders,
permits, waivers, exemptions, authorizations and approvals have been duly
obtained or will on or prior to the Closing Date be duly obtained, and will on
the Closing Date be in full force and effect, (B) any normal periodic and other
reporting requirements under the applicable rules and regulations of the FAA to
the extent required to be given or obtained only after the Closing Date and (C)
to the extent not covered above in this paragraph (iii), those filings
described in Section 6(a)(vi) below;

 

9

 

(iv)                              the Borrower Documents have been duly
executed and delivered by Borrower and each constitutes legal, valid and
binding obligations of Borrower enforceable against Borrower in accordance with
the terms thereof, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws of
general application relating to creditors’ rights generally and by general
equitable principles (regardless of whether the issue of enforceability is
considered in a proceeding in equity or at law);

 

(v)                                 except with respect to matters described in “Part
II OTHER INFORMATION Item 1:  Legal
Proceedings” of Guarantor’s Form 10-Q filed for the period ending June 30, 2005
and, except for any bankruptcy proceedings relating to Delta that involve
Lessee’s codeshare agreement with Delta, there is no pending or threatened
action or proceeding to which Borrower or any of its Affiliates is a party
before any court or administrative agency which individually (or in the
aggregate in the case of any group of related lawsuits) is reasonably likely to
have a material adverse effect on the financial condition of Borrower or the
ability of Borrower to perform its obligations under the Borrower Documents;

 

(vi)                              except for (A) the filing for recording
pursuant to the Transportation Code of the Mortgage Supplement and the
Mortgage, and (B) the filing of financing statements (and continuation
statements at periodic intervals) with respect to the security and other interests
created by such documents under Article 9a of the Uniform Commercial
Code—Secured Transactions of the State of Utah and such other states as may be
specified in the opinion furnished pursuant to Section 4(a)(x) hereof,
no further action, including any filing or recording of any document (including
any financing statement in respect thereof under Article 9 of the Uniform
Commercial Code—Secured Transactions of any applicable jurisdiction), is
necessary or advisable in order to establish and perfect Security Trustee’s
security interest in the Mortgage Estate as against Borrower and any third
parties in any applicable jurisdictions in the United States;

 

(vii)                           there has not occurred any event that
constitutes a Default or an Event of Default that is presently continuing nor
any default under the Purchase Agreement which is continuing;

 

(viii)                        Borrower has good and marketable title to the
Aircraft free and clear of Liens other than the mortgage and security interest
created by the Mortgage and other Permitted Liens described in Section
4.01(a)(ii) and (iii) of the Mortgage not of record;

 

(ix)                                [intentionally omitted];

 

(x)                                   none of the written statements about Borrower
or Guarantor furnished to Lender by or on behalf of Borrower or any Person
authorized or employed by Borrower as agent, broker, dealer or otherwise in
connection with the negotiation of the transactions contemplated by this
Agreement, contained, as of the date thereof, any untrue statement of a
material fact about Borrower or Guarantor or omitted, as of the date thereof, a
material fact about Borrower or Guarantor necessary to make the statements
about Borrower or Guarantor contained therein or herein not misleading and
there is no fact that Borrower has not disclosed to Lender in writing which materially
and adversely affects or, so far as Borrower can reasonably foresee, will
materially and adversely affect the Aircraft, the business, profits or
condition (financial or otherwise) of Borrower or will impair the ability of
Borrower to perform its obligations under Borrower Documents;

 

(xi)                                Borrower and its Affiliates have filed or
caused to be filed all federal, state, and material local and non-U.S. tax
returns that are required to be filed and have paid or caused to be paid all
taxes shown to be due on such returns or on any assessment received by Borrower
or its

 

10

 

Affiliates,
expect any that are being contested diligently and in good faith by appropriate
proceedings and for which adequate provision for payment has been made;

 

(xii)                             the Aircraft is fully equipped to operate in
commercial service and does not require any additions or improvements for its
intended use by Borrower;

 

(xiii)                          no Person acting on behalf of Borrower is or
will be entitled to any broker’s fee, commission or finder’s fee in connection
with the transactions contemplated by the Operative Documents;

 

(xiv)                         no Event of Loss has occurred with respect to
the Aircraft, and no circumstance, condition, act or event has occurred to the
knowledge of Borrower that, with the giving of notice or lapse of time will
give rise to or constitute an Event of Loss with respect to the Aircraft or any
Engine;

 

(xv)                            all sales or use Taxes then due and for which
Borrower is responsible pursuant to Section 6(b) hereof shall have been paid,
other than such Taxes that are being contested by Borrower in good faith and by
appropriate proceedings (and for which Borrower) shall have established
adequate reserves) so long as such proceedings do not involve any reasonable
likelihood of the sale, forfeiture or loss of the Aircraft; and

 

(xvi)                         Security Trustee on behalf of Lender is
entitled to the protection of Section 1110 of the Bankruptcy Code in connection
with it rights to take possession of the Aircraft in the event of a case under
Chapter 11 of the Bankruptcy Code in which Borrower is a debtor.

 

(b)                                 General Tax Indemnity.

 

(i)                                     Indemnity.  Borrower shall pay, and on
written demand shall indemnify and hold harmless on an After-Tax Basis each
Indemnitee from and against, any and all Taxes imposed against any Indemnitee,
Borrower or any Affiliate of Borrower, the Aircraft, Airframe, or any Engine or
any Part thereof or interest therein, or any lessee or user or Person in
possession thereof, or Affiliate of any lessee, user or Person in possession
thereof, by the United States or any state or local government or other taxing
authority thereof or any territory or possession thereof, or by any foreign
government or any international taxing authority or any political subdivision
or taxing authority of any of the foregoing upon or with respect to (A) the
Aircraft, Airframe, any Engine or any Part or any interest therein; (B) the
acquisition, manufacture, purchase, mortgaging, financing, refinancing,
ownership, delivery, nondelivery, redelivery, transport, location, lease,
sublease, hire, assignment, alteration, improvement, possession, registration,
deregistration, transfer of registration, presence, use, replacement,
substitution, pooling, operation, insurance, installation, modification,
rebuilding, overhaul, condition, storage, maintenance, repair, sale, return,
abandonment, preparation, transfer of title, conditional sale, acceptance,
importation, exportation, rejection or other disposition of the Aircraft,
Airframe, any Engine, any Part or any interest in any of the foregoing; (C) the
rentals, receipts, income or earnings arising from the purchase, financing,
ownership, delivery, redelivery, leasing, subleasing, possession, use,
operation, return, storage, transfer of title, sale or other disposition of the
Aircraft, Airframe, any Engine, any Part, or any interest in any of the
foregoing; (D) the Notes, their issuance, acquisition, transfer, refinancing,
or the payment of any amounts thereon; (E) the execution, delivery, performance
or enforcement of any of the Operative Documents or any future amendment,
supplement, waiver or consent thereto, or any of the transactions contemplated
thereby, any proceeds or payments or amounts payable under any thereof, or the
issuance, acquisition or subsequent transfer thereof; (F) the property or the
income or other proceeds with respect to any of the property held in the
Mortgage Estate; (G) the payment of the purchase price pursuant to the Loan

 

11

 

Agreement
and the Purchase Agreement; or (H) otherwise with respect to or in connection
with the transactions contemplated by the Operative Documents.

 

(ii)                                  Exclusions from General Tax Indemnity.  The
provisions of Section 6(b)(i) shall not apply to, and Borrower shall
have no obligation to pay, or to indemnify or hold harmless a particular
Indemnitee with respect to:

 

(1)                                  Taxes imposed on an Indemnitee by withholding
or otherwise, based on, or measured by the income (including gross income), earnings,
receipts, capital, franchises, excess profits or conduct of business of such
Indemnitee, including, without limitation, income Taxes, U.S. Withholding
Taxes, capital gains Taxes, minimum and alternative minimum Taxes, accumulated
earnings Taxes, personal holding company Taxes and branch profits and branch
interest Taxes (other than sales, rental, use, value added, property, ad valorem, license, excise, general
services, stamp, documentary or similar Taxes) imposed by the United States,
any state or local government, or any foreign government; provided,
however, that:

 

(A)                              In the case of any Taxes imposed by a
Governmental Authority other than the United States, the exclusions set forth
in this clause (1) shall apply only if and to the extent that: (I) such Taxes
are imposed as a result of the Indemnitee’s situs of organization, residence,
citizenship, place of business, presence or activities in the jurisdiction
imposing the Tax, and (II) the Indemnitee’s situs, residence, citizenship,
place of business, presence or activity in the taxing jurisdiction is not
solely attributable to (x) the operation, use, presence, or registration of the
Aircraft, Airframe or any Engine or Part or any other aircraft, airframe,
engine or part owned or leased by Borrower, in such jurisdiction, (y) the
presence of Borrower or any lessee or any Affiliate of any thereof, or Borrower
or any lessee or any Affiliate thereof making payments (or having been deemed
to have made payments) from or performing any other actions expressly permitted
or required under the Operative Documents, or the application of the proceeds
of the Notes, in such jurisdiction, or (z) the Indemnitee’s participation in
the transactions contemplated hereby.

 

(B)                                In the case of U.S. Withholding Taxes on an Indemnitee,
the exclusion contained in this clause (1) shall not apply if and to the extent
that such Taxes result from a Change in Tax Law issued, enacted or adopted
after the Closing Date; and

 

(C)                                The exclusions set forth in this clause (1)
shall not apply to amounts necessary to make any payment on an After-Tax Basis.

 

(2)                                  [Taxes attributable to any period following
the payment in full of all of Borrower’s obligations under the Mortgage and all
other amounts then payable under the other Operative Documents; provided,
however, that the exclusions set forth in this subparagraph (2) shall
not apply to Taxes relating to payments made by Borrower to or for the benefit
of any Indemnitee under the Operative Documents following such events];

 

(3)                                  [intentionally omitted];

 

(4)                                  Taxes imposed on an Indemnitee that arise out
of or are caused by (A) the breach of any express representation, warranty or
covenant of such Indemnitee (unless attributable to the breach of any
representation, warranty or covenant set forth in the Operative

 

12

 

Documents
by a party thereto other than such Indemnitee if such breach is not caused by
such Indemnitee), (B) in the case of Security Trustee, any act or omission of
the Security Trustee where such act or omission is not permitted by the
Operative Documents, or (C) the gross negligence or willful misconduct of such
Indemnitee (unless such gross negligence or willful misconduct is imputed to
such Indemnitee by reason of the acts or omissions of Borrower);

 

(5)                                  Taxes that become payable as a result of a
transfer by an Indemnitee of all or a portion of its interest in any Operative
Documents other than in connection with (A) a Specified Default or an Event of
Default, (B) an Event of Loss, or (C) a transfer by the Lender pursuant to a
request by Borrower;

 

(6)                                  Taxes imposed against a transferee of an
Indemnitee to the extent of the excess of such Taxes over the amount of such
Taxes that would have been imposed on the original Lender or Security Trustee,
as applicable, had that original Indemnitee not made a transfer (including for
this purpose the booking of a Note by a Lender in a jurisdiction other than of
its original Lending Office); provided, however, that this clause (6)
shall not apply to:  (A) the extent
necessary to make any payment on an After-Tax Basis, (B) a transfer not
excluded by Section 6(b)(ii)(5) hereof, or (C) Taxes imposed on a Note
Holder which is a transferee of the Lender (including a Lending Office of a
particular Lender that is a transferee of its respective original Lending
Office) if that transferee is domiciled in the United States, Belgium, France,
Germany, Ireland, the Netherlands or the United Kingdom;

 

(7)                                  Taxes imposed on Security Trustee with
respect to any fees received for services rendered by it in its capacity as
Security Trustee under the Mortgage;

 

(8)                                  [intentionally omitted];

 

(9)                                  Taxes imposed on an Indemnitee resulting from
or attributable to any amendment, supplement, waiver, consent or modification
to any Operative Document, the Notes, or any other documents contemplated
hereby or thereby, which have not been approved in writing by Borrower, unless
(A) made while a Specified Default or an Event of Default is continuing or (B)
expressly required pursuant to the terms of the Operative Documents;

 

(10)                            [intentionally omitted];

 

(11)                            Taxes imposed on an Indemnitee to the extent
resulting from a failure of such Indemnitee to provide any certificate,
documentation, or other evidence requested by Borrower and required under
applicable law as a condition to the allowance of a reduction in such Tax,
which in such Indemnitee’s good faith judgment it is eligible to provide; but
only if such Indemnitee was legally eligible to provide such certificate,
documentation or other evidence without adverse consequence to it or its
Affiliate, and, in the case of certificates, documentation or other evidence
requiring disclosure of knowledge of factual information (such as the location
of the Aircraft) that is not readily ascertainable by the Indemnitee, only if
Borrower provides such information to the Indemnitee in a timely written manner
and at Borrower’s cost; or

 

(12)                            Taxes imposed on an Indemnitee to the extent
resulting the failure by such Indemnitee’s or its Affiliates to file any return
or report which it is legally required to file unless such failure results from
Borrower’s breach of its obligations under Section 6(b)(v) below.

 

13

 

(iii)                               Calculation of General Tax Indemnity Payments.

 

(A)                               Any payment that Borrower shall be required
to make to or for the account of any Indemnitee with respect to any Tax that is
subject to indemnification under this Section 6(b) shall be made on an
After-Tax Basis.

 

(B)                                If by reason of any Tax payment made by or on
behalf of Borrower to or for the account of an Indemnitee pursuant to this Section
6(b), such Indemnitee subsequently actually realizes Tax Savings against
Taxes not indemnified against hereunder and not previously taken into account
in computing such payment, such Indemnitee shall promptly pay to Borrower an
amount equal to the sum of (I) the actual net reduction in Taxes, if any,
actually realized by such Indemnitee which is attributable to such Tax Savings
and (II) the actual reduction in any Taxes not indemnified against hereunder
and realized by such Indemnitee as the result of any payment made by such
Indemnitee pursuant to this sentence; provided that such Indemnitee
shall not be obligated to pay any such amount to the extent that such amount
would exceed (x) the aggregate amount of all prior payments by Borrower to such
Indemnitee under this Section 6(b) (including the payment of any amount
necessary for such payments to be on an After-Tax Basis) less (y) the aggregate
amount of all prior payments by such Indemnitee to Borrower pursuant to this Section
6(b); provided, further, that any amount not paid to Borrower
pursuant to the foregoing limitation shall be carried forward to reduce pro
tanto any future payments that Borrower may be required to make to such
Indemnitee pursuant to this Section 6(b).

 

(C)                                Any Taxes that are imposed on an Indemnitee
as a result of the disallowance or reduction of any Tax Savings paid to
Borrower pursuant to this Section 6(b)(iii) shall be treated as a Tax
for which Borrower is obligated to indemnify such Indemnitee without regard to
the exclusions set forth in Section 6(b)(ii) (other than subparagraphs
(4), (11) and (12) thereof).

 

(D)                               In determining the order in which any
Indemnitee utilizes any foreign Taxes as a credit against such Indemnitee’s
United States income Taxes, such Indemnitee may use any reasonable,
non-discriminatory method with respect to the use of any foreign Taxes as a
credit against such Indemnitee’s United States income Taxes.

 

(iv)                              Contests.

 

(A)                               If a written claim shall be made against and
received by any Indemnitee for any Tax for which Borrower is obligated to
indemnify pursuant to this Section 6(b), such Indemnitee shall notify
Borrower in writing of such claim within 30 days after its receipt, and shall
provide Borrower such information regarding such claim as Borrower may
reasonably request; provided, however, that the failure to
provide such notice shall not release Borrower from any of its obligations to
indemnify under Section 6 hereof unless, and only to the extent that,
such failure effectively precludes Borrower’s contest rights.  To the extent permitted under applicable law,
such Indemnitee will not make any payments with respect to such claim for at
least 30 days after giving notice of such claim to Borrower.

 

(B)                                If requested by Borrower in writing within 30
days after its receipt of such notice or such shorter period as may be required
by applicable law, such Indemnitee shall, at the expense of Borrower and subject
to subparagraph (C) below, contest the validity, applicability or amount of
such Taxes by, in the case of an

 

14

 

Indemnitee-Controlled
Contest, in such Indemnitee’s sole discretion or, in the case of a Borrower-Controlled
Contest, in Borrower’s sole discretion, (1) resisting payment thereof if
practicable, (2) not paying such Tax except under protest, (3) if protest is
necessary and proper, and if payment of such Tax is made, using reasonable
efforts to obtain a refund thereof, in appropriate administrative and judicial
proceedings, and (4) in the case of an Indemnitee-Controlled Contest,
considering in good faith any other reasonable action as Borrower may
reasonably request.  Each Indemnitee
shall consult in good faith with Borrower and Borrower’s counsel, and Borrower
shall consult in good faith with such Indemnitee and its counsel in the case of
a Borrower-Controlled Contest. concerning the forum in which the contest is
most likely to be favorably resolved and whether such contest shall be by (x)
resisting payment of such Tax, (y) paying such Tax under protest or (z) paying
such Tax and seeking a refund or other repayment thereof.

 

(C)                                In no event shall an Indemnitee be required,
or Borrower permitted, to contest the imposition of any Tax for which Borrower
is obligated pursuant to this Section 6(b) unless (1) Borrower shall
have agreed to pay and shall promptly be paying on request all reasonable costs
and expenses that such Indemnitee incurs in contesting such claim or arising
out of or relating to such contest (including legal fees, accounting fees, and
disbursements, including those on appeal, if any); (2) such contest is not
reasonably likely to result in a material danger of the sale, seizure, forfeiture
or loss of the Aircraft, or the creation of any Lien thereon other than Liens
for Taxes (i) either not yet due or being contested in good faith by
appropriate proceedings and (ii) for which such reserves, if any, as are
required to be provided under generally accepted accounting principles have
been provided by Borrower, and there is no risk of criminal penalties; (3) if
such contest shall be conducted in a manner requiring the payment of the claim,
Borrower shall have advanced sufficient funds, on an interest-free basis, to
make the payment required, and shall have agreed to indemnify the Indemnitee
against any additional net after-Tax cost to such Indemnitee of such advance;
(4) if requested by the Indemnitee in writing, such Indemnitee shall have received
an opinion of independent Tax counsel selected by Borrower and reasonably
acceptable to such Indemnitee and furnished at Borrower’s sole expense to the
effect that a Realistic Possibility of Success exists for contesting such claim
(or, in the case of an appeal of an adverse judicial determination, a written
opinion from such independent Tax counsel to the effect that it is more likely
than not that such adverse judicial determination will be reversed or
substantially modified); (5) Borrower shall have delivered to such Indemnitee a
written acknowledgment of Borrower’s obligation to indemnify such Indemnitee to
the extent that the contest is not successful; provided, however,
that Borrower will not be bound by its acknowledgment of liability if the contest
is resolved on a clear and unambiguous basis showing no such liability under
this Section 6(b) with respect to such Tax; (6) if a Specified Default
or Event of Default shall have occurred and be continuing, Borrower shall have
provided security for its obligation hereunder satisfactory to the Indemnitee
by placing in escrow sufficient funds to cover any such contested Tax and the
reasonably expected expenses of such contest on an After-Tax Basis, or
otherwise providing satisfactory provisions for payment of such amounts
determined by the Indemnitee in its sole discretion; (7) the aggregate amount
of all indemnity payments that Borrower may be required to make to such
Indemnitee with respect to such claim (or similar or related claims) is at
least $60,000; and (8) the claim is not for a Tax the imposition of which has
been previously contested by, or at the request of, Borrower hereunder, and
such previous contest (including all allowable appeals) was decided adversely
to Borrower, unless Borrower

 

15

 

has
delivered an opinion of independent Tax counsel selected by Borrower and
reasonably acceptable to the Indemnitee to the effect that, on the basis of (i)
a change in applicable law, or (ii) a difference in the underlying facts, there
is currently a Realistic Possibility of Success for contesting such claim.

 

(D)                               If any Indemnitee shall obtain a refund of
all or any part of any Tax paid by Borrower, such Indemnitee shall pay
Borrower, but not before Borrower shall have made all payments theretofore due
to such Indemnitee pursuant to this Section 6(b) and any other payments
theretofore due such Indemnitee under any of the Operative Documents, an amount
equal to the amount of such refund (net of any Taxes imposed thereon),
including interest received and attributable thereto (net of any Taxes imposed
thereon) plus, if Borrower has paid an amount pursuant to the first sentence of
Section 6(b)(iii)(A), any net Tax benefit (or minus any net Tax
detriment) realized by such Indemnitee as a result of any refund received, and
payment made, by such Indemnitee pursuant to this sentence; provided
that the Indemnitee shall not be obligated to pay an amount under the preceding
sentence to the extent that such amount would exceed the amount of such Taxes
paid, reimbursed or advanced by Borrower to such Indemnitee (other than the
cost of the contest thereof); provided, further, that any amount
not paid to Borrower pursuant to the foregoing limitation shall be carried
forward to reduce pro  tanto any future payments that Borrower may
be required to make to such Indemnitee pursuant to this Section 6(b).  If any Indemnitee shall have paid Borrower
any refund of all or part of any Tax paid by Borrower and it is subsequently
determined that such Indemnitee was not entitled to the refund, such
determination shall be treated as the imposition of a Tax for which Borrower is
obligated to indemnify such Indemnitee pursuant to the provisions of this Section
6(b) without regard to the exclusions set forth in Section 6(b)(ii)
(other than subparagraphs (4), (11) and (12) thereof).  Provided no Specified Default or Event of
Default has occurred and is continuing, an Indemnitee shall not settle any such
claim or contest pursuant to this provision without the written consent of
Borrower, which consent shall not be unreasonably withheld, conditioned or
delayed; provided, that an Indemnitee may settle at any time without the
consent of Borrower if the Indemnitee waives (by written notice to Borrower)
the payment by Borrower of an indemnity in respect of such issue and any
related issue the contest of which is effectively foreclosed by the settlement
of such issue, including any payment arising from such issue in subsequent
years or which by reason of the fact that such issue is of a continuing nature,
and promptly pays to Borrower any Tax previously paid or any interest-free loan
advanced by Borrower (other than expenses of such contests) with respect to
such issue.

 

(E)                                 Nothing contained in this Section 6(b)(iv)
shall require any Indemnitee to contest, or permit Borrower to contest in the
name of such Indemnitee, a claim that such Indemnitee would otherwise be
required to contest pursuant to this Section 6(b)(iv) if such Indemnitee
shall waive payment by Borrower of any amount that might otherwise be payable
by Borrower under this Section 6(b) in connection with such claim (other
than the costs of contest previously incurred), nor shall any Indemnitee be
required to pursue any appeal to the United States Supreme Court.

 

(v)                                 Reports.  Borrower will provide such
information as may reasonably be requested by an Indemnitee to enable an
Indemnitee to fulfill its Tax filing, audit, contest, or other information
reporting requirements with respect to the transactions contemplated by the
Operative Documents.  If any report,
return or statement is required to be filed with respect to any Tax that is
subject to indemnification under this Section 6(b), Borrower shall
notify such Indemnitee of such requirement

 

16

 

and,
to the extent legally permitted to do so, Borrower shall timely file the same
(except for any such report, return or statement that the Indemnitee has
notified Borrower that the Indemnitee intends to file, or for income Tax
returns or any other return, report or statement which the Indemnitee is
required by law to file in its own name). 
Borrower shall have no obligation under the preceding sentence if such
Indemnitee, after receipt of Borrower’s timely written request, shall have
failed to furnish Borrower with such information as is within such Indemnitee’s
control, not otherwise available to Borrower and is reasonably necessary to
file such returns.  Borrower shall either
file such report, return or statement required to be filed by it pursuant to
the second preceding sentence and send a copy of such report, return or
statement to the Indemnitee, or, where Borrower is not so permitted to file
such report, return or statement, it shall notify the Indemnitee of such
requirement and prepare and deliver, subject to the immediately preceding
sentence, such report, return or statement to the Indemnitee in a manner
satisfactory to such Indemnitee within a reasonable time prior to the time such
report, return or statement is to be filed.

 

(vi)                              Payment.  Except as provided in Section
6(b)(iv) regarding Borrower’s right to contest certain claims for Taxes,
Borrower shall pay any Tax for which it is liable pursuant to this Section
6(b) directly to the appropriate taxing authority or, upon demand of an
Indemnitee, to such Indemnitee within twenty (20) Business Days of such demand,
but in no event more than five (5) Business Days prior to the date such Tax is
due, in immediately available funds.  Any
such demand for payment from an Indemnitee shall specify in reasonable detail
the amount of the payment and the facts upon which the right to payment is
based (all in accordance with Section 6(b)) and shall be verified in
accordance with the procedures set forth in clause (xi) below.  Each Indemnitee shall promptly forward to
Borrower any notice, bill or advice in the nature of a notice or bill received
by it concerning any Tax subject to indemnification hereunder.  As soon as practicable after each payment by
Borrower of any Tax, Borrower shall furnish the appropriate Indemnitee the
original or a certified copy of a receipt for Borrower’s payment of such Tax or
such other evidence of payment of such Tax as is reasonably acceptable to such
Indemnitee.

 

(vii)                           Definition of Indemnitee.  For
purposes of this Section 6(b), the term Indemnitee shall also include
any consolidated or combined group of which such Indemnitee, its member or a
partner of its member, is or becomes a member if such group is treated as a
single taxpayer for purposes of any Tax.

 

(viii)                        Application of Payments During Existence of a
Specified Default or Event of Default.  Notwithstanding the foregoing,
any amount payable to Borrower pursuant to the terms of this Section 6(b)
shall not be paid to Borrower if at the time such payment is to be made a
Specified Default or an Event of Default shall have occurred and be
continuing.  At such time as there shall
not be continuing any such Specified Default or Event of Default, such amount
shall be paid to Borrower (without interest) to the extent not applied against
Borrower’s obligations hereunder or under any of the other Operative Documents.

 

(ix)                                Forms.  Each Indemnitee agrees to
furnish from time to time to Borrower, or to such other person as Borrower may
designate, at Borrower’s written request or pursuant to the terms of the
Operative Documents, such duly executed and properly completed forms as may be
necessary or appropriate in order to claim any reduction of, or exemption from,
any Tax which Borrower may be required to indemnify against hereunder, unless
such Indemnitee reasonably determines, pursuant to an opinion of counsel
selected by such Indemnitee and reasonably satisfactory to Borrower, which
opinion is to be provided at Borrower’s sole cost and expense, that it is not
entitled to claim such reduction or exemption or unless such Indemnitee
determines in good-faith that it will incur a material adverse financial
consequence for which Borrower has not indemnified it in a manner reasonably
satisfactory to such Indemnitee.  The
mere act of filing completed forms (including Tax returns) shall not be deemed
to have a material adverse effect.

 

17

 

(x)                                   Reimbursements by Indemnitees Generally.  If,
for any reason, Borrower makes any payment that Borrower is required by
applicable law or by the Operative Documents to make for or with respect to any
Taxes imposed on any Indemnitee in respect of the transactions contemplated by
the Operative Documents or on the Aircraft, the Airframe, the Engines, or any
Part thereof, and such Taxes are not the responsibility of Borrower pursuant to
the terms of this Section 6(b), then such Indemnitee shall pay to
Borrower within twenty (20) Business Days of Borrower’s written demand therefor
an amount which equals the amount paid by Borrower with respect to such Taxes.

 

(xi)                                Verification.  At
Borrower’s request, the amount of any indemnity payment by Borrower pursuant to
this Section 6(b), or any payment by an Indemnitee to Borrower pursuant
to this Section 6(b), shall be verified by an accounting firm to be
jointly selected by Borrower and the Indemnitee.  Each Indemnitee and Borrower hereby agree to
provide such accounting firm with all information and materials as shall be
reasonably necessary or desirable in connection herewith (provided that
such accounting firm shall agree in writing to keep confidential any
information relating to any Indemnitee and shall promptly return such
information and materials).  Such
accounting firm shall be requested to make its determination within 30
days.  If such accounting firm shall
determine that such computations are incorrect, then such firm shall determine
what it believes to be the correct computations.  The computations of the accounting firm shall
be final, binding and conclusive upon Borrower and the Indemnitee.  All fees and expenses payable pursuant to
this Section shall be borne by Borrower unless the verification results in a
reduction of the amount payable by Borrower (or an increase in the amount payable
by the Indemnitee to Borrower) of more than ten percent (10%), in which case
such expense shall be borne by the Indemnitee. 
Notwithstanding anything to the contrary that may be contained herein,
Borrower agrees that it will have no right to inspect the Tax returns, books or
records of an Indemnitee for any purpose.

 

(xii)                             Mitigation.  Each Indemnitee agrees to take
reasonable action at the expense of Borrower to mitigate the Taxes for which
indemnification is sought pursuant to this Section 6(b).  Nothing herein shall require an Indemnitee to
take any action requiring knowledge of factual information (such as location of
the Aircraft) that is not known to or readily ascertainable by the Indemnitee
unless such information is provided to the Indemnitee by the Borrower at
Borrower’s cost or to require Indemnitee to take any action which is likely to
have a material adverse effect on Indemnitee or any of its Affiliates. For
purposes hereof, the mere act of filing a Tax return shall not be deemed to
have a material adverse effect.

 

(xiii)                          Non-Parties.

 

(A)                              If an Indemnitee is not a party to this
Agreement, Borrower may require such Indemnitee to agree in writing, in a form
reasonably satisfactory to Borrower, to the terms of Section 6(b) and Section
6(c) hereof prior to making any payment to such Indemnitee under Section
6 of this Agreement.

 

(B)                                In addition to the terms and conditions set
forth in Section 6(b) and Section 6(c) hereof regarding
indemnification applicable to any Indemnitee, a Person that is an Indemnitee
because such Person is an Affiliate, corporate successor, permitted assign,
director, officer, employee, servant, or agent of Lender or Security Trustee,
as the case may be, shall not be indemnified pursuant to Section 6(b) or
Section 6(c) hereof if the Person from which such Indemnitee’s right of
indemnification derives would not be entitled to indemnification pursuant to
the terms of Section 6(b) or Section 6(c) if such Person sought
indemnification directly from Borrower with respect to such matter.

 

18

 

(xiv)                         Withholding.  Borrower agrees, to the extent
required by applicable law, to withhold from each payment due hereunder or
under any Note withholding Taxes at the appropriate rate, and, on a timely
basis, and to deposit such amounts with an authorized depository and make such
reports, filings and other reports in connection therewith, and in the manner,
required under applicable law.  In
respect of U.S. Withholding Taxes, Borrower shall promptly furnish to each Note
Holder (but in no event later than the date 30 days after the due date thereof)
an Internal Revenue Service Form 1042S (or similar forms as at any relevant
time in effect), if applicable, indicating payment in full of any U.S. Withholding
Taxes withheld from any payments by Borrower to such persons together with all
such other information and documents reasonably requested by the Note Holder
and necessary or appropriate to enable each Note Holder to substantiate a claim
for credit or deduction with respect thereto for income Tax purposes of the
country where each Note Holder is located. 
For the avoidance of doubt, Borrower shall, to the extent provided in
Section 6(b), indemnify each Indemnitee on an After-Tax Basis in respect of any
withholding Taxes such that, after making all required deductions (including
deductions applicable to additional sums payable under this Section 6), the
Indemnitee shall receive no less than the sum it would have received had no
such deductions been made.

 

(c)                                  General Indemnity.

 

(i)                                     Borrower hereby agrees to indemnify on an
After-Tax Basis each Indemnitee against, and agrees to protect, save and hold
harmless each Indemnitee from (whether or not the transactions contemplated
herein or in any of the other Operative Documents are consummated), any and all
Expenses imposed on, incurred by or asserted against any Indemnitee, in any way
relating to or arising out of or which would not have occurred but for (A) the
Operative Documents (including the enforcement thereof) and the consummation of
the transactions contemplated thereby or any Default or Event of Default
thereunder; (B) the manufacture, design, purchase, resale, acceptance or
rejection of the Airframe or any Engine or Parts; (C) the Aircraft (or any portion
thereof) or any engine installed on the Airframe or any airframe on which an
Engine is installed whether or not arising out of the manufacture, design,
installation, purchase, registration, re-registration, refinancing, financing,
mortgage, ownership, delivery, re-delivery, nondelivery, lease, sublease,
possession, use or non-use, storage, operation, maintenance, modification,
alteration, condition, replacement, repair, substitution, sale, return or other
disposition of the Aircraft (or any portion thereof) including, without
limitation, latent or other defects, whether or not discoverable, strict tort
liability and any claim for patent, trademark or copyright infringement; (D)
the offer, sale or delivery of the Notes on or prior to the Closing Date or (E)
any violation of law relating to the Aircraft or the transactions contemplated
herein, including any Federal or state securities laws, ERISA, or Federal or
state environmental laws. 
Notwithstanding the preceding sentence, the foregoing agreement to indemnify,
protect, save and hold harmless each any particular Indemnitee under this Section
6(c) shall not extend to any Expense incurred by such Indemnitee to the
extent resulting from or arising out of or which would not have occurred but
for one or more of the following: (1) any express representation or warranty by
such Indemnitee in the Operative Documents being incorrect in any material
respect; or (2) the failure by such Indemnitee to perform or observe in any
material respect any express agreement, covenant or condition in any of the
Operative Documents, unless such failure by such Indemnitee results from any
failure by Borrower to observe in any material respect any covenant, agreement
or condition in any Operative Document; or (3) the willful misconduct or the
gross negligence of such Indemnitee (other than gross negligence imputed to
such Indemnitee solely by reason of its interest in the Aircraft or being party
to the Operative Documents); or (4) in the case of any Lender, a disposition
(voluntary or involuntary) of all or any part of its interest in any Note
(other than as contemplated by the Mortgage or as directed by Borrower) or in
the case of any other Indemnitee, a disposition by such Indemnitee of all or
any part of such Indemnitee’s interest in any of the Operative Documents, other
than, in each case, during the continuance of a Specified Default or an Event
of Default; or (5) any Tax, or any loss of Tax benefits or increase in Tax
liability under any Tax law, whether or not Borrower is required to indemnify
for such Tax pursuant to Section 6(b) hereof (it being

 

19

 

understood
that Section 6(b) hereof exclusively provides for Borrower’s liability
with respect to Taxes); provided, however, that this clause (5)
shall not apply to Taxes taken into consideration in making any payment under
the Operative Documents on an After-Tax Basis; or (6) in the case of Security
Trustee, a failure on the part of Security Trustee to distribute in accordance
with the Mortgage any amounts received and distributable by it thereunder; or
(7) other than during the continuation of a Specified Default or an Event of
Default, the authorization or giving or withholding of any future amendments,
supplements, waivers or consents with respect to any of the Operative Documents
which amendments, supplements, waivers or consents (A) do not require or
receive the approval of Borrower or (B) are not occasioned by a specific
requirement of the Operative Documents; or (8) the offer, sale or delivery of a
Note by such Indemnitee in violation of the Securities Act or a violation by
such Indemnitee of any other applicable law or regulation relating to any
transfer of a Note; or (9) except to the extent fairly attributable to acts or
events occurring prior thereto, acts or events which occur after the payment in
full of all of Borrower’s obligations under the Operative Documents; or (10) in
the case of Security Trustee, any compensation as provided in Section 6.07 of
the Mortgage.

 

(ii)                                  If, by reason of any Expense payment made to
or for the account of an Indemnitee by Borrower pursuant to this Section
6(c), such Indemnitee subsequently realizes a Tax Savings not previously
taken into account in computing such payment, such Indemnitee shall promptly
pay to Borrower, but not before Borrower shall have made all payments then due
and owing to such Indemnitee under the Operative Documents, an amount equal to
the sum of (I) the actual reduction in Taxes, if any, realized by such
Indemnitee which is attributable to such Tax Savings and (II) the actual
reduction in Taxes realized by such Indemnitee as a result of any payment made
by such Indemnitee pursuant to this sentence; provided that such
Indemnitee shall not be obligated to pay any such amount if a Specified Default
or an Event of Default shall be continuing or to the extent that such amount
would exceed (i) the aggregate amount of all prior payments by Borrower to such
Indemnitee under this Section 6(c) in respect of such Expense (including
any amount necessary for such payments to be on an After-Tax Basis) less (ii)
the aggregate amount of all prior payments by such Indemnitee to Borrower
pursuant to this Section 6(c) in respect of such Expense; provided,
however, that any amount not paid to Borrower pursuant to the foregoing
limitation shall be carried forward to reduce pro  tanto any
future payments that Borrower may be required to make to such Indemnitee
pursuant to this Section 6(c); provided  further, that any
amount not paid as a result of the occurrence of a Specified Default or an
Event of Default and not otherwise applied as provided in this subparagraph
(ii) shall be paid to Borrower at such time as there shall not be continuing
any such Specified Default or Event of Default.

 

(iii)                               Any Taxes that are imposed on an Indemnitee
as a result of the disallowance or reduction of any Tax Savings paid to
Borrower pursuant to this Section 6(c) shall be treated as a Tax for
which Borrower is obligated to indemnify such Indemnitee pursuant to the provisions
of Section 6(b) without regard to the exclusions set forth in Section
6(b)(ii) (other than subparagraphs (4), (11) and (12) thereof).

 

(iv)                              If a claim is made against an Indemnitee
involving one or more Expenses and such Indemnitee has notice thereof, such
Indemnitee shall promptly after receiving such notice give notice of such claim
to Borrower; provided that the failure to provide such notice shall not
release Borrower from any of its obligations to indemnify hereunder, unless and
only to the extent such failure materially and adversely affects Borrower or
any of its Affiliates; and no payment by Borrower to an Indemnitee pursuant to
this Section 6(c) shall be deemed to constitute a waiver or release of
any right or remedy which Borrower may have against such Indemnitee for any
actual damages as a result of the failure by such Indemnitee to give Borrower
such notice.  Borrower shall be entitled,
at its sole cost and expense (and acting through counsel reasonably acceptable
to the respective Indemnitee) (A) (so long as Borrower has agreed in a writing
reasonably acceptable to such Indemnitee that Borrower is liable to such
Indemnitee for such Expense) in any judicial or administrative proceeding that
involves solely a claim for

 

20

 

one
or more Expenses, to assume responsibility for and control thereof, (B) (so
long as Borrower has agreed in a writing reasonably acceptable to such
Indemnitee that Borrower is liable to such Indemnitee for such Expense) in any
judicial or administrative proceeding involving a claim for one or more
Expenses and other claims related or unrelated to the transactions contemplated
by the Operative Documents, to assume responsibility for and control of such
claim for Expenses to the extent that the same may be and is severed from such
other claims (and such Indemnitee shall use its commercially reasonable efforts
to obtain such severance), and (C) in any other case, to be consulted by such
Indemnitee with respect to judicial or administrative proceedings subject to
the control of such Indemnitee and to be allowed, at Borrower’s sole expense,
to participate therein.  Notwithstanding
any of the foregoing to the contrary, Borrower shall not be entitled to assume
responsibility for and control of, or participate in or be consulted with
respect to any such judicial or administrative proceedings if (i) any Specified
Default or Event of Default shall have occurred and be continuing, (ii) such
proceedings will involve a material risk of the sale, forfeiture or loss of, or
the creation of any Lien (other than a Permitted Lien) on, the Aircraft, the
Mortgage Estate or any part thereof unless in such an event Borrower shall have
posted a bond or other security reasonably satisfactory to the relevant
Indemnitees in respect to such risk or (iii) such proceedings could in the
reasonable opinion of such Indemnitee involve the imposition of criminal
liability on an Indemnitee or if such control or participation will in the
reasonable opinion of such Indemnitee be inappropriate under applicable
standards of professional conduct due to actual or potential conflicting
interests between them. An Indemnitee may participate at its own expense and
with its own counsel in any judicial proceeding controlled by Borrower pursuant
to the preceding provisions.

 

(v)                                 The applicable Indemnitee shall supply
Borrower with such information reasonably requested by Borrower as is necessary
or advisable for Borrower to control or participate in any proceeding to the
extent permitted by this Section 6(c). 
Such Indemnitee shall not (unless such Indemnitee waives its right to be
indemnified with respect to such Expense under this Section 6(c)) enter
into a settlement or other compromise with respect to any Expense without the
prior written consent of Borrower (except during the continuance of a Specified
Default or an Event of Default when such consent shall not be required if such
Indemnitee has given Borrower at least 15 days prior written notice of the
nature and scope of the proposed settlement or compromise), which consent shall
not be unreasonably withheld, conditioned or delayed.

 

(vi)                              Borrower shall supply the applicable
Indemnitee and its advisors with such information reasonably requested by such
Indemnitee as is necessary or advisable for such Indemnitee to control or
participate in any proceeding to the extent permitted by this Section 6(c).

 

(vii)                           Upon payment of any Expense pursuant to this Section
6(c), Borrower, without any further action, shall, so long as no Specified
Default or Event of Default shall be continuing, be subrogated to any claims
the applicable Indemnitee may have relating thereto (other than claims under
insurance policies not maintained by Borrower); provided, that in the
event Borrower shall not be subrogated to any claim as a result of the
occurrence of a Specified Default or an Event of Default, Borrower shall be
subrogated to such claim at such time as there shall not be continuing any such
Specified Default or Event of Default. 
Such Indemnitee agrees to give, at Borrower’s expense, such further
assurances or agreements and to cooperate, at Borrower’s expense, with Borrower
to permit Borrower to pursue such claims, if any, to the extent reasonably
requested by Borrower.

 

(viii)                        If Borrower shall have paid an amount to an
Indemnitee pursuant to this Section 6(c), and such Indemnitee
subsequently shall be reimbursed in respect of such indemnified amount from any
other Person (other than in respect of insurance carried for its own account),
such Indemnitee shall promptly pay Borrower, but not before Borrower shall have
made all payments then due to such Indemnitee pursuant to this Section 6(c)
and all other payments then due under the Operative Documents, an amount equal
to the sum of (I) the amount of such reimbursement, including interest

 

21

 

received
attributable thereto, net of Taxes required to be paid by such Indemnitee as a
result of any refund received and (II) any Tax Savings realized by such
Indemnitee as a result of any payment by such Indemnitee made pursuant to this
sentence; provided that such Indemnitee shall not be obligated to pay
any such amount if a Specified Default or an Event of Default shall be
continuing or to the extent that such amount would exceed (i) the aggregate
amount of all prior payments by Borrower to such Indemnitee under this Section
6(c) in respect of such reimbursement (including any amount necessary for
such payments to be on an After-Tax Basis) less (ii) the aggregate amount of
all prior payments by such Indemnitee to Borrower pursuant to this Section
6(c) in respect of such reimbursement; provided, however,
that any amount not paid to Borrower pursuant to the foregoing limitation shall
be carried forward to reduce pro  tanto any future payments that
Borrower may be required to make to such Indemnitee pursuant to this Section
6(c); provided  further, that any amount not paid as a result
of the occurrence of a Specified Default or an Event of Default and not
otherwise applied as provided in this subparagraph (viii) shall be paid to
Borrower at such time as there shall not be continuing any such Specified
Default or Event of Default.

 

(ix)                                Borrower agrees to pay each Expense within
five Business Days of demand thereof; provided, that such amount shall
not be due in the event such Indemnitee has failed to provide reasonably
adequate information to Borrower regarding such demand; and, provided,
further that Borrower shall be entitled to contest such Expense as provided
for in this Section 6(c).  In the
event Borrower contests such Expense, such Expense shall be payable at the time
such Expense is due as set forth herein.

 

(x)                                   Borrower’s obligations set forth in this
Section 6(c) shall not apply with respect to any Expense or other amount that
constitutes an Increased Cost for which the Indemnitee or its Affiliate is
entitled to reimbursement under Section 2.13 of the Mortgage.

 

(d)                                 Past Due Amounts.  To
the extent permitted by applicable law, interest at the Past Due Rate shall be
paid, on demand, on any amount or indemnity not paid when due pursuant to this Section
6 until the same shall be paid.  Such
interest shall be paid in the same manner as the unpaid amount in respect of
which such interest is due.

 

SECTION 7.                                Representations, Warranties and Covenants.

 

(a)                                  Security Trustee, in its individual capacity,
covenants and agrees that it shall not cause or permit to exist any Lien,
arising as a result of (i) claims against Security Trustee not related to its
interest in the Aircraft or the administration of the Mortgage Estate pursuant
to the Mortgage, (ii) any act of Security Trustee, or failure of Security
Trustee to take any action to the extent such act or failure arises from or
constitutes gross negligence or willful misconduct, (iii) claims against
Security Trustee relating to Taxes or Expenses that are excluded from
indemnification pursuant to Section 6 hereof, or (iv) claims against
Security Trustee arising out of the transfer by Security Trustee of all or any
portion of its interest in the Aircraft, the Mortgage Estate or the Operative
Documents other than pursuant to the terms of the Operative Documents.

 

(b)                                 Lender represents, warrants and covenants
that (A) the Note to be issued to it pursuant to the Mortgage is being acquired
by it either (x) for investment, and not with a view to any distribution of any
thereof, subject, nevertheless that the disposition of the Note shall at all
times be within the control of the Lender or (y) in the ordinary course of its
commercial lending business, (B) it will not offer or sell any Note in
violation of the Securities Act, (C) it will not transfer any Note to any
Person unless such Person, in a writing delivered to Borrower makes the
representation set forth in Section 7(b) hereof or such other representation
that is sufficient for Borrower to reasonably determine, without independent
due diligence, that such transfer of Note will not cause Borrower or such
Person to

 

22

 

engage
in a prohibited transaction under Section 406 of ERISA or Section 4975 of the
Code, and (D) it will not transfer any or all of its Notes to any Person that
is not a financial institution.  Unless
Default or an Event of Default has occurred and is continuing or the transfer
is at the request of Borrower, Lender shall be responsible for all costs of
Borrower and Guarantor in connection with any transfer of all or any its Notes,
including reasonable attorney fees incurred in connection therewith.

 

(c)                                  Security Trustee represents and warrants, in
its individual capacity, to Borrower, Guarantor, and Lender as follows:

 

(i)                                     [intentionally omitted];

 

(ii)                                  it has the corporate power and authority to
enter into and perform its obligations under the Mortgage and this Agreement
and to authenticate the Notes to be delivered on the Closing Date;

 

(iii)                               the Operative Documents to which Security
Trustee is a party, and the authentication of the Notes to be delivered on the
Closing Date, have been duly authorized by all necessary corporate action on
its part, and neither the execution and delivery thereof nor its performance of
or compliance with any of the terms and provision thereof will contravene or
result in any breach of, or constitute any default under its certificate of incorporation
or bylaws or the provisions of any indenture, mortgage, contract or other
agreement to which it is a party or by which it or its properties may be bound
or affected;

 

(iv)                              there are no pending or, to the knowledge of
Security Trustee, threatened actions or proceedings against Security Trustee
before any court or administrative agency which, if determined adversely to
Security Trustee, would materially adversely affect the ability of Security
Trustee to perform its obligations under the Operative Documents to which it is
a party;

 

(v)                                 no authorization or approval or other action
by, and no notice to or filing with, any Governmental Authority is required for
the due execution, delivery or performance by Security Trustee of the Operative
Documents to which it is a party; and

 

(vi)                              each of the Operative Documents to which
Security Trustee is a party has been duly executed and delivered by it and,
assuming that each such agreement is the legal, valid and binding obligation of
each other party thereto, is the legal, valid and binding obligation of
Security Trustee, enforceable against it in accordance with its terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application relating to
creditors’ rights generally and by general equitable principles (regardless of
whether the issue of enforceability is considered in a proceeding in equity or
at law).

 

(d)                                 Lender represents and warrants that it is not
acquiring its interest in the Mortgage Estate, any Note or any interests
represented thereby with the assets of any “employee benefit plan” as
defined in Section 3(3) of ERISA or any “plan” within the meaning of
Section 4975(e)(1) of the Code.  Borrower
represents and warrants that none of (A) the execution and delivery of the
Operative Documents, and (B) the consummation of the transactions contemplated
by the Operative Documents will involve any prohibited transaction within the
meaning of Section 406(a) of ERISA or Section 4975(c)(1)(A) through (D) of the
Code (such representation being made in reliance upon and subject to the
accuracy of the representations contained in the preceding sentence).

 

(e)                                  Borrower agrees that it will not consolidate
with or merge with or into any other corporation or other Person or convey,
transfer or lease all or substantially all of its assets as an entirety

 

23

 

(whether
in one transaction or a series of related transactions) to any Person (“Borrower
Successor”) unless:

 

(i)                                     the Person is a Citizen of the United States
(as defined in in Section 40102(a)(15) of the Transportation Code) and is a
Certificated Air Carrier, and Security Trustee on behalf of Lender is entitled
to the protection of Section 1110 of the Bankruptcy Code in connection with its
respective rights to take possession of the Aircraft in the event of a case
under Chapter 11 of the Bankruptcy Code in which such Person is a debtor;

 

(ii)                                  the Person executes and delivers to Lender a duly
authorized, valid, binding and enforceable agreement in form and substance
reasonably satisfactory to Lender containing an assumption by such Person of
the due and punctual payment of the amounts due and to become due under the
Notes and the due and punctual performance and observance of each covenant and
condition of the Operative Documents to be performed or observed by Borrower;

 

(iii)                               immediately after giving effect to such
transaction, no Default or Event of Default has occurred or is continuing and
Borrower shall have made all filings necessary to preserve and protect the
rights of Security Trustee and Lender under the Operative Documents;

 

(iv)                              Guarantor shall execute and deliver to Lender
a written consent to such transaction and a written confirmation that the
Guaranty and its obligations thereunder remain in full force and effect; 

 

(v)                                 Borrower has (A) at least 30 days prior to
such consolidation, merger, conveyance, transfer or lease, given written notice
of such transaction to Lender and (B) delivered to Lender (x) a certificate
signed by a Responsible Officer of Borrower stating that such consolidation,
merger, conveyance, transfer or lease and the assumption agreement mentioned in
clause (iii) above comply with this Section 7(e) and that all conditions
precedent herein provided for relating to such transaction have been complied
with and (y) an opinion of counsel (such counsel selected by Borrower and
reasonably acceptable to Lender) reasonably satisfactory to Lender that the
assumption agreement mentioned in clause (iii) above is, subject to reasonable
assumptions, qualifications and exceptions, the duly authorized, valid and
binding agreement of the Borrower Successor enforceable against the Borrower
Successor in accordance with the terms thereof.

 

Upon
any consolidation or merger, or any conveyance, transfer or lease of all or
substantially all of the assets of Borrower as an entirety in accordance with
the terms set forth in this Section 7(e), the Borrower Successor shall
succeed to, and be substituted for, and may exercise every right and power of,
Borrower under the Operative Documents to which it is a party with the same
effect as if such Borrower Successor had been named as Borrower herein.  No such consolidation, merger, conveyance, transfer
or lease of all or substantially all of the assets of Borrower as an entirety
shall have the effect of releasing Borrower or any successor corporation or
Person which shall theretofore have become such in the manner set forth herein
from its liability in respect of any Operative Document to which it is a party.

 

(f)                                    Borrower, at its expense, will take or cause
to be taken such action with respect to the recording, filing, re-recording and
re-filing of the FAA Bill of Sale, the Mortgage, the Mortgage Supplement, and
any financing statements or other instruments as are necessary to maintain, so
long as the Mortgage is in effect, the perfection of any security interest that
may be claimed to have been created by the Mortgage, or to otherwise accomplish
the purposes of this Agreement and the other Operative Documents, or will
furnish to Lender timely notice of the necessity of such action, together with
such instruments, in execution form, and such other information as may be
required to enable it to take such action.

 

24

 

(g)                                 Each party (and its respective agents,
successors or assigns) to this Agreement as to itself hereby, severally, agrees
(as to itself) that it will not, through its own actions or inactions,
interfere in Borrower’s quiet enjoyment of the Aircraft unless an Event of
Default shall have occurred and be continuing.

 

(h)                                 Lender hereby agrees that if indemnification
is sought pursuant to Section 6(b)(i) hereof with respect to U.S.
Withholding Taxes, Lender shall consult in good faith with Borrower and shall
use its reasonable efforts to avoid or mitigate the imposition of U.S.
Withholding Taxes, including, without limitation, by assigning at the direction
of Borrower the rights and obligations of Lender to another office, branch,
subsidiary or Affiliate of Lender or by restructuring the Notes.  Borrower shall be responsible for all actual
costs and expenses (including attorneys’ fees) associated with any such
mitigation or restructuring unless the imposition of such U.S. Withholding Tax
is the result of the breach of any representation or obligation of Lender set
forth in the Operative Documents.

 

(i)                                     Lender further agrees that if pursuant to the
Operative Documents the Notes are to be prepaid in whole or in part or
otherwise satisfied prior to their Final Maturity Date, the Lender shall
provide the Borrower any information reasonably requested by either party for
purposes of determining the amount to be paid in connection with such payment.

 

(j)                                     [intentionally omitted]

 

(k)                                  Borrower hereby represents and warrants that
(i) it has furnished to Security Trustee and Lender a true and complete copy of
the Purchase Agreement as provided to Borrower upon Borrower’s acquisition of
the Aircraft, and (ii) Borrower shall not enter into any change order or other
amendment, modification or supplement of the Warranties without the prior
written consent of Lender (which shall not be unreasonably withheld,
conditioned or delayed, but which may be withheld if such change order,
modification or supplement would result in any rescission, cancellation or
termination of the Aircraft Warranties as to the Aircraft or the Engine
Warranties as to any Engine, or would otherwise adversely affect Security
Trustee’s or Lender’s rights in the Aircraft or any Engine).

 

(l)                                     Upon the receipt of any notice of illegality
or Increased Cost pursuant to Section 2.15 of the Mortgage, Lender and Borrower
shall consult in good faith and Lender and Borrower shall use its reasonable
efforts to avoid the illegality or to avoid or mitigate the amount of any
Increased Cost, including, without limitation, by assigning the rights and
obligations of Lender hereunder to another office, branch, subsidiary or
Affiliate of Lender or by selling or transferring the rights, interests and
obligations of Lender hereunder or under any other Operative Document to
another bank, financial or lending institution, subject to the terms hereof,
that would not be subject to any such illegality or Increased Cost, as the case
may be, provided that Lender shall not be required to take any such
action to avoid such illegality or to avoid or mitigate such Increased Cost
hereunder if such action would result in any economic, legal or regulatory
disadvantage, or any adverse Tax consequence to Lender (other than (i) economic
disadvantage for which Borrower agrees to indemnify Lender, or (ii) adverse Tax
consequences for which Borrower agrees to indemnify Lender on an After-Tax
Basis and in a manner reasonably acceptable to Lender).

 

(m)                               Lender shall, within seven (7) days of the
Closing Date, deliver to Borrower a an Internal Revenue Service Form W-9 fully
completed and executed by Lender.

 

SECTION 8.                                Certain Covenants of Borrower. 
Borrower covenants and agrees with Lender and Security Trustee as
follows:

 

25

 

(a)                                  Borrower will, at its cost and expense, cause
to be done, executed, acknowledged and delivered all and every such further
acts, conveyances and assurances as Lender shall reasonably require for
accomplishing the purposes of this Agreement and the other Operative Documents
and to establish, protect and preserve the rights, title and interest of the
Security Trustee and the Lender in the and to the Aircraft and under the Operative
Documents; provided that any instrument or other document so executed by
Borrower will not expand any obligations or limit any rights of Borrower in
respect of the transactions contemplated by any of the Operative Documents.

 

(b)                                 Borrower, at its expense, will cause the
Mortgage, all Mortgage Supplements and all amendments to the Mortgage, to be
promptly filed and recorded, or filed for recording, to the extent required
under the Transportation Code or required under any other applicable law.  Borrower agrees to furnish Lender with copies
of the foregoing documents with recording data as promptly as practicable
following the issuance of same by the FAA.

 

(c)                                  Promptly upon the recording of the Mortgage
and the Mortgage Supplement covering the Aircraft pursuant to the
Transportation Code, Borrower will cause Lytle Soulé & Curlee, special FAA
counsel in Oklahoma City, Oklahoma, to deliver to Lender, Security Trustee,
Borrower and Guarantor an opinion as to the due and valid registration of the
Aircraft in the name of Borrower, the due recording of the FAA Bill of Sale,
the Mortgage and the Mortgage Supplement and the lack of filing of any
intervening documents with respect to the Aircraft.

 

(d)                                 With respect to the insurance required to be
maintained in accordance with the provisions of Section 4.01(e) of the
Mortgage, Borrower will (1) promptly provide Security Trustee and Lender notice
of any lapse, cancellation or material change in such insurance adversely
affecting any such Person, (2) cause the Insurance Broker to advise Security
Trustee and Lender in writing of any default in the payment of any premium and
of any other act or omission on the part of Borrower of which the Insurance
Broker has actual knowledge and which might invalidate or render unenforceable,
in whole or in part, any insurance on the Aircraft as required by the terms of
the Mortgage and to advise such Persons in writing at least 30 days (7 days, or
such other period as then generally available in the industry in the case of
any war risk or allied perils coverage) prior to the cancellation (but not
scheduled expiration) or material adverse change of any insurance maintained
pursuant to Section 4.01(e) of the Mortgage, and (3) provide the Insurance
Broker with updated address information for Security Trustee and Lender as such
addresses are changed in accordance with Section 11 hereof.

 

(e)                                  Subject to Section 7(g) hereof, if
Borrower fails to perform or comply with any of its agreements contained in the
Mortgage, whether or not such failure shall constitute an Event of Default,
Security Trustee or Lender may (but shall not be obligated to) perform or
comply with such agreement, and the reasonable costs and expenses of Security
Trustee or Lender incurred in connection with such performance of or compliance
with such agreement, together with interest (to the extent permitted by
applicable law) at the Past Due Rate from the date of Borrower’s receipt of
notice (with supporting documentation) of the making of such payment or the
incurring of such costs and expenses by Security Trustee or Lender to the date
of payment of such amount by Borrower, shall be payable by the Borrower upon
demand.  No such payment or performance
by Security Trustee or Lender shall be deemed to waive any Default or Event of Default
or relieve the Borrower of its obligations under the Mortgage.

 

26

 

SECTION 9.                                Notices; Consent to Jurisdiction.

 

(a)                                  All notices, demands, instructions and other
communications required or permitted to be given to or made upon any party
hereto shall be in writing and shall be personally delivered or sent by
registered or certified mail, postage prepaid, or by facsimile device, or by
overnight service or prepaid courier service, and shall be deemed to be given
for purposes of this Agreement on the day that such writing is delivered or if
given by certified mail, three Business Days after being deposited in the
mails, in accordance with the provisions of this Section 9(a).  Unless otherwise specified in a notice sent
or delivered in accordance with the foregoing provisions of this Section
9(a), notices, demands, instructions and other communications in writing
shall be given to or made upon the respective parties hereto at their
respective addresses (or to their respective facsimile numbers) as
follows:  (i) if to Borrower, Guarantor,
Security Trustee or Lender, to the respective addresses set forth on Schedule I
hereto or to such other address or facsimile number as directed by such party
by notice; or (ii) if to any subsequent Lender, addressed to the address set
forth in the register maintained pursuant to the Mortgage.

 

(b)                                 Each of Borrower, Guarantor, Security Trustee
and Lender (each a “Party” and, collectively, “Parties”)
irrevocably agrees that any legal suit, action or proceeding brought by any
other Party or any Indemnitee that is not a Party, that arises out of or
relates to the Operative Documents or any of the transactions contemplated
hereby or thereby or any document referred to herein or therein, may be
instituted in the Supreme Court of the State of New York or the United States
District Court for the Southern District of New York and each Party hereby
submits to the nonexclusive jurisdiction of such courts, acknowledges its
competence and irrevocably agrees to be bound by a final judgment of such
court.  Each such Person irrevocably
waives, to the fullest extent permitted by applicable law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such
a court has been brought in an inconvenient forum.  Each of the Parties hereby generally consents
to service of process to the respective addresses set forth in this Section
9 in the manner specified herein. 
Nothing in this paragraph shall affect the right of any party hereto or
their successors or assigns to bring any action or proceeding against any other
party hereto or their property in the courts of other jurisdictions.

 

SECTION
10.                          Miscellaneous.

 

(a)                                  Consents.  Lender covenants and agrees
that it shall not unreasonably withhold, delay or condition its consent to any
consent requested of Security Trustee under the terms hereof or of the
Mortgage, which by its terms is not to be unreasonably withheld by Security
Trustee.

 

(b)                                 Survival.  The representations,
warranties, indemnities and agreements of Borrower, Security Trustee, Lender
and Guarantor provided for in this Agreement, and, except as expressly provided
in the Operative Documents, Borrower’s, Guarantor’s, Security Trustee’s and
Lender’s obligations under any and all of the Operative Documents, shall
survive the making available of the Loan by the Lender, the delivery of the
Aircraft or the transfer by Lender of an interest in any Note or the Mortgage
Estate and the expiration or other termination of this Agreement or any other
Operative Document.  Without limiting the
generality of the foregoing, the indemnity obligations of Borrower pursuant to
Section 6 hereof shall survive the expiration or termination of the Term.

 

(c)                                  Counterparts; Governing Law.  This
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.  Neither this Agreement nor any of the terms
hereof may be terminated, amended, supplemented, waived or modified, except by
an instrument in writing signed by the party against which the enforcement of
the termination, amendment,

 

27

 

supplement, waiver or modification is sought;
and no such termination, amendment, supplement, waiver or modification shall be
effective unless a signed copy thereof shall have been delivered to Borrower,
Guarantor, Security Trustee and Lender. 
THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

(d)                                 Inurement.  The terms of this Agreement
shall be binding upon, and inure to the benefit of, Borrower, Guarantor,
Security Trustee and Lender and their respective successors and permitted
assigns including each Note Holder.

 

(e)                                  Currency.  This Agreement is entered into
in connection with an international financing transaction in which the
specification of Dollars and payment at the designated place of payment is of
the essence, and Dollars shall be the currency of account in all events.  The payment obligations hereunder and under
the other Operative Documents shall not be discharged by an amount paid in
another currency or in another place, whether pursuant to a judgment or
otherwise, to the extent that the amount so paid on conversion to Dollars and
transferred to the designated place of payment under normal banking procedures
does not yield the amount of Dollars due hereunder.  If for the purpose of obtaining judgment in
any court it is necessary to convert a sum due hereunder in Dollars into
another currency (the “Second Currency”), the rate of exchange which shall
be applied shall be that at which, in accordance with normal banking
procedures, the payee could purchase Dollars with the Second Currency at a
major bank located in the City of New York on the Business Day on which such
payment is received.  The obligation of
the payor in respect of any such sum due from it to a payee hereunder shall,
notwithstanding the rate of exchange actually applied in rendering such
judgment, be discharged only to the extent that on the Business Day of receipt
by such payee of any sum adjudged to be due hereunder in the Second Currency
such payee may, in accordance with normal banking procedures, purchase and
transfer in the City of New York Dollars with the amount of the Second Currency
so adjudged to be due.  Each party hereto
hereby agrees, as a separate obligation and notwithstanding any such judgment,
to indemnify such payee against, and to pay such payee on demand, Dollars, in
the amount equal to any difference between the sum originally due to such payee
in Dollars and the amount of Dollars so purchased and transferred.

 

(f)                                    Entire Agreement.  This
Agreement, together with the other Operative Documents, constitutes the entire
agreement among the parties hereto and supersedes all prior agreements and
understandings of the parties with respect to the subject matter hereof and
thereof.

 

(g)                                 Confidentiality.  Each
of Lender, Borrower and Guarantor hereby covenants and agrees to maintain the
confidential nature of (i) the terms and conditions of the Operative Documents
and any other information disclosed to such party in connection with the
execution and delivery of the Operative Documents and not to disclose the same
(except for portions thereof which are filed with the FAA or are otherwise part
of the public domain) by any means or for any purpose and (ii) any other
information disclosed to such party after the date hereof pursuant to the terms
of the Operative Documents which is identified by the Person supplying the same
as being confidential at the time the same is delivered to such party, except
(in the case of each of the preceding clauses (i) and (ii)) except as follows:
(1) to its accountants, attorneys and other professional advisors, (2) to its
directors, officers, employees, its Affiliates and their directors, officers and
employees, and to each other party to the Operative Documents, (3) as required
by force of law or by judicial or administrative process, (4) to a potential
assignee or transferee of the Aircraft and/or the Engine or to a potential
transferee of all or any of the Notes, in which event such Party shall use its
reasonable best efforts to assure that such potential assignee or transferee
agrees to be bound by the same covenant and agreement, (5) as expressly
contemplated under the Operative Documents, or (6) to any Governmental
Authority, or (7) as may be necessary in the opinion of Lender in connection
with the exercise of remedies under the Operative

 

28

 

Documents, provided that in case of a
disclosure referred to in Clause (3) above, the party requiring
disclosure shall use its commercially reasonable efforts to limit the extent of
such disclosure to the extent permitted by law. Notwithstanding anything to the
contrary, each party (and each employee, representative, or other agent of any
party) may disclose to any and all persons, without limitation of any kind, the
tax treatment and tax structure of the transactions contemplated by the
Operative Documents and all materials of any kind (including opinions and other
tax analyses) that are provided to the party relating to such tax treatment and
tax structure.  However, any information
relating to the tax treatment or tax structure shall remain subject to the
confidentiality provisions hereof (and the foregoing sentence shall not apply)
to the extent reasonably necessary to enable the parties hereto and their
respective Affiliates to comply with applicable securities laws.  This paragraph is intended to cause the
transactions contemplated by the Operative Documents to be treated as not
having been offered under conditions of confidentiality for purposes of Section
1.6011-4 (or successor provision) of the Treasury Regulations promulgated under
Code Section 6011 and shall be construed in a manner consistent with such purpose.
Nothwithstanding anything to the contrary in this paragraph, Lender authorizes
Guarantor to file copies of the Operative Documents with the SEC to the extent
Guarantor determines that such filing is required under governing laws and
rules.

 

(h)                                 Waiver Of Jury Trial.  EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

 

SECTION 11.                          Transaction Costs.

 

(a)                                  The following costs and expenses are herein
and in the other Operative Documents referred to as “Transaction Costs”:  all of the costs and expenses incurred by
Borrower, Guarantor, Lender and Security Trustee in connection with the
execution and delivery of this Agreement, the Mortgage and the other Operative
Documents, and the execution and delivery of the Notes to Lender, including,
without limitation,

 

(i)                                     the reasonable fees, expenses and
disbursements of (1) Winston & Strawn, LLP, special counsel for Lender and
Security Trustee, (2) Daugherty, Fowler, Peregrin & Haught, FAA counsel in
Oklahoma City, and (3) Parr Waddoups Brown Gee & Loveless, special Utah
counsel to Borrower and Guarantor, in each case only with respect to the
reasonable fees, expenses and disbursement in connection with the Operative
Documents;

 

(ii)                                  all out-of-pocket expenses in connection with
the transactions contemplated by the Operative Documents, including, without
limitation, printing and duplication expenses and any recording and filing
fees;

 

(iii)                               the Upfront Fee;

 

(iv)                              any other amounts approved by Borrower.

 

(b)                                 Borrower agrees to pay, promptly upon receipt
and reasonable approval by Borrower of invoices for Transaction Costs, all such
invoices of Transaction Costs.

 

[Remainder of Page Intentionally
Left Blank – Signature Page Follows]

 

29

 

IN
WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly
executed by their respective officers hereunto duly authorized as of the day
and year first above written.

 

	
   

  	
  SKYWEST
  AIRLINES, INC.,

  
	
   

  	
  Borrower

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Michael J. Kraupp

  	
   

  
	
   

  	
  Name:
  

  	
  Michael
  J. Kraupp

  
	
   

  	
  Title:

  	
  Vice
  President Finance and Assistant Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SKYWEST,
  INC.,

  
	
   

  	
  Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Michael J. Kraupp

  	
   

  
	
   

  	
  Name:
  

  	
  Michael
  J. Kraupp

  
	
   

  	
  Title:

  	
  Vice
  President Finance and Assistant Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  C.I.T. LEASING CORPORATION,

  
	
   

  	
  Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Glen T. Dimpfel

  	
   

  
	
   

  	
  Name:

  	
  Glen
  T. Dimpfel

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  C.I.T.
  LEASING CORPORATION,

  
	
   

  	
  Security Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Glen T. Dimpfel

  	
   

  
	
   

  	
  Name:

  	
  Glen
  T. Dimpfel

  
	
   

  	
  Title:

  	
  Vice
  President

  
					

 

Signature
Page to Loan Agreement

 

 

SCHEDULE I

 

Name, Addresses and Accounts

 

Borrower:

SkyWest
Airlines, Inc., a Utah corporation

444
South River Road

St.
George, Utah  84790

Attn:
Chief Financial Officer

Telephone:  (435) 634-3200

Facsimile:  (435) 634-3205

Organizational
Number:  UT 9107640142

Internal
Revenue Service Employer ID No.: 
87-0426325

 

Guarantor:

SkyWest
Inc.

444
South River Road

St.
George, Utah 84790

Attn:
Chief Financial Officer

Telephone:  (435) 634-3200

Facsimile:  (435) 634-3205

Internal
Revenue Service Employer ID No.: 87-0292166

 

Payments to Borrower or Guarantor should be by wire transfer to:

Zions
First National Bank

One
South Main

Salt
Lake City, Utah  84111

ABA
No. 124-000-054

Account
No. 34-12884-3

Ref:
SkyWest (CIT Loan)

 

Lender:

 

C.I.T.
Leasing Corporation

c/o
The CIT Group, Inc.

1211
Avenue of the Americas, 21st Floor

New
York, New York 10036

Attention: 
Legal Department

Telephone: 
(212) 536-9488

Facsimile: 
(212) 536-1388

 

with
a copy to:

CIT
Capital Finance

207
Queen’s Quay West, Suite 700

Toronto, Ontario M5J 1A7 Canada

Attention:  Glen Dimpfel

Telephone: 
(416) 507-5159

Facsimile: 
(416) 507-5559

 

 

I-1

 

Payments to Lender should be by FedWire to:

 

	
  Bank:

  	
  JPMorgan Chase Bank

  
	
  Address:

  	
  New
  York, NY

  
	
  ABA
  #

  	
  021-000-021

  
	
  Beneficiary:

  	
  The
  CIT Group/Equipment Financing, Inc.

  
	
  Account
  #

  	
  116-003855

  
	
  Reference:

  	
  Skywest
  Facility

  

 

I-2

 

SCHEDULE II

 

 

Certain
Financial and Other Terms

 

1.                                       The Applicable Margin is 2.50% per annum.

 

2.                                       The Final Maturity Date is March 21, 2006.

 

3.                                       The Assumed Debt Rate is 6.3118% per annum.

 

4.                                       “Loan” means the loan made by Lender to
Borrower pursuant to Section 2.01 of the Mortgage in an amount equal to
$60,000,000.

 

5.                                       Acquisition Date means December 3, 2004.

 

6.                                       The Upfront Fee is $390,000, which is .65% of
the amount of the Loan.

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